Do the big 4 and the second-tier firms provide audits of similar independence?

Abstract

In this paper, we examine the relation between the Big 4 and Second-tier auditors with auditor independence. Prior research suggests that the Big 4 audit firms are of higher independence than are non-Big 4 firms. The study also indicates a view that, both the public company respondents and audit firm respondents perceived the Big Four audit firms as having a higher auditor independence than other audit firms, which is consistent with findings of (Abu Bakar et al., 2005; DeAngelo, 1981b) Data were collected by two methods, a questionnaire survey (quantitative) and a number of semi-structured interviews (qualitative) to give both triangulation and amplification. The questionnaire was analysed using both conventional comparative statistics and multivariate methods. The sample of respondents comprised three groupings: accounts managers, financial managers and internal auditors working in Libyan public companies; managing partners, partners, audit supervisors and auditors working in audit firms in Libya; and controllers working for the Libyan Association of Auditors and Accountants (LAAA). The results of the study indicate two groups agreed that the big audit firms have enough financial resources and a large number of clients, which means they can resist client management pressure, and protect their reputation.