Subject The article addresses external audit of banks and the influence of bank audit on bank activities, analyzes factors impacting the bank profitability, and the degree of influence of audit firms on bank operations. Objectives The aim is to review various classifications of audit firms and their impact on profitability of bank assets. Methods I employ a regression analysis using linear models with fixed individual effects. The Mobile database that includes various financial and accounting indicators of Russian banks from 2005 to 2016 serves a major resource for the study. Results The fact that an audit firm belongs to the Big Four has a positive impact on the profitability of bank assets in the next period. The market share and specialization of the audit firm have no effect on this indicator. Conclusions Every year banks face the choice of an auditing company. The choice in favor of the Big Four is quite justified: large banks benefit from the reputation of the audit firm, which influences their profitability despite significant cost of audit services. Small banks should choose other than the Big Four audit firms to reduce the cost of audit.
Keywords: audit activity, bank profitability, audit firm reputation, financial statements quality, Big Four
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