Big 4, 'Next 4', and Article Review

Open, View, and/or
Download this Document

Total Length: 843 words ( 3 double-spaced pages)

Total Sources: 1

Page 1 of 3



Analyses were performed to determine the prevalence of resignations among the different types of accounting firms; the relationship between tier status and audit fee; and the likelihood of engaging lower-tier audit firms when audit firms have resigned.

5) Implications, Findings, and Conclusions

The researchers found that there was a significantly higher likelihood of Next 4 accounting firms to resign than Big 4 or Smaller Firms. Big 4 firms are also found to charge higher fees than other firms, while Next 4 and Smaller Firms do not show a significant differentiation in the fees that they charge.

It is also found that, upon resignation of a firm, the client is more likely to engage a successor from a lower tier than when accounting firms are dismissed. In general, it is found that auditor realignment decisions are mainly client-based.

The implication of these findings is that more meaningful insights into the auditing market might be obtained by classifying audit firms into a three-tier market rather than the Big4/Non Big-4 dichotomy.

There are two main conclusions from the study. The first is that the lower incidence of resignations by Big 4 firms than Next 4 firms is somewhat surprising. It is suggested that the materially higher fees charged by these firms is an induction for "less desirable" clients to dismiss their auditors.

Stuck Writing Your "Big 4, 'Next 4', And" Article Review?

View All Our Example Big 4, 'Next 4', and Article Review

Have A Custom Example Essay Written

This is an important springboard for further study.

Further, a possible explanation for the higher prevalence of resignations by Next 4 firms as compared with Smaller firms is that they may face a higher demand than capacity, as they represent a higher tier status than Smaller Firms, but do not charge significantly higher fees. This higher demand then also encourages a higher level if resignation by these firms.

6) Personal Observations

While the article appears relevant and interesting, particularly in terms of the official use of auditing firms by companies, I am somewhat surprised by the lack of a satisfactory conclusion. The article appears to end rather abruptly while discussing the differentiation among Big 4, Next 4, and smaller firms in terms of fees as related to the level of services provided. I would have expected a specific section that addresses a summary and concluding remarks, which lists specific areas of future study. Just one implication for future study is mentioned in this section.

Furthermore, I would have expected some focus on the discrepancy between demand and capacity for Next 4 firms, where demand could be mitigated by charging higher fees. Although….....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Big 4 'Next 4' And" (2010, October 02) Retrieved June 5, 2026, from
https://www.aceyourpaper.com/essays/big-4-next-4-8090

Latest MLA Format (8th edition)

Copy Reference
"Big 4 'Next 4' And" 02 October 2010. Web.5 June. 2026. <
https://www.aceyourpaper.com/essays/big-4-next-4-8090>

Latest Chicago Format (16th edition)

Copy Reference
"Big 4 'Next 4' And", 02 October 2010, Accessed.5 June. 2026,
https://www.aceyourpaper.com/essays/big-4-next-4-8090
   

Open, View, and/or
Download this Document
order custom essay example