Evidence on the Relation between Audit and Earnings Quality. Do Clients of Higher Quality Auditors Provide Better Financial Reporting? PDF Download
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Author: Publisher: GRIN Verlag ISBN: 366846748X Category : Business & Economics Languages : en Pages : 34
Book Description
Seminar paper from the year 2017 in the subject Business economics - Accounting and Taxes, grade: 1,3, , language: English, abstract: This paper studies the relation between audit and earnings quality. It examines whether firms audited by a Big 4 member engage in higher earnings management activities as proxied by the magnitude of discretionary and absolute accruals, as well as an income smoothing measure. The author predicts that large auditors have higher competencies and incentives to deliver a higher quality audit. Therefore, their clients are expected to reveal less sophisticated earnings management and thus higher earnings quality. The results do not support this relation. Since standardsetters have been concerned about managers’ use of discretion to manage earnings in their financial reports, an increasing amount of empirical research was conducted to address this issue, additionally to regulation. While independent auditors (aim to) assure that these statements are in accordance with legal compliance, the actual audit quality can be grasped as the contingency that the auditor exposes and discloses an anomaly in their clients’ financial reports. Whereas numerous audit scandals threaten the trustworthiness of well-known large auditors, there is various research revealing that Big N audited firms are supposed to disclose financial reports of higher quality. Supplementing misguiding accrual accounting practices in this regard, this study also addresses another proxy for earnings management: income smoothing. Burgstahler and Dichev (1997) explain corporate income smoothing with the fact that managers avoid revealing earning decreases and losses to diminish costs arising from transactions with stakeholders. Similarly, Degeorge, Patel and Zeckhauser (1999) show that managers smooth earnings to meet analysts’ forecasts. On the other hand there are various contrary studies. DeFond and Jimbalvo (1993) found that auditor-client disagreements resulting from earnings management, are more present in Big 4 audited firms. They explain this with the properties of the “common” Big 4 clients. For the reason of the ambiguous results, it is interesting to study the effects and compare them with prior evidence to answer the question whether Big 4 auditors deliver “higher” quality in terms of a “better” financial reporting. The terms are operationalized using a dis-cretionary accruals and income smoothing measure and analyzed for (non-)Big 4 audited UK-firms in the period 2005-2011.
Author: Publisher: GRIN Verlag ISBN: 366846748X Category : Business & Economics Languages : en Pages : 34
Book Description
Seminar paper from the year 2017 in the subject Business economics - Accounting and Taxes, grade: 1,3, , language: English, abstract: This paper studies the relation between audit and earnings quality. It examines whether firms audited by a Big 4 member engage in higher earnings management activities as proxied by the magnitude of discretionary and absolute accruals, as well as an income smoothing measure. The author predicts that large auditors have higher competencies and incentives to deliver a higher quality audit. Therefore, their clients are expected to reveal less sophisticated earnings management and thus higher earnings quality. The results do not support this relation. Since standardsetters have been concerned about managers’ use of discretion to manage earnings in their financial reports, an increasing amount of empirical research was conducted to address this issue, additionally to regulation. While independent auditors (aim to) assure that these statements are in accordance with legal compliance, the actual audit quality can be grasped as the contingency that the auditor exposes and discloses an anomaly in their clients’ financial reports. Whereas numerous audit scandals threaten the trustworthiness of well-known large auditors, there is various research revealing that Big N audited firms are supposed to disclose financial reports of higher quality. Supplementing misguiding accrual accounting practices in this regard, this study also addresses another proxy for earnings management: income smoothing. Burgstahler and Dichev (1997) explain corporate income smoothing with the fact that managers avoid revealing earning decreases and losses to diminish costs arising from transactions with stakeholders. Similarly, Degeorge, Patel and Zeckhauser (1999) show that managers smooth earnings to meet analysts’ forecasts. On the other hand there are various contrary studies. DeFond and Jimbalvo (1993) found that auditor-client disagreements resulting from earnings management, are more present in Big 4 audited firms. They explain this with the properties of the “common” Big 4 clients. For the reason of the ambiguous results, it is interesting to study the effects and compare them with prior evidence to answer the question whether Big 4 auditors deliver “higher” quality in terms of a “better” financial reporting. The terms are operationalized using a dis-cretionary accruals and income smoothing measure and analyzed for (non-)Big 4 audited UK-firms in the period 2005-2011.
Author: Anonym Publisher: Grin Publishing ISBN: 9783668467491 Category : Languages : en Pages : 36
Book Description
Seminar paper from the year 2017 in the subject Business economics - Accounting and Taxes, grade: 1,3, language: English, abstract: This paper studies the relation between audit and earnings quality. It examines whether firms audited by a Big 4 member engage in higher earnings management activities as proxied by the magnitude of discretionary and absolute accruals, as well as an income smoothing measure. The author predicts that large auditors have higher competencies and incentives to deliver a higher quality audit. Therefore, their clients are expected to reveal less sophisticated earnings management and thus higher earnings quality. The results do not support this relation. Since standardsetters have been concerned about managers' use of discretion to manage earnings in their financial reports, an increasing amount of empirical research was conducted to address this issue, additionally to regulation. While independent auditors (aim to) assure that these statements are in accordance with legal compliance, the actual audit quality can be grasped as the contingency that the auditor exposes and discloses an anomaly in their clients' financial reports. Whereas numerous audit scandals threaten the trustworthiness of well-known large auditors, there is various research revealing that Big N audited firms are supposed to disclose financial reports of higher quality. Supplementing misguiding accrual accounting practices in this regard, this study also addresses another proxy for earnings management: income smoothing. Burgstahler and Dichev (1997) explain corporate income smoothing with the fact that managers avoid revealing earning decreases and losses to diminish costs arising from transactions with stakeholders. Similarly, Degeorge, Patel and Zeckhauser (1999) show that managers smooth earnings to meet analysts' forecasts. On the other hand there are various contrary studies. DeFond and Jimbalvo (1993) found that auditor-client disagreements resulting from earnin
Author: David Hay Publisher: Routledge ISBN: 1136210350 Category : Business & Economics Languages : en Pages : 387
Book Description
Auditing has been a subject of some controversy, and there have been repeated attempts at reforming its practice globally. This comprehensive companion surveys the state of the discipline, including emerging and cutting-edge trends. It covers the most important and controversial issues, including auditing ethics, auditor independence, social and environmental accounting as well as the future of the field. This handbook is vital reading for legislators, regulators, professionals, commentators, students and researchers involved with auditing and accounting. The collection will also prove an ideal starting place for researchers from other fields looking to break into this vital subject.
Author: Francesco De Luca Publisher: Springer Nature ISBN: 3031151569 Category : Business & Economics Languages : en Pages : 137
Book Description
The globalization of financial markets worldwide has progressively pushed toward simultaneous globalization of accounting information. Thus, during the last 50 years, categories of preparers, users, and regulators have devoted their efforts to support the global comparability of financial reporting aiming at favoring the comparison of corporates’ financial performances at a cross-country level. In the same vein, IASB, national standard setters, and jurisdictions have participated in and given momentum to this process. At the same time, academic research has followed this process and tried to build a theoretical framework to address the related issues, to assess the impact on preparers, users, and regulators, while defining hindrances and obstacles to the comparability of financial reporting especially in an IFRS environment. In this context, this book reviews research studies on the comparability of financial reporting at a global level as well as highlights empirical analyses that demonstrate the extent to which global comparability has been achieved, and how it enhances value relevance of earnings across countries. It also looks at the cross-country investors’ perspectives by shaping the empirical analysis to provide further insights on the role of the "Big Four" auditing services in enhancing the comparability of earnings. The book provides an original contribution to the current debate about the comparability of financial reporting under IFRS and will be useful for researchers in the field.
Author: Cheng F.Lee Publisher: Center for PBBEFR & Ainosco Press ISBN: 9866286754 Category : Business & Economics Languages : en Pages :
Book Description
Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.
Author: Ulf Mohrmann Publisher: Logos Verlag Berlin GmbH ISBN: 3832541853 Category : Business & Economics Languages : en Pages : 300
Book Description
The dissertation consists of four essays on the quality of audited financial statements. The first analysis investigates the association between several regulations of the audit market and earnings characteristics. The second essay differentiates between different drivers of audit quality after an auditor change by comparing the effects of voluntary and mandatory auditor changes. The third study analyses the different strategies of Big4 and non-Big4 auditors in dealing with Level 3 fair values. The fourth part examines banks' valuation behavior concerning Level 3 fair values.
Author: Reiner Quick Publisher: Routledge ISBN: 1134060238 Category : Business & Economics Languages : en Pages : 381
Book Description
The reputation of corporate reporting has been in crisis. Trust in the process of financial accounting and auditing has been undermined by a series of high profile scandals involving major corporations, including Enron, Parmalat, Ahold, and Worldcom. In response, regulators and practitioners world-wide have put forward a series of initiatives to re
Author: Xingqiang Du Publisher: Springer Nature ISBN: 9813344628 Category : Business & Economics Languages : en Pages : 506
Book Description
This book focuses on the Chinese context to investigate how informal institutions (Confucian culture and its dimensions, religion, political connections) in China affect accounting behaviors. This book tries to show that cultural influence and religious impacts in China are not trivial and increasingly important, and specifically, informal institutions have its bright and dark sides with regard to its effects on accounting behaviors. This book aims to investigate whether and how informal institutions (Confucian culture and its dimensions, religion, political connections) affect micro-level accounting behaviors, including but not limited to audit quality, financial misstatement, R&D, corporate misconducts, corporate philanthropy and corporate environmental responsibility. This book provides graduate students, scholars and practitioners in the fields of accounting, business administration and religion with an in-depth understanding about how informal institutions as a set of social norms affect micro-level accounting behaviors. First, this book is the first to focus on the Chinese context and investigate the effects of informal institutions on accounting behavior. Second, this book documents systematic evidence to show the bright and dark sides with regard to the relation between informal institutions and accounting behavior in China. Lastly, this book reveals informal institutions can serve as an important mechanism to affect accounting behaviors.
Author: Albert Tavidze Publisher: Nova Publishers ISBN: 9781590338384 Category : Business & Economics Languages : en Pages : 244
Book Description
This series spans the globe presenting leading research in economics. Perhaps it is a sign of the times that economic weapons such as sanctions seem to be as powerful as or more so than tanks. International applications and examples of economic progress are invaluable in a troubled world with economic booms bursting like so many penny balloons. Intraindustry Trade; Inequality, Human Capital, and Trade: Theory and Evidence; Estimation of Duration Models in the Presence of Heterogeneity of Unknown Form; Health and the Process of Economic Development; Monetary Volatility and the Paper-Bill Spread; Habits and Meaning in Alfred Schutz's Action Theory; Tax Evasion in a Transition Economy: Theory and Empirical Evidence from the Former Soviet Union Republic of Moldova; A Tale of Three Cities: Is an Electronic Public Order Book Appropriate for Transition Economies?; Auditors, Actuaries, and Managed Earnings; Using Principal Component Analysis to Explain Term Structure Movements: Performance and Stability; Index.
Author: 
Author: 
Author: Anonym
Author: David Hay
Author: Johanna Miettinen
Author: Francesco De Luca
Author: Cheng F.Lee
Author: Ulf Mohrmann
Author: Reiner Quick
Author: Xingqiang Du
Author: Albert Tavidze