Has SOX enhanced non-big 4 auditors' ability to deal with client pressure?
JL Kao, Y Li, W Zhang
Accounting Perspectives | Wiley | Published : 2013
We investigate whether non-Big 4 auditors have enhanced their ability to resist client pressure over accrual reporting following the Sarbanes-Oxley Act (SOX). Regressing abnormal accruals on proxies for economic bonding, we find that changes in the association, defined as (Post-Pre), are significantly negative, implying an improvement in auditor independence after SOX. Among non-Big 4 auditors, only Tier 3 auditors compromised reporting objectivity before SOX, but neither Tier 2 nor Tier 3 auditors yielded to client pressure after SOX. Evidence that these two groups of non-Big 4 auditors differ in the way they cope with client pressure in a loose regulatory regime highlights the importance o..View full abstract