auditor size and audit quality（审计师的大小和审计质量）.pdf

Journal of Accounting and Economics 3 (1981) 183-199. North-Holland Publishing Company AUDITOR SIZE AND AUDIT QUALITY Linda Elizabeth DeANGELO* University of Pennsylvania, Philadelphia, PA 19104, USA Received May 1981, final version received July 1981 Regulators and small audit firms allege that audit firm size does not affect audit quality and therefore should be irrelevant in the selection of an auditor. Contrary to this view, the current paper argues that audit quality is not independent of audit firm size, even when auditors initially possess identical technological capabilities. In particular, when incumbent auditors earn client- specific quasi-rents, auditors with a greater number of clients have more to lose by failing to report a discovered breach in a particular clients records. This collateral aspect increases the audit quality supplied by larger audit firms. The implications for some recent recommendations of the AICPA Special Committee on Small and Medium Sized Firms are developed. 1. Introduction Large audit firms are increasingly criticized on the basis of size alone both by regulators and by smaller firms within the accounting profession. 1 The allegation underlying these criticisms is that professional standards impart a homogeneity across different sized audit firms such that audit quality is independent of audit firm size. For example, employing the assumption that audit quality is relatively homogeneous across audit firms, Arnett and Danos (1979) argue that size alone should not be a prime determinant of future success (p. 8, emphasis added). Furthermore, they