Does office size matter in client acceptance decisions? Evidence from big 4 accounting firms

Yu Ting Hsieh, Chan Jane Lin, Hsihui Chang

Research output: Contribution to journalArticlepeer-review

Abstract

This study examines whether audit firm office size affects auditors’ risk tolerance in making client acceptance decisions. Analyzing publicly traded client portfolios of the Big 4 audit firms from 2003 to 2012, we find that large Big 4 offices are less likely to accept clients with high audit risk. This is particularly true when auditors face temporary capacity constraints arising from the exogenous demand shock by SOX 404 during the post-SOX 404/pre-AS5 period (2003–2007). However, the negative association between office size and risk consideration in client acceptance decisions attenuates when AS5 coupled with the financial recession results in a temporary capacity surplus in the post-AS5/financial crisis period (2008–2012).

Original languageEnglish
Pages (from-to)383-407
Number of pages25
JournalReview of Quantitative Finance and Accounting
Volume58
Issue number1
DOIs
Publication statusPublished - 2022 Jan

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance

Fingerprint

Dive into the research topics of 'Does office size matter in client acceptance decisions? Evidence from big 4 accounting firms'. Together they form a unique fingerprint.

Cite this