This study examines auditors’ strategic use of Twitter surrounding potentially reputation-damaging events. Using data extracted from the Twitter accounts of Big 4 audit firms, we find auditors increase the volume of their tweets in the three days prior to the announcement of a client restatement or the loss of a client. In cross-sectional analyses, we find that heightened social media activity is significantly more pronounced for restatements that have an impact on net income than for those that do not. Additionally, we find that strategic social media activity is concentrated among audit firms with relatively higher PCAOB inspection deficiency rates, suggesting that heightened social media activity surrounding bad-news events is driven by reputation concerns. Finally, we also find evidence that increased social media activity is associated with more positive Twitter user sentiment toward the audit firm, and a decreased likelihood of losing additional clients following the loss of a client.
| Speaker: | Dr Jonathan Black Senior Lecturer, University of Melbourne |
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