Audit opinion and earnings management: Evidence from Greece

This study examines the relationship between audit opinions and earnings management, as measured by discretionary accruals, for listed firms on the Athens Stock Exchange (ASE). We divide the qualified audit opinions into two categories: qualified for the going-concern uncertainty and qualified for other reasons. The results indicate that audit opinions are not related to earnings management. Client financial characteristics, such as profitability and size are determinants of the going-concern audit opinion decision. The decision of auditors to issue qualified opinions for other reasons is explained by the type of audit opinion issued in the previous year.     

Are fully independent audit committees really necessary?

Accounting scandals and concerns about the quality of financial statements have led to many calls for improved audit committee effectiveness. Prior research indicates that audit committee independence is positively related to effective oversight of the financial reporting process. Unfortunately, prior research has not provided an answer as to how much independence on the audit committee is enough. This is an important unanswered question because while Section 301 of the Sarbanes-Oxley Act of 2002 (SOX) currently requires all listed companies to maintain an audit committee that is 100% independent there has been much debate regarding easing the SOX requirements for smaller and foreign companies. In this paper we examine whether the regulatory requirements of a completely independent audit committee are necessary to obtain the monitoring benefits related to audit committee independence that have been documented in prior literature. Our results suggest that the benefits of audit committee independence are consistently achieved only when the audit committee is completely independent. These results provide support for the SOX requirement of 100% independent audit committees.     

公司权益价值的非线性效应——基于持续经营和转换期权分析

基于对持续经营价值与转换期权价值的分析,本文将两种非线性效应引入了传统的线性权益定价模型。同时进一步考虑税收摩擦,新的模型刻画了公司权益价值关于其营业收入的凹性关系:即公司的权益价值随公司营业收入单调递增,而其边际贡献却在递减。基于中国A股上市公司财务数据的实证结果表明:就单一行业而言,定价模型所描述的关系基本成立;但由于异质性的存在,不同行业的营业收入与权益价值之间并不存在同一的非线性协整关系。     

Going-concern initial public offerings

We study the relation between audit reports and the capital-raising activities of small business by studying the role of going-concern (GC) audit opinions in IPOs. After controlling for other effects, we find that the presence of a GC opinion is positively related to whether a stock delists (for deleterious reasons) within two years of IPO. We also find that GC IPOs suffer less first-day underpricing. Based on Rock (1986), this implies that firms with GCs have less ex ante uncertainty in the sense that the information conveyed by a GC helps uninformed investors estimate the dispersion of secondary market values.     

"重大疑虑事项"为审计判断证据的差异性研究——《中国注册会计师审计准则第1324号——持续经营》实施效果预测

2006年2月修订颁发的持续经营审计准则在取得重要修订成果的同时,完全保留了原准则中对持续经营审计判断的核心证据--影响持续经营假设的重大疑虑事项或情况--的界定.本文以2003年到2004年涉及持续经营问题而被出具非标准审计意见的所有A股上市公司为样本,研究了注册会计师依据影响持续经营假设的重大疑虑事项实施审计判断的差异情况.明确提出:新旧准则对重大疑虑事项界定的不确定性、对依据重大疑虑事项出具不同审计意见规范的或缺性是导致诸多审计判断差异的主要原因,新准则的实施效果可能仍不理想;持续经营审计准则自身不可克服的修订缺陷,应考虑从审计手段和方法的创新上寻找突破口,以提高新准则的实施效果.     

公司社会责任对审计收费与审计意见影响的实证研究

本文利用2011年沪深两市上市公司发布的社会责任报告,对社会责任信息进行定量化的基础上,实证研究了审计师是否会对被审计单位的社会责任信息做出反应,以及如何做出反应.研究结果表明,公司社会责任履行情况会影响审计收费,且社会责任信息披露越充分,越有利于降低审计师收费;相比没有发布社会责任报告的公司,审计师对独立发布社会责任报告的公司出具持续经营审计意见的可能性会更低.     

Delays in reporting price-sensitive information: The case of going concern

Regulators require firms to disclose all price-sensitive information at the earliest possible date. The going-concern opinion constitutes a fundamental uncertainty for the firm and thus is likely to be of a price-sensitive nature. This paper explores whether going-concern uncertainty disclosures are price sensitive in the London market, and then tests whether managements report such audit report information to investors on a timely basis. We capitalize on a London Stock Exchange regulatory loophole which, in effect, allows financially-distressed firms to choose either to report a forthcoming going-concern at the preliminary results announcement stage, or to delay this crucial information to their annual report release. In line with the regulatory requirements, we expect that firms with more price-sensitive, i.e., more serious, adverse news will disclose their forthcoming going-concern opinion at the earliest stage i.e., in their preliminary announcement, rather than delay to their annual report.     

Client importance and non-Big 5 auditors’ reporting decisions

In this paper, we examine the effect of the trade-off between economic dependence and reputation protection on the link between client size and the audit reporting decisions of non-Big 5 auditors. We find that non-Big 5 auditors, like Big 5 auditors, do not allow their larger clients greater leeway to manage earnings. In fact, there is some evidence that non-Big 5 auditors treat their larger clients more strictly. In addition, non-Big 5 auditors, like Big 5 auditors, are at least as likely to issue a going-concern report to their potentially financially distressed larger clients as they are to their otherwise smaller clients.     

Employee firing costs and auditors’ going-concern opinions: Evidence from wrongful discharge laws

This paper examines the impact of employee firing costs on auditors’ going-concern (GC) reporting decisions by exploiting the wrongful discharge laws (WDLs) adopted by U.S. states. We find that auditors are more likely to issue GC opinions to financially-distressed clients headquartered in states that have adopted the laws, in particular the good faith exception, than to clients in states that have not. This finding is robust to controlling for the state-level economics, the strictness of legal liability rules, audit office fixed effects, as well as alternative definitions of financial distress and estimation methods. The impact is concentrated in labor-intensive clients and clients in industries with a higher proportion of nonunionized or permanent employees. We further find that the increased propensity to issue GC opinions is attenuated when the auditor is economically dependent on the client, and is driven by auditors who possess labor-specific expertise. Overall, these findings are consistent with higher firing costs increasing auditors’ propensity to issue GC opinions.