Audit Firm Lobbying Before the Financial Accounting Standards Board: An Empirical Study

• Published in: Journal of accounting research 1984-10, Vol.22 (2), p.624-646
• Main Author: Puro, Marsha
• Format: Article
• Language: English
• Subjects: Accounting firms; Accounting interpretations; Accounting standards; Auditing standards; Audits; Business audits; Business structures; Disclosure; FASB standards; Financial accounting; Financial accounting standards; Financial audits; Lobbying; Musical agency; Procedures; Standardization; Statistical analysis; Studies
• ISSN: 0021-8456; 1475-679X
• DOI: 10.2307/2490668

Empirical results are provided on auditor lobbying behavior when new standards were being considered by the Financial Accounting Standards Board (FASB). Attention is focused on the costs and benefits for one class of lobbyists - public accounting firms. Analysis is based on 2 competing models that could be used to predict audit firms' lobbying behavior: 1. a model of the economics of regulation, and 2. an agency theoretic model. The former perspective leads to an emphasis on the private incentives of audit firms, while agency theory emphasizes the ways in which the interests of clients and auditors can overlap. Two types of FASB standards are examined, those requiring new disclosures to be made and those requiring standardization of accounting treatment. Test data include a sample of audit firms divided into 2 groups - those with publicly listed clients and those without - a sample of 2,263 publicly listed clients, and accounting data pertaining to the clients' 1975 statements. Results indicate that standardization and disclosure issues are different kinds of events and elicit different kinds of responses from auditors.