Perceptions of preparers, users and auditors regarding financial statement audits conducted by Big 4 accounting firms

This study includes the most diverse stakeholder population integrated into one research study regarding perceptions of fi nancial statement audits conducted by Big 4 accounting firms. Whereas prior studies almost exclusively used either archival data or experiments to implicitly derive the stakeholders perceptions, this study employed focus groups with fi nancial statement (1) preparers; (2) users consisting of bankers, financial analysts and non-professional investors; and (3) auditors to explicitly solicit perceptions regarding the financial statement audits conducted by Big 4 accounting firms. Some stakeholders opined that Big 4 audit quality has decreased because of the rush to hire staff because of increased Sarbanes – Oxley (SOX) work. However, stakeholders generally agreed that for organizations that are some combination of large, complex and / or multinational, the Big 4 accounting firms will be superior. For other organizations, second- and third-tieraccounting firms will provide the same quality audit as the Big 4 firms. One factor as to why there are fewer differences between the firms is that many of the non-Big 4 auditors are Big 4 firm alumni. Regardless of whether a Big 4 audit is actually superior, the stakeholders generally agreed that the Big 4 audit has a cachet that has a monetary value in the financial marketplaces. In terms of differences between the Big 4 firms, the auditors believe there is little difference in how they interpret GAAP or GAAS because there is open communication between the Big 4 firms. Alternatively, the preparers have witnessed differences, particularly, in GAAP interpretations. However, both the auditors and the preparers generally agreed that interpretation differences are wider between Big 4 and non-Big 4 firms.