The Effect of Auditor Reputation on the Pricing of Accruals: Evidence from Privately Held Companies

Illueca Muñoz, Manuel; Gill-de-Albornoz, Belen

doi:10.2139/ssrn.908813

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The Effect of Auditor Reputation on the Pricing of Accruals: Evidence from Privately Held Companies

58 Pages Posted: 19 Jun 2006

See all articles by Manuel Illueca Muñoz

Belen Gill-de-Albornoz

Jaume I University - Department of Finance and Accounting

Date Written: June 2006

Abstract

The aim of this paper is to test whether the pricing of accruals depends on auditor reputation. Using a wide sample made up of Spanish privately held firms for the period 1996-2002, we show that the inverse correlation between accruals quality and cost of debt reported by Francis et al. (2005) only holds when the auditor belongs to a Big 4 firm. When the auditors are national majors or local audit firms, an increase of accruals quality does not lead to a significant decrease in the cost of debt.

Keywords: cost of debt, accruals quality, auditor quality, auditor reputation

JEL Classification: M41, G32

Suggested Citation: Suggested Citation

Illueca Muñoz, Manuel and Gill de Albornoz Noguer, Belen, The Effect of Auditor Reputation on the Pricing of Accruals: Evidence from Privately Held Companies (June 2006). Available at SSRN: https://ssrn.com/abstract=908813 or http://dx.doi.org/10.2139/ssrn.908813