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Author: Jeffrey L. Callen Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study examines whether the term of the auditor-client relationship (i.e., auditor tenure) is associated with future stock price crash risk measured both ex ante and ex post. Using a large sample of U.S. public firms with Big Four auditors, we find robust evidence that auditor tenure is negatively related to one-year-ahead stock price crash risk. The evidence is consistent with monitoring-by-learning where development of client-specific knowledge over the term of the auditor-client relationship enhances auditors' ability to detect and deter bad news hoarding activities by clients, thereby reducing future crash risk. This result holds even after controlling for endogeneity of the tenure/crash risk relation. We further provide evidence indicating that option market investors do not fully incorporate the information contained in the term of auditor-client relationship in predicting future stock price crash risk. Our empirical results have important policy implications for regulators concerned with ensuring auditor independence.
Author: Jeffrey L. Callen Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study examines whether the term of the auditor-client relationship (i.e., auditor tenure) is associated with future stock price crash risk measured both ex ante and ex post. Using a large sample of U.S. public firms with Big Four auditors, we find robust evidence that auditor tenure is negatively related to one-year-ahead stock price crash risk. The evidence is consistent with monitoring-by-learning where development of client-specific knowledge over the term of the auditor-client relationship enhances auditors' ability to detect and deter bad news hoarding activities by clients, thereby reducing future crash risk. This result holds even after controlling for endogeneity of the tenure/crash risk relation. We further provide evidence indicating that option market investors do not fully incorporate the information contained in the term of auditor-client relationship in predicting future stock price crash risk. Our empirical results have important policy implications for regulators concerned with ensuring auditor independence.
Author: Gary Kleinman Publisher: Gary Kleinman ISBN: 1558761802 Category : Business & Economics Languages : en Pages : 137
Book Description
This work is intended to assist researchers, regulators, and practitioners who are interested in the topic of auditor independence. It presents a comprehensive model of the individual, work place, organization, inter-organizational, and organizational field level determinants of the topic.
Author: Suhaib Aamir Publisher: LAP Lambert Academic Publishing ISBN: 9783845415666 Category : Languages : en Pages : 116
Book Description
Different scandals around the globe during the past, in specific during the last decade, have intrigued the stakeholders to question the roles of both auditors and management. But most of the fingers since then have been raised on the role of auditors, because it is the auditors who are entrusted with the responsibility to detect any errors or frauds in the financial reports of the client-firm. Apart from this, the long-term auditor client relationship has been the center of attention in most of the discussions and debates as well. Numerous studies have been conducted by the academic researchers, financial and professional analysts, regulatory authorities and governing bodies, and in some cases by the auditors and the firms as well regarding the effects of long-term auditor-client relationship on audit quality, equity risk premium, financial reports quality, audit pricing etc. These studies provide us with different results, both with the positive and negative associations and effects of long-term auditor-client relationship on the basis of different factors and contexts. Therefore, we would be studying this relationship in between auditors and SME clients.
Author: Mary Dodgson Publisher: ISBN: Category : Languages : en Pages :
Book Description
Maintaining a positive auditor-client relationship is critical for audit firms, particularly during sensitive events. For instance, audit firms state in transparency reports that they take steps to minimize disruption during audit partner rotations, yet it is unclear what these actions entail or the potential effects of these actions on auditor independence and audit quality. I use multiple methods to provide insight into these practices and their related effects. First, I interview 20 audit partners to learn about the process by which audit firms manage the auditor-client relationship during sensitive partner rotation events. Interviewees describe how audit firms identify appropriate partner candidates and procedures followed to select and prepare the next lead partner. Respondents also elaborate on firms' ongoing relationship-managing activities, including the assignment of non-decision-making liaisons (often referred to as relationship partners or "RPs") to a subset of engagements to assist in navigating the auditor-client relationship during sensitive events (i.e., in preparation for upcoming partner rotations and when contentious auditor-client issues arise). Second, I conduct an experiment with financial executives to examine the influence that RPs may have on the resolution of contentious auditor-client issues. I also consider how RP influence may vary depending on the extent to which the audit partner and client manager have tried, albeit unsuccessfully, to resolve the issue (i.e., negotiation ripeness). I find that, in a traditional setting in which a RP is not involved, client managers concede less toward an audit partner's more appropriate position when the negotiation has reached a more ripe stage than when the negotiation stage is less ripe. However, I find it is at a more ripe stage that RP intervention is more effective in moving client managers toward a resolution, limiting the risk of seeking alternative methods of resolution that may impair the auditor-client relationship (e.g., issuing a qualified audit opinion). Collectively my findings inform regulators and researchers about the ongoing process by which audit firms manage the auditor-client relationship during sensitive events and how one common approach for managing the auditor-client relationship (i.e., assignment of RPs to a subset of engagements) influences the auditor-client relationship and audit quality.
Author: Khalid Rasheed Al-Adeem Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This paper reviews the accounting literature on the audit function, the auditor-client manager relationship, and the possible influence of these relationships on auditor independence. The negotiation interactions between client managers and auditors and the distribution of power reveal the superior position of client management. The interactions also reveal that auditors participate in potential joint ventures. Auditor independence may be subject to compromise to sustain effective relationships with corporate client management even with the presence of a monitoring mechanism such as a board of directors. To ensure favorable opinions from their current auditors, managers may utilize any available possible means. A thorough audit that displeases client management comes at a cost for auditors who can be viewed as economic agents serving their own interests. To sustain confidence in attesting and assurance services, auditors must appear independent to external parties to provide assurance that auditors provide valuable services that support a 'functional' market. Trust placed in auditors and, thus, the capital market is possible as long as auditors appear independent.
Author: Joshua Ronen Publisher: ISBN: Category : Languages : en Pages : 51
Book Description
This paper presents a model of auditor-client relationship-building. Existing literature suggests that quasi-rents rising from long auditor tenure have a negative effect on auditor independence. In contrast to this conventional wisdom, our paper shows a positive effect of quasi-rents resulting from relationship-building on auditor independence. Prohibiting relationship-building takes away this benefit, and increases the likelihood of an auditor accepting an inaccurate, higher report. This is the first study analyzing the impact of client relationship-building initiated by auditors on audit quality.
Author: John C. Coffee Jr. Publisher: OUP Oxford ISBN: 0191516066 Category : Business & Economics Languages : en Pages : 398
Book Description
In the wake of a series of corporate governance disasters in the US and Europe which have gained almost mythic status - Enron, WorldCom, Tyco, Adelphia, HealthSouth, Parmalat - one question has not yet been addressed. A number of 'gatekeeping' professions - auditors, attorneys, securities analysts, credit-rating agencies - exist to guard against these governance failures. Yet clearly these watchdogs did not bark while corporations were looted and destroyed. But why not? To answer these questions, a more detailed investigation is necessary that moves beyond journalism and easy scapegoating, and examines the evolution, responsibilities, and standards of these professions. John C. Coffee Jr, world-renowned Professor of Corporate Law, examines how these gatekeeping professions developed, to what degree they failed, and what reforms are feasible. Above all, this book examines the institutional changes and pressures that caused gatekeepers to underperform or neglect their responsibilities, and focuses on those feasible changes that can restore gatekeepers as the loyal agents of investors. This informed and readable view of the players on the contemporary business stage will be essential reading for investors, professionals, executives and business academics concerned with issues of good governance.
Author: Jeffrey L. Callen
Author: Jeffrey L. Callen
Author: Gary Kleinman
Author: Suhaib Aamir
Author: 羅欣昀
Author: Mary Dodgson
Author: Linda DeAngelo
Author: Khalid Rasheed Al-Adeem
Author: Joshua Ronen
Author: John C. Coffee Jr.
Author: James E. Rebele