Abstract This study examines the role of smaller CPA firms in the market for audits of public companies. It provides information on the number of firms that do fewer than ten public audits, the types of clients they have, and the types of reports they issue. Data on 9,691 audits of domestic public companies were collected in 1986. Findings include the identification of 994 smaller CPA firms with low activity in the public company sector including a significant number of firms doing only one public audit. The clients of such low activity firms come from a broad spectrum of industries with several concentrations and include large as well as small companies. A weak test of DeAngelo's theory about auditor size and audit quality found no relationship between activity level and patterns of reports.
Wyer et al. (Tue,) studied this question.