Litigation Risk and the Financial Reporting Credibility of Big 4 versus Non‐Big 4 Audits: Evidence from Anglo‐American Countries

摘要: Prior research suggests that Big 4 auditors provide higher quality audits in the U.S. order to protect firm's brand name reputation and avoid costly litigation. In this study, we examine whether perceived of a audit is related auditor litigation exposure or concerns. Specifically, utilize an estimable proxy for financial reporting credibility—the ex ante cost equity capital—to are as providing (relative non‐Big auditors) U.S., less litigious (but economically similar) environments other Anglo‐American countries during 1990–99 period. We find associated with lower capital auditees but not Australia, Canada, U.K. Our findings suggest it rather than protection drives quality.