THE IMPACT OF BIG FOUR AUDIT FIRMS AND OTHER AUDIT FIRMS ON ACCRUAL QUALITY

ABSTRACT

The rapid globalization of commercial activities has necessitated the efficient functioning of capital

markets worldwide. The effective operation of these markets relies heavily on the transparent and

reliable reporting of financial statements. One of the indicators reflecting the faithful representation of

financial statements is accrual quality. Accrual quality refers to the degree to which accounting accruals

accurately reflect future cash flows—in other words, how well they predict those flows. Although

various models have been proposed in the literature to measure accrual quality, no universally accepted

method has been established. This study employs a hybrid model that combines the foundational

approach of Dechow and Dichev (2002) with the enhancements proposed by Francis et al. (2005) and

Kothari et al. (2005), which are widely used in the literature. The primary aim of this research is to

examine whether the type of audit firm—specifically, international Big Four audit firms (PwC, Deloitte,

KPMG, EY) versus other audit firms—has a significant effect on the accrual quality of audited

companies. The study analyzes data from 49 manufacturing companies listed on Borsa Istanbul (BIST)

over the period 2021–2024. The data were analyzed using panel data methods via STATA 17. In the

empirical model, the dependent variable is scaled accrual quality, while the independent variables

include the annual change in revenues (scaled_Δrevenue), property, plant, and equipment (scaled_ppe),

and return on assets (ROA). The results indicate that ROA has a positive and statistically significant

effect on accrual quality across both audit firm groups. Additionally, the annual change in revenues is

statistically significant only for firms audited by Big Four firms, suggesting that higher audit quality

contributes to more transparent and predictable financial reporting. On the other hand, property, plant,

and equipment were found to have no statistically significant impact on accrual quality in either group.

Overall, the study finds no statistically significant relationship between audit firm type and accrual

quality.