Auditing and City - Level Human Capital
نویسندگان
چکیده
This study examines how human capital externalities affect audit markets in U.S. cities. A high level of human capital is predicted to improve the quality of labor in all audit firms, but a stronger effect is expected for the more “locally tied” non-Big 4 audit offices. Consistent with this, the quality of audited earnings improves as human capital increases, but the relation is stronger for non-Big 4 offices. In addition, as human capital increase, there are more non-Big 4 firms that perform audits, the total non-Big 4 market share is greater, and fees of nonBig 4 auditors increase, all of which are suggestive that non-Big 4 firms are more competitive with the Big 4 in cities with a higher level of human capital. JEL Classification: J44; M41; M42; R23
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