Section 301 of the Corporations Act requires companies to have their financial reports audited. Academic research suggests that Big-4 auditors charge higher fees than other auditors and their audit reports are more credible than those issued by other auditors. Required: In times of economic recession would you expect: the demand for audits to increase or decrease? clients to shift from large (Big-4) auditors to smaller auditors, or from smaller auditors to Big- 4 auditors? Why or why not?
Section 301 of the Corporations Act requires companies to have their financial reports audited. Academic research suggests that Big-4 auditors charge higher fees than other auditors and their audit reports are more credible than those issued by other auditors. Required: In times of economic recession would you expect: the demand for audits to increase or decrease? clients to shift from large (Big-4) auditors to smaller auditors, or from smaller auditors to Big- 4 auditors? Why or why not?
Chapter1: Comprehensive Cases
Section1.11: New Century Financial Corporation
Problem 3Q
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Section 301 of the Corporations Act requires companies to have their financial reports audited. Academic research suggests that Big-4 auditors charge higher fees than other auditors and their audit reports are more credible than those issued by other auditors.
Required:
In times of economic recession would you expect:
- the demand for audits to increase or decrease?
- clients to shift from large (Big-4) auditors to smaller auditors, or from smaller auditors to Big-
4 auditors? Why or why not?
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