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Article
Publication date: 13 February 2025

Shu Lin, Lizhong Hao and Shengqiang Liu

The purpose of this study is to examine the audit efficiency and timeliness of Big 4 auditors relative to non-Big 4 auditors, where audit efficiency is defined as the auditor’s…

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Abstract

Purpose

The purpose of this study is to examine the audit efficiency and timeliness of Big 4 auditors relative to non-Big 4 auditors, where audit efficiency is defined as the auditor’s ability to conduct an audit more quickly or with fewer resources while still achieving effective outcomes.

Design/methodology/approach

The authors use audit report lags (also referred to as audit delay) as a proxy for audit timeliness and efficiency, controlling for audit quality and audit fees (audit input). The authors use a propensity-score matching (PSM) approach to construct a pseudorandom sample in which each non-Big 4 client is matched with a similar Big 4 client based on their characteristics and audit quality, to control for potential endogeneity related to self-selection bias in this setting.

Findings

The authors find that non-Big 4 auditors are associated with shorter audit delays than Big 4 auditors. Additional analysis of the matched sample reveals that non-Big 4 auditors charge lower fees than Big 4 auditors do after controlling for the Big 4 premium. These findings do not support the notion that Big 4 auditors conduct audits more efficiently than non-Big 4 auditors do.

Originality/value

These results could be of interest to the management of public firms, audit committees, investors and regulators; provide valuable insights into the performance of audit firms in varying client environments; and contribute to a better understanding of audit timeliness and efficiency.

Details

Managerial Auditing Journal, vol. 40 no. 3
Type: Research Article
ISSN: 0268-6902

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