Resignations by the Big 4 and the Market for Audit Services

• DOI: 10.2308/acch.2006.20.2.97
• Publication Date: 2008-03-28T23:42:46Z
• Authors: Dasaratha V. Rama; William J. Read
• Keywords: Successor cardinal; Big Four; Going concern; Sarbanes–Oxley Act

Following enactment of the Sarbanes-Oxley Act (SOX) 2002, Big 4 auditors claimed to have a more conservative policy regarding client retention and acceptance decisions. In this paper, we examine resignations audit firms in periods before after SOX. We find that resigned from clients 2003 than 2001, group had significantly lower measures financial stress. Our results are robust adjustments for differences bankruptcy probability between 2001. also relative increases fees charged by successor following resignation predecessor higher 2001; with non-Big firm resignation, significant fee discount 2001 but not 2003. Overall, support view much post-Enron/SOX period immediately preceding period.