The Determinants and Consequences of Big 4 Lobbying Positions on Proposed Financial Accounting Standards

The Accounting Review (2022) 97 (3): 309–341; https://doi.org/10.2308/TAR-2019-0283

57 Pages Posted: 26 Mar 2021 Last revised: 15 Aug 2022

See all articles by Brian Monsen

Brian Monsen

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Date Written: March 1, 2021

Abstract

Despite the considerable participation of Big 4 accounting firms in accounting standard setting, there is no systematic evidence on what factors shape Big 4 support or opposition toward proposed accounting standards or whether their lobbying positions materially influence standards. Using textual features of Big 4 comment letters on FASB proposals, I find that Big 4 firms’ lobbying positions reflect profit motives through support for standards that will generate more fees or are supported by their clients. Big 4 lobbying support is concentrated in proposals exhibiting both characteristics, with some evidence suggesting client agreement dominates fee-generating incentives. Big 4 lobbying positions are significantly associated with standard setting outcomes, both in isolation and relative to other FASB constituents, including financial statement users. Although I primarily focus on Big 4 accounting firms, results indicate the tone of comment letters submitted by users is unassociated with the standard setting outcomes measured in this study.

Keywords: accounting standards, auditors, FASB, Financial Accounting Standards Board, lobbying, standard setting

JEL Classification: M41, M42, D72

Suggested Citation

Monsen, Brian, The Determinants and Consequences of Big 4 Lobbying Positions on Proposed Financial Accounting Standards (March 1, 2021). The Accounting Review (2022) 97 (3): 309–341; https://doi.org/10.2308/TAR-2019-0283, Available at SSRN: https://ssrn.com/abstract=3812600 or http://dx.doi.org/10.2139/ssrn.3812600

Brian Monsen (Contact Author)

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

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