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Political StandardsCorporate Interest, Ideology, and Leadership in the Shaping of Accounting Rules for the Market Economy$
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Karthik Ramanna

Print publication date: 2015

Print ISBN-13: 9780226210742

Published to Chicago Scholarship Online: May 2016

DOI: 10.7208/chicago/9780226210889.001.0001

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The Shrinking Big N

The Shrinking Big N

Rule-Making Incentives of the Tightening Oligopoly in Auditing

Chapter:
(p.68) 4 The Shrinking Big N
Source:
Political Standards
Author(s):

Karthik Ramanna

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226210889.003.0004

This chapter provides evidence on the role of auditors in accounting rulemaking – particularly the Big Four audit firms that dominate the industry. These large audit firms are among the few players that could provide broad stewardship of public interests in accounting rulemaking. But the evidence suggests that they are instead focused on their own interests. In their lobbying on accounting rules, the auditors have sought to protect their wealth and income from political and legal scrutiny. Prevailing standards of litigation and regulatory enforcement are key explanatory variables for the nature of auditor lobbying in accounting rulemaking. One likely consequence is the increasing incidence of accounting rules that are “check-the-box” or compliance-based – a phenomenon identified by the Securities & Exchange Commission as a major source for concern in U.S. capital markets.

Keywords:   auditors, big four, fair-value accounting, liability, risk aversion

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