BIG 4 FIRMS VS SECOND TIER

DO THEY IMPACT ON INDEPENDENCY AND LENDER’S DECISION?

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Radzikri Nugroho 130314
Zia Rizky R. 130314203
Wirawan Santoso 130314
Cynthia Wijaya 130314
 IS COMMERCIAL LENDING AFFECTED BY KNOWLEDGE OF AUDITOR
SWITCHES FROM BIG 4 FIRMS TO REGIONAL FIRMS?

1. Prior studies focused on the effect of switching from Big 4 firms

to smaller ones.
Research 2. No prior research has examined the effects on commercial
Background lending decision of switches from Big 4 to smaller audit firms.

Research Commercial lenders rely on audit firms’ financial statement

opinions in making their lending decisions. Companies changing
Problem Audit Firms may cause the lenders to wonder why this occured.

Over the years, many companies have decided to switch the certified public accounting (CPA)
firms that conduct their annual outside audits. Often, these changes are from Big 4 audit firms
to smaller ones (Cullinan et al., 2012)
 whether knowledge (reasons)
about companies switching
Dependent:
whether lending decisions auditors from Big 4 Firms to
highly influenced by Regional Firms affects
companies that did switch
their auditors from Big 4 Commercial Lending Decisions.
firms to regional firms.
Independent:
no switching condition,
switching without reason,
switching to obtain lower
fees, switching by
wanting better
services/more expertise
audit firms (second tier)
RESULT, SUMMARY & CONCLUSION
SUMMARY
Group (and Mean risk Mean probability
sample size) assessment of extending - Neither risk assessment nor
probabilities of granting credit
credit differ for companies that switch
NO-SWITCH 5.15 0.66 auditors from Big 4 firms ro
(n=24) regional firms as compared to
companies that do not switch
auditors.
SWITCH/NO- 5.37 0.66
REASON (n=19) - Company that did switch
auditors did not influenced
lending decision.
SWITCH/LOWER- 5.71 0.56
FEES (n=17) CONCLUSION
When applying for bank loan,
SWITCH/MORE- 5.43 0.63 company did not to be concerned
EXPERTISE (n=23) about having auditors switched
from big 4 to regional firms.
For risk assessement risk, the rating scale ranged from
1 = “very low risk” to 10 = “very high risk”.