Audit Quality And Overvalued Equity
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Audit Quality And Overvalued Equity
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Author : Robert Houmes
language : en
Publisher:
Release Date : 2013
Audit Quality And Overvalued Equity written by Robert Houmes and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Purpose - Audit quality studies document that accruals decrease when the audit firm is large, or the audit firm is an industry specialist, or the audit-client tenure is long. The purpose of this paper is to posit that incentives related to highly-valued equity mitigate these results, as managers use income increasing accruals to augment earnings.Design/methodology/approach - To test this assertion, the authors regress discretionary accruals on: controls, a highly valued equity indicator variable equal to 1 if the client's lagged price-to-earnings ratio is in the highest P/E quintile, indicator variables equal to 1 for alternative measures of audit quality, and interaction terms between the highly valued equity indicator variable and audit quality indicator variables.Findings - Results of tests show positive and statistically significant coefficients for each of the highly-valued equity-audit quality interaction terms, suggesting that when a firm is highly valued the accruals' decreasing effect of high quality auditors is reduced.Originality/value - Beginning with Jensen's article regarding the agency costs of overvalued equity, a stream of research examining factors associated with highly priced firms has developed. The paper extends these findings, as well as the considerable body of audit quality studies, by examining the ability of a high quality auditor to attenuate this result.Keywords Auditing, Equity capital, Price earning ratio, Audit quality, Highly valued equity,Discretionary accruals.
Essays On Audit Quality Auditor Choice And Equity Valuation
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Author : Kim Pettersson
language : en
Publisher:
Release Date : 2011
Essays On Audit Quality Auditor Choice And Equity Valuation written by Kim Pettersson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Private Equity Disclosure Quality And Audit Quality
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Author : Brian K. Baik
language : en
Publisher:
Release Date : 2021
Private Equity Disclosure Quality And Audit Quality written by Brian K. Baik and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
I study the influence of disclosure/audit quality on private equity funds' investment decisions, and the relationship between private equity ownership and disclosure/audit quality. Using Preqin and FAME data, I find that PE funds are more likely to invest in firms with superior financial statement transparency (disclosure quality) and in firms that employ big 4 auditors (audit quality). Conversely, I find that PE ownership is associated with audit quality, but not for disclosure quality.
Audit Firm Tenure And The Equity Risk Premium
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Author : Jeff P. Boone
language : en
Publisher:
Release Date : 2010
Audit Firm Tenure And The Equity Risk Premium written by Jeff P. Boone and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
Although investor perceptions of audit quality play a critical role in maintaining systemic confidence in the integrity of financial accounting reports (Levitt 2000), prior research on the effects of auditor tenure from an investor perspective is relatively sparse. In this study, we investigate whether investors price audit firm tenure for Big Five audits by examining the relation between tenure and the ex ante equity risk premium, i.e., the excess of the company-specific ex ante cost of equity capital over the risk-free interest rate. Based on prior research, whereas the quot;auditor learningquot; argument predicts that audit quality will change in only one direction (i.e., improve) with tenure, the quot;auditor-client closenessquot; argument suggests that audit quality may decrease beyond some (albeit unspecified) length of tenure due to impaired auditor independence and objectivity. Consistent with prior theoretical arguments, we find some evidence of a non-linear relation between audit firm tenure and the ex ante equity risk premium, i.e., we find that the equity risk premium decreases in the early years of tenure but increases with additional years of tenure. These findings persist after we control for well-known risk factors and company characteristics that have been shown in prior research to be related to the cost of equity capital. The implications of our findings are discussed.
The Role Of Asset Reliability And Auditor Quality In Equity Valuation
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Author : Yaser Fallatah
language : en
Publisher:
Release Date : 2006
The Role Of Asset Reliability And Auditor Quality In Equity Valuation written by Yaser Fallatah and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Auditing categories.
This paper brings together the auditor quality, asset reliability and firm valuation literatures by examining the role of auditor quality in equity valuation. The study broadly follows the Richardson et al. (2005) categorization of the reliability of accounting accruals of balance sheet components and conjectures that the role of auditor quality in equity valuation is more pronounced when asset reliability is not high. Auditor quality is measured using reputation, industry specialist and tenure metrics. The underlying assumption is that auditor quality enhances the market's perception of firm value; as such, auditor quality may mitigate the cost of security mispricing documented by Richardson et al. (2005) for low or medium reliability accruals. The results of the study provide some support that high quality auditors contribute to the valuation of equity for assets. It is less clear as to whether the value is more pronounced for low or medium reliability assets.
Audit Quality Auditor Compensation And Ipo Underpricing
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Author : Xin (Simba) Chang
language : en
Publisher:
Release Date : 2007
Audit Quality Auditor Compensation And Ipo Underpricing written by Xin (Simba) Chang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
By examining a sample of Australian firms going public over the period 1996 to 2003, we jointly study the impact of audit quality on auditor compensation and IPO underpricing. We find that quality (Big 4) audit firms earn significantly higher fees than Non-Big 4 auditors, and audit quality is positively associated with IPO underpricing. The positive relation between audit quality and underpricing is more pronounced for small issues, IPOs underwritten by non-prestigious underwriters, and those that are not backed by venture capitalists. Taken together, our results suggest that quality auditors serve as a signaling device that enhances post-issue market value of equity.
Do Investors Perceive A Change In Audit Quality Following The Rotation Of The Engagement Partner
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Author : Gopal V. Krishnan
language : en
Publisher:
Release Date : 2018
Do Investors Perceive A Change In Audit Quality Following The Rotation Of The Engagement Partner written by Gopal V. Krishnan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
Though Section 203 of the Sarbanes-Oxley Act (SOX) calls for the rotation of the audit partner every five years, we do not know whether investors value audit partner rotation. This is an important issue since many in the auditing profession believe that mandatory rotation of the audit partner is unnecessary and may in fact impair audit quality. We identify a sample of firms that disclosed changes in the engagement partner in the proxy statement and examine whether equity investors perceive a change in audit quality following the partner rotation. We find a significant increase in earnings informativeness following audit partner rotation. We also find that short sellers regard earnings in the post-rotation to be of higher quality than earnings prior to the rotation. Finally, cost of equity capital is lower following partner rotation. Our findings have important implications for the regulators, auditors, and investors.
The Rold Of Asset Reliability And Auditor Quality In Equity Valuation
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Author : Yaser Fallatah
language : en
Publisher:
Release Date : 2006
The Rold Of Asset Reliability And Auditor Quality In Equity Valuation written by Yaser Fallatah and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Auditing categories.
Ethics Equity And Regulation
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Author : Cheryl R. Lehman
language : en
Publisher: Emerald Group Publishing
Release Date : 2010-05-18
Ethics Equity And Regulation written by Cheryl R. Lehman and has been published by Emerald Group Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-05-18 with Business & Economics categories.
How can we account for continuing inequalities in an era promoting enlightened social and economic connections? What mechanisms of perceptions and politics will enable policy makers and scholars to advance significant progressive change? This title examines accounting's contribution to these challenges given the profession's multifaceted roles.
Auditor Quality Industry Specialisation And Industry Leadership Post The Big Eight And Big Six Mergers
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Author : Andrew C. Ferguson
language : en
Publisher:
Release Date : 2002
Auditor Quality Industry Specialisation And Industry Leadership Post The Big Eight And Big Six Mergers written by Andrew C. Ferguson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Auditing categories.