Characteristics Of The Public Accounting Firm

1412 Words Apr 12th, 2016 6 Pages
The characteristics of the public accounting firm performing the audit over an accelerated filer or large accelerated filer has a significant impact on the overall audit. Through research compiled by Ge and McVay, the purpose of this analysis will be to acknowledge the impact of firm size on the audit of internal controls in order for public companies to remain in compliance with SOX 404 regulations. Through their findings, the auditor characteristic of firm size has been proven to offer a more enhanced and comprehensive audit.
Audit Firm Size
Through the study carried out by Ge and McVay, the relationship between firm size and material weaknesses is revealed. For purposes of this study, the term ‘large audit firm’ refers to the Big 6 accounting firms of: BDO Seidman, Deloitte & Touche, Ernst & Young, Grant Thornton, KPMG, and PricewaterhouseCoopers. Ge and McVay reasoned that larger audit firms are expected to have more expertise and higher exposure to legal liability than smaller firms (Ge et al., 151). The research findings validated this hypothesis, proving large accounting firms to be positively correlated with internal control deficiencies. This asserts to the fact that larger firms have a greater depth of resources and are subjected to greater oversight, as exemplified by the PCAOB’s annual reviews (Ge et al., 153).
The key implications made by these studies underscores the enhanced level of audit procedures brought about by greater firm size…
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