This study investigated whether the Big N audit firms in emerging markets can provide audits of high
quality and mitigate information risk, by comparing the audit quality of Big N audit firms in Taiwan
with those in China. The two countries share a similar cultural background and engage in frequent
economic exchange; however, they have different legal systems and institutional environments. This
study followed previous research in the use of bid-ask spread and discretionary accruals as proxy
variables for information asymmetry and audit quality. Our results indicate that politico-economic
differences between Taiwan and China influence the effectiveness of independent auditors when it
comes to the mitigation of information asymmetry. Big N audit firms in Taiwan helped to mitigate
information asymmetry and provided audit services of higher quality, whereas Big N firms in China
were better able to constrain earnings management. Our results indicate that market concentration
and market share have a stronger influence on reputation incentive and audit quality than does the
size of an audit firm.