Assessing the Relationship Between Audit Firm Size and the Quality of Audit Engagements

Posted: Oct 22, 2022

• Maya Jennings
• Avery Rhodes
• Diego Ford

Abstract

The relationship between audit firm size and audit quality represents one of the most extensively examined topics in accounting research, yet conventional approaches have yielded inconsistent and often contradictory findings. Traditional studies have predominantly relied on outcome-based metrics such as financial restatements, audit opinions, and earnings quality measures, which provide limited insight into the underlying processes that constitute audit quality. This research introduces a paradigm shift by developing a comprehensive computational framework that examines audit quality through multiple dimensions previously unexamined in the literature. Our investigation addresses a fundamental gap in current understanding: while larger audit firms are presumed to deliver higher quality audits due to greater resources, specialized expertise, and stronger reputational concerns, the mechanisms through which firm size influences audit processes remain inadequately understood. The prevailing binary classification of firms as Big Four versus non-Big Four oversimplifies the complex organizational dynamics that shape audit quality. This study moves beyond this simplistic dichotomy to examine how various aspects of firm size—including personnel resources, technological capabilities, and structural complexity—interact to influence audit engagement quality.