Doctoral Dissertations

Date of Award


Degree Type


Degree Name

Doctor of Philosophy


Business Administration

Major Professor

Linda A. Myers

Committee Members

Lauren M. Cunningham, Larry A. Fauver, Roy Schmardebeck


Big 4 auditors perform most audits of companies that issue initial public offerings (IPOs). Regulators have expressed interest in increasing IPO audit market competition and a growing body of evidence suggests that Second-Tier auditors could provide IPO audit service quality comparable to that of Big 4 auditors. However, there exists limited empirical evidence on whether IPO audit service quality varies with auditor type. I investigate whether IPO audit service quality differs between Big 4 and Second-Tier auditors for a sample of small and mid-sized IPOs from 2005 through 2019. I find that Big 4 clients are associated with lower pre-IPO discretionary accruals, suggesting that Big 4 auditors are better able to constrain the opportunistic financial reporting decisions of management. I also examine whether the extent of accounting comments in Securities and Exchange Commission (SEC) comment letters on the registration statement varies by auditor type. I find that Big 4 clients receive fewer initial accounting comments and that they more effectively address these comments, suggesting that Big 4 auditors are better able to advise clients on achieving compliance with SEC reporting standards. Collectively, my findings suggest that Big 4 auditors provide higher IPO audit service quality than Second-Tier auditors. However, I find that Big 4 clients are not less likely to be sued in IPO-related litigation and that they pay a considerable audit fee premium relative to Second-Tier clients. These findings should be of interest to those who influence IPO auditor selection and must consider the viability of Second-Tier auditors as an alternative to the Big 4. In addition, my findings should be informative to regulators concerned that the lack of audit market competition may not provide sufficient incentives for Big 4 auditors to deliver high quality audits.

Files over 3MB may be slow to open. For best results, right-click and select "save as..."

Included in

Accounting Commons