Journal of Law, Finance, and Accounting > Vol 3 > Issue 2

Auditor Lobbying on Accounting Standards

Abigail Allen, Brigham Young University, USA, , Karthik Ramanna, Oxford University, UK and Harvard Business School, USA, , Sugata Roychowdhury, Boston College, USA,
Suggested Citation
Abigail Allen, Karthik Ramanna and Sugata Roychowdhury (2018), "Auditor Lobbying on Accounting Standards", Journal of Law, Finance, and Accounting: Vol. 3: No. 2, pp 291-331.

Publication Date: 21 Dec 2018
© 2018 A. Allen, K. Ramanna and S. Roychowdhury
JEL Codes: D72, G18, M41, M42, M48


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In this article:
1. Introduction 
2. Factors Influencing Auditor Lobbying on Reliability 
3. Data and Research Design 
4. Results 
5. Conclusion 
A. Tightening of the Big N Auditing Oligopoly, 1973–2006 
B. Details of the Process for Creating Auditor-Based Measures of Decreased Reliability 
C. Coding Rubric for Research-Assistant-Based Measures of Decreased Reliability 


We examine how Big N auditors’ changing incentives impact their comment-letter lobbying on U.S. GAAP over the first thirty-four years of the FASB (1973–2006). In particular, we focus on the influence of auditors’ lobbying incentives arising from two basic factors: managing expected litigation and regulatory costs and catering to clients’ preferences for flexibility in GAAP. We find evidence that auditor lobbying is driven by prevailing standards of litigation and regulatory scrutiny, but we find no evidence that catering to clients’ preferences for flexibility in GAAP drives auditor lobbying. Broadly, our paper offers the first large-sample descriptive analysis of the role of Big N auditors in the accounting standard-setting process.