Does Audit Firm Size, as Proxy for Audit Quality, Constrain the Manipulation of Fair Value Reporting?

摘要

Prior research shows that fair value estimates reported for marketable securities are frequently manipulated upward so that the first or left-most digit of the amounts presented increases by one. Significant research also suggests that in the U.S., Big 4 audit firms provide higher quality audits than non-Big 4 firms. The current study examines whether audit quality, as proxy by audit firm size, impacts clients' tendencies to manipulate the fair value estimates reported for marketable securities. The findings overall indicate that audit quality produces little or no affect in this area as the clients of both Big 4 and non-Big 4 firms exhibit strong tendencies to manipulate the fair value estimates presented for marketable securities. In addition, little difference is noted among individual Big 4 firms as some signs of manipulating the reported fair value estimates occur with the clients of each firm.