Does Audit Firm Size Matter? : A comparison of possible Earnings Management among the Big Four and Second-Tier Audit firms in Sweden

Sammanfattning

Date: 2 June 2026 Level: Bachelor's thesis in Business Administration, 15 credits Authors: Ninni Engström, Ebba Meier & Jesper Timståhl Title: Does Audit Firm Size Matter? - A comparison of possible Earnings Management among the Big Four and Second-Tier Audit firms in Sweden Supervisor: Christopher Nicol Keywords: Big Four, discretionary accruals, Earnings Management, Modified Jones Model, second-tier firms. Research Question: Does the level of Earnings Management differ between firms audited by the Big Four firms versus the second-tier firms in the Swedish market? Purpose: The main purpose of this thesis is to investigate whether audit quality differs between Big Four and second-tier audit firms in the Swedish market. The thesis addresses the gap by analysing data from 2021 to 2024 to test for differences in measurements using the Jones Modified Model and a regression model to examine discretionary accruals. The findings of this thesis may contribute to regulators, investors, share/stakeholder, and the auditing profession overall. Method: The study applied a positivist research philosophy with the quantitative method. Using the numerical data from Business Retriever to summarise the data in Excel. Compiling the result in RStudio with the applied Jones Modified Model for detecting discretionary accruals. Conclusion: The study finds somewhat higher levels of discretionary accruals among firms audited by second-tier firms compared to firms audited by the Big Four. Outcome does not reach statistical significance and results must therefore be interpreted with caution and the verdict cannot be definitive. Acknowledgement: As our bachelor's journey comes to an end with this thesis, we extend our warmest thanks to Umeå School of Business and Statistics for nurturing the academic environment that has been our foundation throughout this research endeavour. We want to show our heartfelt gratitude to our supervisor, Professor Christopher Nicol for directing honest and transparent feedback throughout the whole thesis. His insightful critiques and encouraging guidance have been a beacon of clarity and inspiration to steer our work with this thesis in the right direction.