Audit Market Concentration and Audit Quality: Evidence from Auditors of Earliest Announcers

초록

This study examines whether auditors of earliest announcers within a given industry and year provide higher audit quality and how this relationship varies with the level of audit market concentration. Using a large sample of U.S. firms audited by Big 4 auditors between 2003 to 2021, the results show that auditors of earliest announcers are associated with generally lower absolute value of discretionary accruals, thereby providing higher audit quality. Moreover, at moderate audit market concentration (more competition), while the overall audit quality improves, auditors of earliest announcers exhibit reduced audit quality likely due to pressures to report quickly for attracting market attentions. In contrast, when audit market concentration becomes excessive (less competition), the overall audit quality declines, but auditors of earliest announcers provide improved audit quality through enhanced their audit competency and independence. Taken together, this study contributes to understanding the influence of auditing earliest announcers on auditors’ overall audit quality within an industry, highlighting a complex nonlinear pattern in shaping audit quality under the pressures driven by the level of audit competition.