Audit Reporting of Big 4 Versus Non-Big 4 Auditors: The Case of Ex-Andersen Clients

Posted: 21 Apr 2005 Last revised: 23 Jul 2013

See all articles by Kam Wah Lai

Kam Wah Lai

Hong Kong Polytechnic University

Date Written: April 30, 2013


This paper examines audit reporting of Big 4 versus non-Big 4 auditors for ex-Andersen clients and other clients. It suggests that ex-Andersen clients are more risky than other clients and are able to exert more influence than other clients on non-Big 4 auditors since they are larger in size than other non-Big 4 auditees. In addition, Big 4 auditors are more risk-averse and able to withstand clients’ pressure than non-Big 4 auditors. The results show that Big 4 auditors are more likely than non-Big 4 auditors to issue going-concern opinions to ex-Andersen clients or restrict the level of discretionary accruals of those clients compared with other clients. Furthermore, ex-Andersen clients of Big 4 (non-Big 4) auditors would have had a lower (higher) likelihood of receiving going-concern opinions or higher (lower) level of discretionary accruals had reporting practices for other clients been applied. Hence, the suggestion to reduce the Big 4 concentration in the audit market by allowing non-Big 4 firms a larger market share should be viewed prudently. Overall, these results are consistent with the suggestion that litigation risk and client pressure are important factors in audit reporting.

Keywords: Reporting conservatism, Big 4 auditors, Arthur Andersen, going-concern opinions, discretionary accruals

JEL Classification: M49

Suggested Citation

Lai, Kam Wah, Audit Reporting of Big 4 Versus Non-Big 4 Auditors: The Case of Ex-Andersen Clients (April 30, 2013). International Journal of Accounting, Forthcoming. Available at SSRN: or

Kam Wah Lai (Contact Author)

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong

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