J. Kenneth Reynolds

Does size matter? The influence of large clients on office-level auditor reporting decisions

Abstract Large clients create an economic dependence that may cause auditors to compromise their independence and report favorably to retain valuable clients. Economic dependence is measured as a clients size relative to the size of the office that contracts for the audit and issues the audit report. We find no evidence economic dependence causes Big Five auditors to report more favorably for larger clients in their offices. However, larger clients also pose greater litigation risk, and we do find that Big 5 auditors report more conservatively for larger clients, suggesting that reputation protection dominates auditor behavior.

Audit‐Firm Tenure and the Quality of Financial Reports*

This study examines whether the length of the relationship between a company and an audit firm (audit†firm tenure) is associated with financial†reporting quality. Using two proxies for financial†reporting quality and a sample of Big 6 clients matched on industry and size, we find that relative to medium audit†firm tenures of four to eight years, short audit†firm tenures of two to three years are associated with lower†quality financial reports. In contrast, we find no evidence of reduced financial†reporting quality for longer audit†firm tenures of nine or more years. Overall, our results provide empirical evidence pertinent to the recurring debate regarding mandatory audit†firm rotation — a debate that has, to date, relied on anecdotal evidence and isolated cases.

A Typology of Online Retail Assurance: Implications for Managers and Ideas for Future Research

Through qualitative data analysis, a typology of assurance provision elements is derived from an extensive analysis of the assurances currently being offered to online retailers through multiple assurance provision services (e.g., BBB online, WebTrust, and Verisign). A list of the 100 highest volume retail websites in the United States was obtained through lOOhot—an Internet monitoring service. Each of these Websites was then searched to identify the assurance providers employed in the online retailing sector. Results of the search revealed that of the top 100 retail sites surveyed, 51 exhibited some form of web assurance program. Using a content analysis procedure, the assurances offered through each assurance provider were reviewed. The analysis yielded five conceptually distinct assurance categories (i.e., e-tailer authenticity, order integrity, information protection, recourse, and business practice disclosure) encompassing a total of eight variations in online assurances.