Journal ArticleDOI
Auditor Industry Specialization and Earnings Quality
TLDR
In this paper, the authors examined the association between measures of earnings quality and auditor industry specialization and found that clients of industry specialist auditors have lower discretionary accruals and higher ERC than clients of nonspecialist auditors.Abstract:
This study examines the association between measures of earnings quality and auditor industry specialization. Prior work has examined the association between auditor brand name and earnings quality, using auditor brand name to proxy for audit quality. Recent work has hypothesized that auditor industry specialization also contributes to audit quality. Extending this literature, we compare the absolute level of discretionary accruals (DAC) and earnings response coefficients (ERC) of firms audited by industry specialists with those of firms not audited by industry specialists. We restrict our study to clients of Big 6 (and later Big 5) auditors to control for brand name. Because industry specialization is unobservable, we use multiple proxies for it. After controlling for variables established in prior work to be related to DAC and the ERC, we find clients of industry specialist auditors have lower DAC and higher ERC than clients of nonspecialist auditors. This finding is consistent with clients of industry ...read more
Citations
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Journal ArticleDOI
A review of archival auditing research
Mark L. DeFond,Jieying Zhang +1 more
TL;DR: In this article, the authors define higher audit quality as greater assurance of high financial reporting quality, and they provide a framework for systematically evaluating their unique strengths and weaknesses, including the role of auditor and client competency in driving audit quality.
Journal ArticleDOI
What do we know about audit quality
TL;DR: In this paper, the authors present empirical research over the past 25 years, mainly from the United States, in order to assess what we currently know about audit quality with respect to publicly listed companies and suggest that audit failure rates are infrequent, far less than 1% annually, and audit fees are quite small, less than 0.1% of aggregate client sales.
Journal ArticleDOI
Big 4 Office Size and Audit Quality
Jere R. Francis,Michael D. Yu +1 more
TL;DR: In this article, the authors predict that larger offices of Big 4 auditors will have higher quality audits for SEC registrants due to greater in-house experience in administering such audits.
Journal ArticleDOI
Financial Fraud, Director Reputation, and Shareholder Wealth
Eliezer M. Fich,Anil Shivdasani +1 more
TL;DR: The authors investigated the reputational impact of financial fraud for outside directors based on a sample of firms facing shareholder class action lawsuits and found that outside directors do not face abnormal turnover on the board of the sued firm but experience a significant decline in other board seats held.
Posted Content
National and Office-Specific Measures of Auditor Industry Expertise and Effects on Audit Quality
Kenneth J. Reichelt,Dechun Wang +1 more
TL;DR: In this article, the authors examined whether audit quality is higher for industry audit specialists at the national and city-office levels using the framework developed in Ferguson et al. [2003] and Francis et al [2005].
References
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Journal ArticleDOI
A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
Journal ArticleDOI
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Eugene F. Fama,James D. MacBeth +1 more
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Journal ArticleDOI
Earnings Management During Import Relief Investigations
TL;DR: In this article, the authors test whether firms that would benefit from import relief attempt to decrease earnings through earnings management during import relief investigations by the United States International Trade Commission (ITC).
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Positive Accounting Theory
TL;DR: In this article, the authors review the theory and methodology underlying the economics-based empirical literature in accounting and discuss the role of theory in empirical work and the extent to which the theories are consistent with those studies' evidence.
Journal Article
Detecting earnings management
TL;DR: In this paper, the authors evaluate alternative accrual-based models for detecting earnings management and find that they appear well specified when applied to a random sample of firm-years.