Monday, August 13, 20014:005:30 PM

Concurrent Session 4Audit Quality

Differences in Audit Quality

among Audit Firms: An Examination
Using Bid-Ask Spreads
Paul C. Schauer
Bowling Green State University

Abstract
Prior research has provided a great
deal of evidence that large audit firms
produce higher quality audits and therefore provide more credibility to their clients financial statements than smaller
audit firms. It is generally believed large
audit firms produce higher quality audits
in order to maintain their reputation or
minimize litigation resulting from their
deep pockets. The audit quality literature

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has generally defined large as the international audit firms referred to as the Big
8, Big 6, or Big 5 depending on the time
frame of the study. Using bid-ask spread
as a proxy for audit quality, this paper
reexamines the definition of large audit
firms used in the audit quality literature
to determine if the definition of a large
audit firm should include not only the Big
6, but also the National audit firms.