Brad A. Badertscher , Jaewoo Kim , William R. Kinney Jr. , Edward Owens
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引用次数: 1
Abstract
Many U.S. private firms choose either a financial statement compilation or review rather than the higher assurance provided by an audit, yet little is known about these choices. We explore economic aspects of private firm choice of less-than-audit levels of assurance applied to GAAP-based financial statements. We find that CPA fees more than double for each increment in assurance. Commonly used financial reporting quality proxies are higher for both reviews and audits relative to compilations but are statistically indistinguishable on average between reviews and audits. Cost of debt is significantly lower for reviews than for compilations and significantly lower for audits than for reviews. Finally, we find that assurance level choices are associated with bank debt, trade credit, and potential internal information reliability and control concerns.
期刊介绍：
The Journal of Accounting and Economics encourages the application of economic theory to the explanation of accounting phenomena. It provides a forum for the publication of the highest quality manuscripts which employ economic analyses of accounting problems. A wide range of methodologies and topics are encouraged and covered: * The role of accounting within the firm; * The information content and role of accounting numbers in capital markets; * The role of accounting in financial contracts and in monitoring agency relationships; * The determination of accounting standards; * Government regulation of corporate disclosure and/or the Accounting profession; * The theory of the accounting firm.
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