Abstract

This research examines what proportion of Big Four auditors underperform in integrated audit settings and why. Incorporating the inverse relation between detection risk and assessed risk of material misstatement (RMM) per the classic audit risk model, we create an RMM coverage ratio to measure how many times the total audit effort expended covers pre-existing RMM—the higher the ratio, the larger the margin for errors. We then partition the RMM coverage ratios in each industry into Deciles (0–9). Empirical analyses corroborate that, given the risk-based audit approach strictly executed, only the Big Four auditors of higher Deciles (2–9) increase the likelihood of integrated audit effectiveness. This evidence indicates that due to a small margin for errors (e.g., RMM coverage ratios ≤ 2.31), 20% of Big Four auditors are less likely to adequately assess or address risks to deliver an engagement, breaking the Big Four brand’s halo effect precisely.

中文翻译：

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精准打破四大品牌光环效应：来自RMM覆盖率与综合审计有效性关系的证据

摘要

本研究调查了四大审计师在综合审计环境中表现不佳的比例以及原因。根据经典审计风险模型，结合发现风险和评估的重大错报风险 (RMM) 之间的反比关系，我们创建了 RMM 覆盖率来衡量审计工作总支出覆盖预先存在的 RMM 的次数——比率越高，误差幅度越大。然后，我们将每个行业的 RMM 覆盖率划分为十分位数 (0-9)。实证分析证实，鉴于严格执行基于风险的审计方法，只有较高十分位数 (2-9) 的四大审计师才能提高综合审计有效性的可能性。该证据表明，由于误差幅度较小（例如，RMM 覆盖率≤ 2.31），20% 的四大审计师不太可能充分评估或解决交付业务的风险，从而精确打破四大品牌的光环效应。