Did the 1998 Merger of Price Waterhouse and Coopers & Lybrand Increase Audit Quality?

• 成果类型: Article
• 署名作者: Choi, Jong-Hag; Kim, Seil; Raman, K. K.
• 署名单位: Seoul National University (SNU); City University of New York (CUNY) System; Baruch College (CUNY); University of Texas System; University of Texas at San Antonio
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12290
• 发表日期: 2017
• 页码: 1071-1102
• 关键词: nonaudit service fees; big 4; pricewaterhousecoopers merger; industry expertise; market share; firm mergers; office size; earnings; client; IMPACT

摘要

We examine the effects of the 1998 merger of Price Waterhouse (PW) and Coopers & Lybrand (CL) on the audit quality of the merged firm PricewaterhouseCoopers (PwC) at both the firm and office levels, where audit quality is surrogated by the auditor's propensity to issue a going-concern opinion, clients' likelihood of meeting or beating analysts' earnings forecasts, and clients' accrual quality. At the firm level, we find that the merger increased audit quality for PwC relative to the audit quality of the other Big N firms. At the office level, our findings, albeit mixed, collectively suggest that the improvement in firm-level audit quality was likely driven by the improvement in audit quality at PwC's overlapping offices, that is, offices in cities where both PW and CL had separate offices prior to the merger. Further, our findings suggest that although the PW/CL merger increased auditor concentration in local audit markets with PwC overlapping offices, the merger improved (rather than hurt) audit quality in those markets. Overall, our study contributes to the extant sparse literature on the effect of Big N mergers on audit quality, and is of potential interest to regulators.