Auditor tenure and non-GAAP earnings

IF 2.8 3区 管理学 Q2 BUSINESS, FINANCE
Pureum Kim, Myungsoo Son
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引用次数: 0

Abstract

Purpose

This study aims to examine whether the newly available auditor tenure information is associated with non-GAAP earnings, as the recent requirement to disclose the initial year of auditor-client relationship in audit reports may give the impression that longer auditor tenure may be related to lower audit quality.

Design/methodology/approach

Using a sample of firm-quarters from 2017 to 2020, the authors conduct both univariate and regression analyses. We use hand-collected data for auditor tenure, SEC comment letters, and non-GAAP variables.

Findings

First, the authors find that the likelihood of disclosing non-GAAP earnings monotonically increases with auditor tenure on a univariate basis. Second, auditor tenure is negatively associated with aggressive non-GAAP reporting. Third, the authors document evidence of aggressive reporting in general; that is, items excluded in calculating non-GAAP earnings are associated with future performance. However, the association declines with longer auditor tenure. Finally, the authors report evidence that the likelihood of receiving an SEC comment letter that contains non-GAAP comments decreases with longer auditor tenure.

Practical implications

The results show that regulators need to consider both GAAP and non-GAAP disclosures’ costs and benefits when enacting auditor tenure regulation. Investors can benefit from the findings in evaluating the quality of non-GAAP earnings. The findings are also relevant to the SEC when allocating limited resources in monitoring non-GAAP reporting.

Originality/value

To the best of the authors’ knowledge, this is the first study showing that auditor tenure is associated with the quality of non-GAAP earnings. Given that financial reporting quality should be understood as a comprehensive system comprising both mandatory and voluntary disclosures, this study complements the literature that examines the effect of auditor tenure on financial reporting quality using GAAP reporting.

审计师任期和非美国通用会计准则收益
目的本研究旨在考察新提供的审计师任期信息是否与非美国通用会计准则收益相关,因为最近要求在审计报告中披露审计师与客户关系的初始年份,这可能会给人造成审计师任期较长可能与审计质量较低有关的印象。设计/方法/途径作者利用 2017 年至 2020 年的公司季度样本,进行了单变量分析和回归分析。我们使用了手工收集的审计师任期、美国证券交易委员会评论信和非美国通用会计准则变量的数据。研究结果首先,作者发现,在单变量基础上,披露非美国通用会计准则收益的可能性随着审计师任期的增加而单调增加。其次,审计师任期与激进的非美国通用会计准则报告呈负相关。第三,作者记录了激进报告的一般证据,即计算非美国通用会计准则收益时排除的项目与未来业绩相关。然而,这种关联随着审计师任期的延长而减弱。最后,作者报告的证据表明,审计师任期越长,收到美国证券交易委员会包含非美国通用会计准则意见的评论信的可能性就越小。投资者在评估非美国通用会计准则收益的质量时,可以从研究结果中获益。据作者所知,这是第一项表明审计师任期与非美国通用会计准则盈利质量相关的研究。鉴于财务报告质量应被理解为一个由强制披露和自愿披露组成的综合体系,本研究是对使用公认会计准则报告检验审计师任期对财务报告质量影响的文献的补充。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
5.40
自引率
13.80%
发文量
45
期刊介绍: The key areas addressed are: ■Audit and Assurance (financial and non-financial) ■Financial and Managerial Reporting ■Governance, controls, risks and ethics ■Organizational issues including firm cultures, performance and development In addition, the evaluation of changes occurring in the auditing profession, as well as the broader fields of accounting and assurance, are also explored. Debates concerning organizational performance and professional competence are also covered.
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