Has SOX Enhanced Non-Big 4 Auditors' Ability to Deal with Client Pressure?

We investigate whether non-Big 4 auditors have enhanced their ability to resist client pressure over accrual reporting following the Sarbanes-Oxley Act (SOX). Regressing abnormal accruals on proxies for economic bonding, we find that changes in the association, defined as (Post-Pre), are significantly negative, implying an improvement in auditor independence after SOX. Among non-Big 4 auditors, only Tier 3 auditors compromised reporting objectivity before SOX, but neither Tier 2 nor Tier 3 auditors yielded to client pressure after SOX. Evidence that these two groups of non-Big 4 auditors differ in the way they cope with client pressure in a loose regulatory regime highlights the importance of assessing the efficacy of SOX separately for subsets of auditors and contributes to an understanding of the underresearched, but inherently important, segment of the audit market served by non-Big 4 auditors. Further analysis indicates that the low pre-SOX audit quality observed in the full sample is driven by non-PCAOB registrants.