تاثیر 4 مشاور مشهور در تاخیر گزارش حسابرسی و اصلاحیه ها The impact of Big 4 consulting on audit reporting lag and restatements

1. Introduction This paper contributes to the ongoing discussion regarding regulating the scope of services offered by public accounting firms. Specifically, we explore the question: Does the regrowth of sizable consulting practices by the Big 4 influence audit reporting lag and restatement rates? The question is motivated by concerns raised by regulators and accounting scholars over the potential impact of the recent burgeoning of Big 4 consulting practices. The US Public Company Accounting Oversight Board (PCAOB) Chairman James Doty summarized these concerns when he commented on growing Big 4 consulting by saying that, “We simply can’t be unaware of the implications for independence, objectivity, skepticism, audit quality” (Rapoport, 2013). Such concerns are a serious matter, as recent PCAOB inspection reports find significant audit quality issues at each Big 4 firm (PCAOB, 2013a, 2013b). Accounting scholars have raised similar concerns; Hermanson (2009) noted that, “The reemergence of consulting poses a significant threat to long-term audit quality”, while Fuerman and Kraten (2009) called for more empirical research investigating whether consulting threatens the audit quality. We present evidence suggesting that growing Big 4[1] consulting practices, measured as the ratio of aggregate consulting practice fees per year at the firm level to total aggregate fees from all services at the firm level, increase audit reporting lag (ARL) and client restatements. The data used comprise the population of Securities and Exchange Commission (SEC)-registered US audit clients of the Big 4. During 2000 through 2009, three of the Big 4 firms divested and subsequently redeveloped their consulting practices, whereas Deloitte retained their consulting arm. Capitalizing on this natural experiment, we analyze longitudinal data on Big 4 audit clients from 2000 through 2009, to determine their annual ARL and restatement rate. This analysis controls for year and industry effects, as well as client and auditor office factors, that prior work suggests influences ARL and financial restatements (Ettredge et al., 2006; Whitworth and Lambert, 2014; Stanley and DeZoot, 2007; Francis and Yu, 2009). The findings are robust to alternative specifications of the sample, for example, excluding restatements because of technical generally accepted accounting principles (GAAP) changes. These findings support Zeff’s (2003b) and Wyatt’s (2004) intuition that erosion of professional focus by audit firms’ expansion into consulting is detrimental to the audit practice. Further, the results contribute empirical findings to the ongoing theoretical discussion on the changing nature of professional focus within the accounting field (Malsch and Gendron, 2013). The findings extend prior research by theoretically approaching the scope-of-services issue through the lens of a reduced professional focus rather than conflict-of-interest concerns. Using a sample spanning the 2000-2009 time period permits controlling for conflicts of interest as Sarbanes–Oxley (SOX) regulations are implemented. Additionally, by using, restatements and ARL as our variables of interest, we provide less ambiguous outcome measures than much of the prior literature, which typically used accrual quality, level of audit fees and/or measures of investor perceptions (Ruddock et al., 2006; Ashbaugh et al., 2003; Pany and Reckers, 1987).