Auditor Lobbying on Accounting Standards

60 Pages Posted: 7 Jan 2015 Last revised: 26 Mar 2018

See all articles by Abigail M. Allen

Abigail M. Allen

Brigham Young University - Marriott School

Karthik Ramanna

Harvard Business School; University of Oxford - Blavatnik School of Government

Sugata Roychowdhury

Boston College

Date Written: January 22, 2018

Abstract

We examine how Big N auditors’ changing incentives impact their comment-letter lobbying on U.S. GAAP over the first thirty-four years of the FASB (1973-2006). In particular, we focus on the influence of auditors’ lobbying incentives arising from two basic factors: managing expected litigation and regulatory costs and catering to clients’ preferences for flexibility in GAAP. We find evidence that auditor lobbying is driven by prevailing standards of litigation and regulatory scrutiny, but we find no evidence that catering to clients’ preferences for flexibility in GAAP drives auditor lobbying. Broadly, our paper offers the first large-sample descriptive analysis of the role of Big N auditors in the accounting standard-setting process.

Keywords: Auditors, FASB, GAAP, Lobbying, Litigation

JEL Classification: D72, G18, M41, M42, M48, K22

Suggested Citation

Allen, Abigail M. and Ramanna, Karthik and Roychowdhury, Sugata, Auditor Lobbying on Accounting Standards (January 22, 2018). Journal of Law, Finance & Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2545378 or http://dx.doi.org/10.2139/ssrn.2545378

Abigail M. Allen

Brigham Young University - Marriott School ( email )

Provo, UT
United States

Karthik Ramanna (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

University of Oxford - Blavatnik School of Government ( email )

10 Merton St
Oxford, Oxfordshire OX1 4JJ
United Kingdom

Sugata Roychowdhury

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-1764 (Phone)

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