Evidence on (the lack of) audit-quality differentiation in the private client segment of the Belgian audit market?.

Abstract

Auditor size is used as audit-quality proxy. Prior evidence on audit-quality differentiation between big 6 and non-big 6 auditors in the private client segment of the Belgian audit market is mixed. In this paper we investigate whether these mixed results tem from the inability of the dichotomous Big6/non-Big6 variable to capture auditor-size differences in a less concentrated audit market. To that end we examine whether alternative continuous measures of audit-firm size (i.e. auditor market hare, number of audit-firm clients, number of partners in the audit firm, total assets and operating profit of the audit firm) have a constraining impact on earnings management in a large sample of privately held Belgian companies (n = 1302). Overall, we do not find evidence that is supportive of quality differentiation in the private client segment of the Belgian audit market.