Does Audit Firm Size Contribute to Audit Quality? Evidence from Two Emerging Markets

[[abstract]]This study investigated whether the Big N audit firms in emerging markets can provide audits of high quality and mitigate information risk, by comparing the audit quality of Big N audit firms in Taiwan with those in China. The two countries share a similar cultural background and engage in frequent economic exchange; however, they have different legal systems and institutional environments. This study followed previous research in the use of bid-ask spread and discretionary accruals as proxy variables for information asymmetry and audit quality. Our results indicate that politico-economic differences between Taiwan and China influence the effectiveness of independent auditors when it comes to the mitigation of information asymmetry. Big N audit firms in Taiwan helped to mitigate information asymmetry and provided audit services of higher quality, whereas Big N firms in China were better able to constrain earnings management. Our results indicate that market concentration and market share have a stronger influence on reputation incentive and audit quality than does the size of an audit firm.[[sponsorship]]中國文化大學商學院會計學系曁研究所; 中華財政學會[[notice]]補正完畢[[conferencetype]]國內[[conferencedate]]20130510~20130510[[booktype]]電子版[[iscallforpapers]]Y[[conferencelocation]]台北市, 台灣[[countrycodes]]TW