Bhaskar, Lori Shefchik
[VerfasserIn]
;
Hopkins, Patrick E.
[Sonstige Person, Familie und Körperschaft];
Schroeder, Joseph H.
[Sonstige Person, Familie und Körperschaft]
An Investigation of Auditors' Judgments When Companies Release Earnings Before Audit Completion
Erschienen in:Kelley School of Business Research Paper ; No. 18-6
Umfang:
1 Online-Ressource (52 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3097241
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 1, 2018 erstellt
Beschreibung:
Over two-thirds of United States public companies now announce annual earnings prior to (versus with, or after) audit completion. We expect this practice has potential to increase pressure in auditor/client negotiations over post-announcement audit adjustments. In a controlled experiment with audit partners and senior managers, we find, in the presence of today's typical level of audit committee engagement, auditors are significantly more likely to accept aggressive financial reporting when earnings have been released (versus drafted). Further, we test and find this effect is mitigated with strong audit committee effectiveness (i.e., including ideal, but achievable, characteristics typically currently lacking in today's average committees). Our process-model tests find the joint effects are mediated by auditors' directional goals such that in the absence of strong audit committees, released earnings increases auditors' directional goals, leading to lower judgment quality. Our study provides evidence on the importance of investing in high-quality audit committees in promoting high-quality financial reporting