Annals of Business, Finance and Management

Attributes of auditing a non-registered Italian firms


Ajello Bonetti and Fontana Pacino

This study investigates the audit quality of Big-x auditing companies within the context of the Italian non-listed firms by examining (i) auditing ability to restrict accrual-based earnings management and (ii) the level of auditing independence. The Italian non-listed firms provide a unique set of auditing environment with multiple layers of audit quality compared to other European auditing environments. Accounting related data are collected from the Bureau van Dijk AIDA Database, and the data sample includes 18,721 firms with 168,489 firm-year observations. The findings suggest that Big-x auditing companies, and in general also non-Big-x auditors, are more efficient than statutory auditors on restricting accrual-based earnings management initiatives. Still, Big-x auditors’ engagement on a financial audit increases the likelihood of a modified audit opinion to be issued. 


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