TY - CHAP
T1 - Big 4 Conservatism Around the World
AU - Chung, Richard
AU - Firth, Michael
AU - Kim, Jeong Bon
AU - Pang, Lei
N1 - Publisher Copyright:
© 2014, Springer-Verlag Berlin Heidelberg.
PY - 2014/2/10
Y1 - 2014/2/10
N2 - Conservatism is a long-established underlying principle of accounting but its implementation has come under the spotlight in recent years following the spate of well-publicized corporate collapses in the U.S. and elsewhere. Previous studies have shown that the Big 4 audit firms are more conservative than the non-Big 4 in the U.S. The current study examines whether the U.S. findings extend to other countries. In doing so, we make use of a relatively new measure of conservatism, namely, the C-score developed by Khan and Watts. We find that the conclusion drawn from U.S. studies, namely that the Big 4 are more conservative, extends to the international setting but only under certain conditions. Specifically, the Big 4 are more conservative in those countries where litigation and reputation risks, broadly defined, are high. This increase in conservatism represents a rational response by the Big 4 auditors to their greater exposure, vis-a-vis the non-Big 4 auditors, to litigation and reputation loss in those countries.
AB - Conservatism is a long-established underlying principle of accounting but its implementation has come under the spotlight in recent years following the spate of well-publicized corporate collapses in the U.S. and elsewhere. Previous studies have shown that the Big 4 audit firms are more conservative than the non-Big 4 in the U.S. The current study examines whether the U.S. findings extend to other countries. In doing so, we make use of a relatively new measure of conservatism, namely, the C-score developed by Khan and Watts. We find that the conclusion drawn from U.S. studies, namely that the Big 4 are more conservative, extends to the international setting but only under certain conditions. Specifically, the Big 4 are more conservative in those countries where litigation and reputation risks, broadly defined, are high. This increase in conservatism represents a rational response by the Big 4 auditors to their greater exposure, vis-a-vis the non-Big 4 auditors, to litigation and reputation loss in those countries.
UR - http://www.scopus.com/inward/record.url?scp=85046349207&partnerID=8YFLogxK
UR - https://link.springer.com/chapter/10.1007/978-3-642-44955-0_8
U2 - 10.1007/978-3-642-44955-0_8
DO - 10.1007/978-3-642-44955-0_8
M3 - Chapter
AN - SCOPUS:85046349207
SN - 9783642449543
T3 - CSR, Sustainability, Ethics and Governance
SP - 197
EP - 238
BT - CSR, Sustainability, Ethics and Governance
A2 - Boubaker, Sabri
A2 - Nguyen, Duc Khuong
PB - Springer Nature
CY - Berlin
ER -