Client Consulting Opportunities and the Reemergence of Big 4 Consulting Practices: Implications for the Audit Market

• 成果类型: Article
• 署名作者: Cowle, Elizabeth N.; Kleppe, Tyler J.; Moon, James R., Jr.; Shipman, Jonathan E.
• 署名单位: Colorado State University System; Colorado State University Fort Collins; University of Kentucky; University System of Georgia; Georgia Institute of Technology; University of Arkansas System; University of Arkansas Fayetteville
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2019-0557
• 发表日期: 2022
• 页码: 135-168
• 关键词: NONAUDIT SERVICES; CONFERENCE CALLS; earnings; QUALITY; INDEPENDENCE; TENURE; COMPETITION; IMPACT; pcaob

摘要

Consulting service revenues recently surpassed audit revenues as the primary income source for the largest accounting firms. Since SOX limits the provision of consulting services to audit clients, this shift in revenues implies that firms and many clients likely choose between audit and consulting relationships. We explore the implications of this by developing and validating a measure of client-level consulting needs that can likely be fulfilled by accounting firms, which we refer to as ''consulting opportunities.'' As predicted, we find that consulting opportunities relate positively to auditor switches. We also find that consulting opportunities relate negatively to subsequent Big 4 auditor selection-the firms focusing most on consulting-but we fail to find evidence that consulting opportunities relate to deteriorations in audit quality. Together, our results suggest that legislation limiting firms' ability to deliver consulting services to audit clients may have reduced audit market concentration without discernably impacting quality.