Abstract

http://ssrn.com/abstract=1919584
 
 

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Does a Lack of Choice Lead to Lower Quality?: Evidence from Auditor Competition and Client Restatements


Nathan J. Newton


University of Missouri at Columbia - School of Accountancy; Texas A&M University - Department of Accounting

Dechun Wang


Texas A&M University

Michael S. Wilkins


Trinity University


Auditing: A Journal of Practice & Theory, Vol. 32, No. 3, 2013

Abstract:     
We examine the relationship between auditor competition and the likelihood of financial restatements that occur as a result of failures in the application of GAAP. Policy makers and audit market participants have expressed concern that the current level of auditor competition is low, resulting in a negative impact on audit quality. However, we find that restatements are more likely to occur in metropolitan statistical areas (MSAs) that have higher auditor competition. The association between audit market competition and restatements is statistically and economically significant. Our finding that audit quality is higher when auditor competition is lower suggests that at least some of the concerns about concentrated audit markets may be unfounded.

Number of Pages in PDF File: 52

Keywords: auditor competition, audit quality, restatements

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Date posted: August 31, 2011 ; Last revised: October 4, 2013

Suggested Citation

Newton, Nathan J. and Wang, Dechun and Wilkins, Michael S., Does a Lack of Choice Lead to Lower Quality?: Evidence from Auditor Competition and Client Restatements. Auditing: A Journal of Practice & Theory, Vol. 32, No. 3, 2013. Available at SSRN: http://ssrn.com/abstract=1919584 or http://dx.doi.org/10.2139/ssrn.1919584

Contact Information

Nathan J. Newton
University of Missouri at Columbia - School of Accountancy ( email )
College of Business
Columbia, MO 65211
United States
Texas A&M University (TAMU) - Department of Accounting ( email )
430 Wehner
College Station, TX 77843-4353
United States

Dechun Wang
Texas A&M University ( email )
430 Wehner
College Station, TX 77843-4353
United States
Michael S. Wilkins (Contact Author)
Trinity University ( email )
One Trinity Place
San Antonio, TX 78212-7200
United States
210-999-7347 (Phone)
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