Accounting Research Journal

Client importance and audit quality, office level evidence from the banking
industry: a pitch
Yuyu Zhang,
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Yuyu Zhang, (2017) "Client importance and audit quality, office level evidence from the banking
industry: a pitch", Accounting Research Journal, Vol. 30 Issue: 2, pp.147-152, https://doi.org/10.1108/
ARJ-07-2016-0089
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Client
Client importance and audit importance
quality, office level evidence from and audit
quality
the banking industry: a pitch
Yuyu Zhang 147
School of Accountancy, Queensland University of Technology, Brisbane, Australia
Received 20 July 2016
Revised 13 February 2017
Accepted 28 March 2017
Abstract
Purpose – This paper aims to discuss the application of Faff’s pitch template to a research proposal on
Downloaded by Göteborgs Universitet At 08:36 15 November 2017 (PT)

client importance and audit quality.

Design/methodology/approach – The “cocktail glass” approach and “3-2-1” design provide
junior researchers with an effective tool to develop, evaluate and communicate research ideas in a
simple way.
Findings – The author further provides a commentary and reflections based on his own experience in
this letter.
Research limitations/implications – Based on my pitching experience, pitching requires significant
preparation. Further, the pitching template is a useful means to deposit research ideas and as a control and
supervisory tool.
Originality/value – It is a PRL submission.
Keywords Auditing, Financial institutions, Client importance, Pitch research
Paper type Research paper

1. Introduction
This pitch letter discusses the application of the “pitching research” template
developed by Faff (2015) to an auditing research topic. My PhD thesis (completed
November 2013) investigated financial statement audit in financial institutions. As an
early career researcher, I have published two research papers on auditing and
assurance (Carson et al., 2016; Liao et al., 2016) while still face the regular challenge of
converting my numerous raw, unprocessed research ideas into meaningful research
proposals and projects. Compared to experienced researchers, my relative lack of
experience, confidence and limited writing skills (non-English background) pose
significant constraints when approaching this process. The pitching template provides
a simple, efficient yet still comprehensive tool for development, evaluation and
communication of my research ideas with colleagues and grant reviewers.
The remainder of this letter is organized as follows. Section 2 presents a brief
commentary; Section 3 provides my personal reflections on the pitch exercise and
Section 4 concludes the letter.

2. Brief commentary on the pitch

This pitch, entitled “Client Importance and Audit Quality, Office-Level Evidence from the Accounting Research Journal
Banking Industry” was originally drafted for an AFAANZ grant application. Excepting the Vol. 30 No. 2, 2017
pp. 147-152
extensive time spent examining the literature and brainstorming, I completed the pitch itself © Emerald Publishing Limited
1030-9616
in two days, including the time spent reading Faff’s pitching research articles, selecting DOI 10.1108/ARJ-07-2016-0089
 ARJ appropriate papers using the “cocktail glass” approach (Faff, 2015, p. 326), filling out the
30,2 template table, and writing up the required text.
Table I presents the pitch table. The key research question is: “how does office-level
client importance affect a set of audit quality measures as reflected in the banking
industry?” This is a real pitch[2] in which I have developed a new topic from prior
literature. It is also an extension of my PhD project within the arena of financial
148 institutions.
Identifying the key papers within the literature has always been a big challenge in
my prior research. It is easy to become immersed and rapidly lost. The pitch
requirement to limit the number of key papers to three has pushed me to re-evaluate the
large body of literature. The selected key papers have nevertheless satisfied the
following criteria in that they:
(1) well inform the current research and future directions;
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(2) are published in high-quality journals; and

(3) are able to suggest motivation, contribution and/or research methodology for the
pitched study.

The novelty of this study aligns well with the identified key papers. As depicted in
Figure 1, DeFond and Zhang (2014) suggest that auditor independence is a research
area desperate for high-quality studies. Kanagaretnam et al. (2010) indicate the
necessity of auditing research in this particular industry. Gaver and Paterson (2007)
provide arguable office-level client importance evidence from insurance companies and
also suggest the banking industry as a good setting for audit quality research. The
research gap and subsequent queries identified in this part of the pitch forms the basic
framework of the study.
Faff’s “3-2-1” design deconstructs the research initiatives into: THREE – “core ideas”,
“data”, “tools”, TWO – “what’s new” and “so what” and ONE – “contribution and other
considerations”. Part (E) articulates the research ideas and further develops them into potential
hypotheses; although the hypotheses drafted may not be the final hypotheses in the research
paper, the attempt to develop hypotheses from the core ideas and key literature is a useful
exercise in evaluating the grounds and validity of the proposed study. Parts (F) and (G) are
relevant to both research design and feasibility of the planned study. As I have experience in
using similar data and tools, I found it relatively simple to complete parts (F) and (G), building
my confidence regarding the proposed research project. In contrast, I spent a considerable
amount of time completing the “what’s new” and “so what” sections to convince myself of the
value of this research.

3. Personal reflections on the pitch exercise

Aligning with the benefits and considerations of devising a pitch as discussed in prior
pitching works (Beaumont, 2015; Ratiu, 2015; Unda, 2015; Faff, 2015; Faff, 2016), I highlight
the following points from my own experience.

3.1 Pitching requires preparation

The efficiency of pitch completion is built upon good preparation and understanding within
the intended research area(s). The items in the template are chains to connect the pearls
collected in the research journey. The whole template offers a box in which to keep the
jewelry. However, it is first necessary to have those pearls in hand.
 Pitcher’s name: Yuyu Zhang For category Accounting Date completed First version: 10 February 2015;
Client
latest version: 12 December 2016 importance
(A) Working title Client Importance and Audit Quality, Office-Level Evidence from the Banking and audit
Industry
(B) Basic research How does office-level client importance affect a set of audit quality measures as
quality
question reflected in the banking industry?
(C) Key paper(s) DeFond and Zhang (2014)
Gaver and Paterson (2007) 149
Kanagaretnam et al. (2010)
(D) Motivation/Puzzle Office-level client influence is argued as the locus of auditor-client contracting
and should have critically influenced auditor independence and hence the audit
quality (Gaver and Paterson, 2007). There is no prior study investigating the
impact of client influence to bank audit quality. The economic significance of
the banking industry warrants the importance of evidence from financial
institutions (Kanagaretnam et al., 2010; Cullen et al., 2015). The financial
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structure of the banking industry provides a rich context of financial reporting

measures to reflect the comprehensive audit quality (Cullen et al., 2015). A
study on client influence in bank audit against a comprehensive set of financial
reporting quality measures may capture a more complete understanding of the
client-influence topic. In addition, audit quality on the banking industry has
been criticized during the recent financial crisis as auditors are argued to have
compromised audit independence in favour of bank clients (DeFond and Zhang,
2014). The evidence of the temporal changes in the impact of client importance
on bank audit quality with the GFC will be of significant regulatory and policy
implication
Puzzle: 1) What is the impact of office-level client influence on audit quality in
the banking industry? and 2) how has the impact of office-level client influence
on bank audit quality changed with the occurrence of the GFC?
THREE
(E) Idea? “Core” idea: Client importance may influence auditor independence, and hence
affect audit quality. A study on the client importance topic in the banking
industry is not simply a replicate of prior literature with supplementary
evidence from one specific industry. First, the economic significance and its
close link with the microeconomic environment suggest that empirical auditing
research without evidence from the banking industry is incomplete (Carson et
al., 2013; Cullen et al., 2015). Second, the unique financial structure of the
banking industry provides a rich profile of audit quality measures (Gaver and
Paterson, 2007; Cullen et al., 2015). The overall study will provide a more
comprehensive understanding of the impact of client influence on bank audit
quality
Auditor independence and audit quality are also affected by audit environment
factors. Research on the association between audit environment factors and
audit quality is relatively scarce (DeFond and Zhang, 2014). Audit quality in
the banking industry has been criticized during the recent financial crisis as
auditors are argued to have compromised the audit independence in favour of
bank clients. The evidence of the temporal changes in the impact of client
importance on bank audit quality with the microeconomic changes of the GFC
will be of significant regulatory and policy implication Table I.
Central hypotheses: H1. In the context of the bank holding companies (BHCs), Completed two-page
office-level client influence negatively affects bank audit quality; and H2. The pitch template on
association between office-level client influence and bank audit quality has
client importance
changed with the occurrence of the GFC
and audit quality in
(continued) the banking industry
 ARJ
30,2 (F) Data? The US bank holding company financial data and audit firm information from
2003 to 2015 (firm-years N  4,000) will be used. Pooled sample, cross-sectional
and longitude analyses are expected. Unbalanced panel data will be estimated
in the main tests, and balanced panel data will be tested in the robustness tests
Banking financial data are available at Bank regulatory database (Y9C filing)
and the US audit information is available at Audit Analytics database. No hand
150 collecting is required. In general, the databases involved in this study are of
high quality and have been widely used in prior research
(G) Tools? Pooled OLS regression on unbalanced panel data, clustered by firm with year
fixed effect controlled, will be used as the main approach. Balanced panel data
will be tested as the robustness tests. The proposed data are compatible with
planned empirical framework, as evidenced by the existing literature and the
investigators’ working projects. Statistical validity is not an issue in this study
TWO
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(H) What’s New? 1. The evidence on office-level client importance to audit quality from the
banking industry is new
2. The comprehensive measures of bank audit quality are new
3. The temporal analysis of the effect of the GFC on the impact of client
importance on audit quality is new
(I) So What? Given the economic significance of the banking industry and the criticism on bank
audit quality due to threats from client importance, especially from the cases
surrounding the GFC, the results are of interest to regulators and the audit
profession as a whole, including the standard setters on the ethics code of conduct.
The results from a comprehensive set of audit quality measures will enhance
understanding of the debate around client importance and audit quality
ONE
(J) Contribution? 1. Adding to the limited bank audit literature
2. Providing the first empirical evidence on office-level client importance on
bank audit quality
3. The comprehensive audit quality measures from the banking industry,
including discretionary LLP, fair value accounting and the extent of off-balance
sheet financial instruments provide enhanced understanding to the audit
quality setting and rich explanations to this debating topic
4. The temporal analysis on the effect of the GFC to the client-importance and
audit quality relationship incorporates the audit environment factor into the
broad picture
(K) Other None
considerations

Table I. Note: Cued template adapted from Faff (2016)

3.2 Using pitch templates to deposit research ideas

Aligning with 3.1, the pitch template can be used as a depository for research ideas. I believe it
is not just my experience that sometimes we get an exciting idea randomly but, without proper
housekeeping, we lose it easily. After finding Faff’s pitch template in 2015, I have tried to
deposit my research ideas into this pitching template as a means to store and ruminate on my
ideas. Templates on different topics may be at different maturity stages, so it is necessary and
helpful to regularly revisit the pitching depository.

3.3 Pitching as a control tool and supervisory tool

I treat the items (H), (I) and (J) on “what’s new”, “so what” and “contribution” carefully as a
quality control tool in the initial stage. In particular, the answers to these sections should
 Client
importance
and audit
quality
Office-level client Auditor independence
importance & audit quality 151
(Gaver and Paterson (DeFond and Zhang
2007) 2014)
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Uniqueness of the
banking industry
(Kanagaretnam et al.
2010) Figure 1.
Mickey Mouse
diagram
characterizing
novelty of research
idea

sufficiently convince myself that the project is worth doing with potential real-world
contributions. I use items (F) “data” and (G) “tools” to control the research design process, in
which consideration of data sources, analysis tools and methods, constraints and alternatives
should be reasonably detailed. The pitch template has also been introduced into my
supervision repertoire to help students simplify and clarify their research ideas and design.

3.4 Pitching can be flexible

Although the pitch template sets restrictions on the extent of information included, these
restrictions aim to distinguish, rather than eliminate, important information. In practice, the pitch
template may be used in a more flexible way to suit individual targets and preferences. When we
revisit the pitch in later stages, the pitch can evolve (Faff, 2016), and when the pitch is expanded
to a lengthy work, it might be the time to convert the proposal into a real research paper.

4. Conclusion
This pitch letter reflects a research pitch on client importance and audit quality in the
banking industry. Since its introduction in 2014, the pitch template has provided a quick and
effective approach for junior researchers to plan and manage their research projects
(Ratiu, 2015; Beaumont, 2015). It could also be used as a storage tool, quality control tool or a
supervisory tool for researchers.
 ARJ Note
30,2 1. According to Faff (2015, p. 327), A “real” pitch is labelled as an “ex ante” pitch and assumes that the
topic is “owned” by the pitcher. In contrast, an “ex post” pitch is referred as a “reverse-engineered”
pitch, including: (1) the pitcher applies the pitch to their own current in-progress project or possibly
even their own completed/published work; or (2) an independent “third party” pitcher reverse
engineering someone else’s existing work. By the time I developed this pitch, it was an “ex ante” pitch
and the topic is owned by the pitcher. Therefore, I categorize the pitch as a “real” pitch.
152

References
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bonus payments and firm financial performance: a pitch”, Accounting and Finance, Vol. 55 No. 2,
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securitizations”, Working paper, Queensland University of Technology.
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pp. 311-336.
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evidence from the property-casualty insurance industry”, Journal of Accounting and Economics,
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Corresponding author
Yuyu Zhang can be contacted at: yuyu.zhang@qut.edu.au

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