Summary of variables definitions
| Variable | Definition |
|---|---|
| Panel A: Audit firm classification | |
| B4 | The audit firms (1) Deloitte and Associes; (2) ERNST and YOUNG; (3) KPMG and (4) Price Waterhouse Coopers (PwC) are classified as Big4 audit firms |
| S1 | Internationally affiliated audit firms: Baker tilly, BDO, Crowe Howarth, Grant Thornton, Mazars, Nexia, PKF, RSM and BM&A |
| S2 | Audit firms not identified B4 or S1 recognized as local auditing firms |
| Panel B: Independent variables (joint audit combinations) | |
| B4B4 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising Two (2) Big4 audit firms, then it is scored One (1); otherwise, it is scored zero (0) |
| B4S1 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising One Big4 and One international auditing firm, then it is scored One (1); otherwise, it is scored zero (0) |
| B4S2 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising One Big4 and One local auditing firm, then scored One (1); otherwise, scored zero (0) |
| S1S1 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising Two international auditing firms, then scored One (1); otherwise scored zero (0) |
| S1S2 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising One international and One local auditing firm, then scored One (1); otherwise scored zero (0) |
| S2S2 | If the external audit of firm I, in year t, is conducted by a joint audit comprising Two local auditing firms, then scored One (1); otherwise scored zero (0) |
| Panel C: Dependent variables | |
| ARL | The number of days from the end of the financial year (i.e. 31 December) of firm i in year t to the date the independent audit report is signed and issued |
| Panel E: Control variables | |
| Sqrt_Sub | Square root of the number of subsidiaries of firm I in year t |
| LOSS | an indicator variable that takes the value of 1 if net income is negative, and 0 otherwise |
| ROA | Ratio of net income of firm I reported for year t to the total assets of firm i at the end of year t |
| LEV | Ratio of total debt to total assets of firm I at the end of year t |
| SHARES | The percentage of closely held shares |
| Restatement | An indicator variable equal to 1 if a financial statement restatement has been reported in the current year and 0 otherwise |
| OPINION | Firm i in year t is scored One (1) if the audit opinion is a qualified, adverse or disclaimer opinion; otherwise, it is scored zero (0) |
| MTB | The ratio of the market value of equity of firm i at the end of year t to the book value of equity of firm i at the end of year t |
| BUSY | Equals One for firms with a fiscal year-end date between 12/31 and January, zero otherwise |
| LNTA | Natural logarithm of total assets of firm i at the end of year t |
| CHANGE | 1 if the client firm changed auditor during the year, and 0 otherwise |
| Sqrt_Age | Square root of the number of years since establishment |
| IFRS | In year t, a firm receives a score of One (1) if it adopts IFRS standards; otherwise, it is assigned a score of zero (0) |
| SPEC | Dummy variable equal to 1 if at least One audit firm is an industry specialist and zero otherwise |
| Variable | Definition |
|---|---|
| B4 | The audit firms (1) Deloitte and Associes; (2) |
| S1 | Internationally affiliated audit firms: Baker tilly, BDO, Crowe Howarth, Grant Thornton, Mazars, Nexia, PKF, |
| S2 | Audit firms not identified B4 or S1 recognized as local auditing firms |
| B4B4 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising Two (2) Big4 audit firms, then it is scored One (1); otherwise, it is scored zero (0) |
| B4S1 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising One Big4 and One international auditing firm, then it is scored One (1); otherwise, it is scored zero (0) |
| B4S2 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising One Big4 and One local auditing firm, then scored One (1); otherwise, scored zero (0) |
| S1S1 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising Two international auditing firms, then scored One (1); otherwise scored zero (0) |
| S1S2 | If the external audit of the firm, I in year t, is conducted by a joint audit comprising One international and One local auditing firm, then scored One (1); otherwise scored zero (0) |
| S2S2 | If the external audit of firm I, in year t, is conducted by a joint audit comprising Two local auditing firms, then scored One (1); otherwise scored zero (0) |
| The number of days from the end of the financial year (i.e. 31 December) of firm i in year t to the date the independent audit report is signed and issued | |
| Panel E: Control variables | |
| Sqrt_Sub | Square root of the number of subsidiaries of firm I in year t |
| an indicator variable that takes the value of 1 if net income is negative, and 0 otherwise | |
| Ratio of net income of firm I reported for year t to the total assets of firm i at the end of year t | |
| Ratio of total debt to total assets of firm I at the end of year t | |
| The percentage of closely held shares | |
| Restatement | An indicator variable equal to 1 if a financial statement restatement has been reported in the current year and 0 otherwise |
| OPINION | Firm i in year t is scored One (1) if the audit opinion is a qualified, adverse or disclaimer opinion; otherwise, it is scored zero (0) |
| The ratio of the market value of equity of firm i at the end of year t to the book value of equity of firm i at the end of year t | |
| Equals One for firms with a fiscal year-end date between 12/31 and January, zero otherwise | |
| Natural logarithm of total assets of firm i at the end of year t | |
| 1 if the client firm changed auditor during the year, and 0 otherwise | |
| Sqrt_Age | Square root of the number of years since establishment |
| In year t, a firm receives a score of One (1) if it adopts | |
| Dummy variable equal to 1 if at least One audit firm is an industry specialist and zero otherwise | |
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