TY  - JOUR
AB  - Purpose– The purpose of this paper is to examine whether client‐specific litigation risk affects the audit quality differentiation between Big N and non‐Big N auditors. Specifically, the authors examine whether higher quality audits of Big N auditors relative to non‐Big auditors is more pronounced for clients with high litigation risk than for clients with low litigation risk.Design/methodology/approach– The authors develop the hypothesis based on auditors' potential monetary and reputational losses, collect the data of US listed companies from the Compustat and CRSP databases, and conduct regression analyses.Findings– The authors find that the higher effectiveness of Big N auditors over non‐Big N auditors in constraining earning management is greater for high litigation risk clients than for low litigation risk clients, suggesting that clients' high litigation risk can force big auditors to perform more effectively.Originality/value– This paper contributes to the literature by providing novel evidence on the effect of client‐specific litigation risk on the audit quality differentiation between Big N and non‐Big N auditors. The authors' findings complement the extant research on the relationship between the audit quality differentiation and country‐level litigation risk.
VL  - 26
IS  - 4
SN  - 0268-6902
DO  - 10.1108/02686901111124639
UR  - https://doi.org/10.1108/02686901111124639
AU  - Sun Jerry
AU  - Liu Guoping
PY  - 2011
Y1  - 2011/01/01
TI  - Client‐specific litigation risk and audit quality differentiation
T2  - Managerial Auditing Journal
PB  - Emerald Group Publishing Limited
SP  - 300
EP  - 316
Y2  - 2024/04/25
ER  -