Big 4 conservatism around the world

Richard CHUNG, Michael Arthur FIRTH, Jeong Bon KIM, Lei PANG

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3 Citations (Scopus)


Conservatism is a long-established underlying principle of accounting but its implementation has come under the spotlight in recent years following the spate of well-publicized corporate collapses in the U.S. and elsewhere. Previous studies have shown that the Big 4 audit firms are more conservative than the non-Big 4 in the U.S. The current study examines whether the U.S. findings extend to other countries. In doing so, we make use of a relatively new measure of conservatism, namely, the C-score developed by Khan and Watts. We find that the conclusion drawn from U.S. studies, namely that the Big 4 are more conservative, extends to the international setting but only under certain conditions. Specifically, the Big 4 are more conservative in those countries where litigation and reputation risks, broadly defined, are high. This increase in conservatism represents a rational response by the Big 4 auditors to their greater exposure, vis-a-vis the non-Big 4 auditors, to litigation and reputation loss in those countries.
Original languageEnglish
Title of host publicationCorporate Governance in Emerging Markets, CSR, Sustainability, Ethics and Governance
PublisherSpringer Berlin Heidelberg
Number of pages42
ISBN (Print)9783642449543
Publication statusPublished - 1 Jan 2014


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