Auditor Industry Specialization And The Earnings Response Coefficient
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Auditor Industry Specialization And The Earnings Response Coefficient
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Author : Jagan Krishnan
language : en
Publisher:
Release Date : 2014
Auditor Industry Specialization And The Earnings Response Coefficient written by Jagan Krishnan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This study compares the earnings response coefficients of clients of industry specialist and non-specialist auditors. Prior work (e.g., DeAngelo 1981) has suggested that auditors offer different levels of audit quality, in response to client variations in the demand for different levels of audit quality (Watts and Zimmerman 1986). One component of the quality difference across auditors is industry specialization (Craswell et al. 1995). Empirical evidence on the effect of industry specialization on audit quality proxies such as audit fees, auditor litigation and compliance with accounting standards is mixed. This study examines the hypothesis that industry specialization leads to a better quality of audit by comparing the earnings response coefficients of clients audited by industry specialists with those of clients not audited by industry specialists. Teoh and Wong (1993) argue that audit quality is positively associated with the client's quality of earnings and therefore the earnings response coefficient (ERC), which is the responsiveness of the stock market to information about unexpected earnings. They present evidence that one measure of audit quality, auditors' brand-name (Big 6 or not), is positively associated with the ERC. This paper extends this argument by examining the effect of another facet of audit quality, auditor industry specialization, on the ERC. The results suggest that, after controlling for previously established correlates of the ERC, as well as industry affiliation, clients of industry specialist auditors have higher ERCs than clients of non-specialist auditors.
Auditor Industry Specialization And Earnings Response Coefficient
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Author : Somdeb Bhattacharya
language : en
Publisher:
Release Date : 2011
Auditor Industry Specialization And Earnings Response Coefficient written by Somdeb Bhattacharya and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Auditing categories.
The Prospector Defender Strategy Auditor Industry Specialization Earnings Management Through Real Activities And Earnings Quality
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Author : Wuryan Andayani
language : en
Publisher:
Release Date : 2009
The Prospector Defender Strategy Auditor Industry Specialization Earnings Management Through Real Activities And Earnings Quality written by Wuryan Andayani and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
This study examined the influence of the company prospector-defender strategy and auditor industry specialization towards the earnings management through real activities and earnings quality. An important finding in this study shows that the auditor specialization and the company's prospector strategy could restrict the earnings management. The prospector strategy was done by the companies which did not do earnings management. On the contrary, defender strategy was done by companies which did earnings management. Another finding shows that the auditor industry specialization influenced the earnings response coefficient (ERC), cummulative abnormal return (CAR) and investors' response. Besides the auditor industry specialization, prospector and defender strategies, other factors which influenced ERC were leverage, company size, company's stock return, beta and market return. The interaction among prospector and defender strategies and unexpected earnings influenced both the CAR and the investors' response. This was probably because the investors pay attention to the strategy used by the company.
Auditing
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Author :
language : en
Publisher:
Release Date : 2003
Auditing written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Auditing categories.
Non Audit Service Fees And Audit Quality
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Author : Chee Yeow Lim
language : en
Publisher:
Release Date : 2013
Non Audit Service Fees And Audit Quality written by Chee Yeow Lim 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.
Recent studies on whether the provision of non-audit services impairs audit quality document mixed results, depending on the proxy for auditor quality used. We posit that the effect of non-audit fees on audit quality is conditional on auditor industry specialization in that audit quality is less likely to be impaired in the case of industry specialist auditors providing non-audit services. Our premise is that industry specialist auditors are more likely to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non-audit services. We find some evidence that audit quality (as measured by increased propensity to issue going-concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings-response coefficients) is less likely to be reduced for firms that acquire non-audit services from industry specialist auditors compared to non-specialist auditors. Implications are discussed.
Earnings Response Coefficients And The Quality Of Earnings
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Author : Wikil Kwak
language : en
Publisher:
Release Date : 1990
Earnings Response Coefficients And The Quality Of Earnings written by Wikil Kwak and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990 with categories.
How Increased Regulatory Oversight Of Non Audit Services Affects Investors Perceptions Of Earnings Quality
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Author : Aasmund Eilifsen
language : en
Publisher:
Release Date : 2012
How Increased Regulatory Oversight Of Non Audit Services Affects Investors Perceptions Of Earnings Quality written by Aasmund Eilifsen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
In 2003, the Financial Supervisory Authority of Norway (FSA) disclosed that audit firms had violated the legal restrictions for providing non-audit services (NAS). In response, the FSA tightened the NAS regulations. This study examines how regulatory oversight affects the relation between the provision of NAS and earnings response coefficients (ERC). For small, non-industry specialized audit firms, the disclosure of violations in 2003 negatively affected the relationship between NAS and ERC, but the effect was more pronounced in the disclosure year 2003 than in the new regulation period 2004-2008. For Big 5 audit firms, these negative effects are moderated, indicating higher audit quality. Contrary to our expectations, the results of this study suggest that investors perceive audit firm industry specialization as a threat to independence in 2003.
Audit Quality And Properties Of Analyst Earnings Forecasts
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Author : Bruce K. Behn
language : en
Publisher:
Release Date : 2008
Audit Quality And Properties Of Analyst Earnings Forecasts written by Bruce K. Behn and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Under the assumption that audit quality relates positively to unobservable financial reporting reliability, we investigate whether audit quality is associated with the predictability of accounting earnings by focusing on analyst earnings forecast properties. The evidence shows that analysts' earnings forecast accuracy is higher and the forecast dispersion is smaller for firms audited by a Big Five auditor. We further find that auditor industry specialization is associated with higher forecast accuracy and less forecast dispersion in the non-Big Five auditor sample but not in the Big Five auditor sample. Overall, our results suggest that high quality audit provided by Big Five auditors and industry specialist non-Big Five auditors is associated with better forecasting performance by analysts.
Non Audit Services Auditor Quality And The Value Relevance Of Earnings
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Author : Ferdinand A. Gul
language : en
Publisher:
Release Date : 2006
Non Audit Services Auditor Quality And The Value Relevance Of Earnings written by Ferdinand A. Gul and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This paper tests the hypothesis that there is an inverse relation between non-audit services (NAS) provided by a firm auditor and the value relevance of earnings (measured as the earnings response coefficient) and that this relation is weaker for firms with Big 6 auditors. The hypothesis is based on anecdotal evidence and prior research which suggest that the provision of NAS by the external auditor is likely to adversely affect investors' perceptions of the credibility of financial reports and that Big 6 auditors due to reputational capital and litigation costs are likely to mitigate the adverse effects of NAS. Results using 840 firm-year observations of Australian companies document a statistically significant inverse relationship between NAS and the value relevance of earnings and that this inverse relationship is weaker for Big 6 auditors, thus supporting the hypothesis.
Investor Perceptions Of The Earnings Quality Consequences Of Hiring An Affiliated Auditor
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Author : William R. Baber
language : en
Publisher:
Release Date : 2014
Investor Perceptions Of The Earnings Quality Consequences Of Hiring An Affiliated Auditor written by William R. Baber and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
The Sarbanes-Oxley Act of 2002 (SOX) proscribes so-called “affiliated hires” of financial executives. More specifically, SOX requires that firms wait at least one year before hiring an individual recently employed as a member of the firm's external audit team. The intent of the regulation is to reduce the perceived loss of auditor independence due to affiliated hiring. SOX provisions also require that firms establish fully independent audit committees and disclose the identity of directors with financial expertise. Using a sample of firms that employ new financial executives during the period leading up to SOX, we find that earnings response coefficients (ERCs) computed using quarterly data decline following hires of individuals recently employed by the firm's external auditor, but ERCs do not decline following hires of comparably qualified financial executives not recently employed by the external auditor. We also find that ERC declines following affiliated hires are statistically significant for firms with audit committee compositions inconsistent with SOX regulation, but not for firms with audit committees consistent with SOX regulation subsequently imposed. Further investigation using measures of earnings quality employed in prior studies suggests that the documented differences in ERC changes are attributable to perceived, rather than real, changes in earnings quality following affiliated hires.