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Audit Quality And Overvalued Equity
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Book Synopsis Audit Quality and Overvalued Equity by : Robert Houmes
Download or read book Audit Quality and Overvalued Equity written by Robert Houmes and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - Audit quality studies document that accruals decrease when the audit firm is large, or the audit firm is an industry specialist, or the audit-client tenure is long. The purpose of this paper is to posit that incentives related to highly-valued equity mitigate these results, as managers use income increasing accruals to augment earnings.Design/methodology/approach - To test this assertion, the authors regress discretionary accruals on: controls, a highly valued equity indicator variable equal to 1 if the client's lagged price-to-earnings ratio is in the highest P/E quintile, indicator variables equal to 1 for alternative measures of audit quality, and interaction terms between the highly valued equity indicator variable and audit quality indicator variables.Findings - Results of tests show positive and statistically significant coefficients for each of the highly-valued equity-audit quality interaction terms, suggesting that when a firm is highly valued the accruals' decreasing effect of high quality auditors is reduced.Originality/value - Beginning with Jensen's article regarding the agency costs of overvalued equity, a stream of research examining factors associated with highly priced firms has developed. The paper extends these findings, as well as the considerable body of audit quality studies, by examining the ability of a high quality auditor to attenuate this result.Keywords Auditing, Equity capital, Price earning ratio, Audit quality, Highly valued equity,Discretionary accruals.
Book Synopsis Audit Quality in the Equity Market by : Yang Li
Download or read book Audit Quality in the Equity Market written by Yang Li and published by . This book was released on 2009 with total page 574 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Effects of Audit Quality on Earnings Management and Cost of Equity Capital by : Hanwen Chen
Download or read book Effects of Audit Quality on Earnings Management and Cost of Equity Capital written by Hanwen Chen and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effects of audit quality on earnings management and cost of equity capital for two groups of Chinese firms: state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs). The differences in the nature of the ownership, agency relations and bankruptcy risks lead SOEs to have weaker incentives than NSOEs to engage in earnings management. As a result, the effect of audit quality in reducing earnings management will be greater for NSOEs than for SOEs. In addition, investors' pricing of information risk as reflected in the cost of equity capital will be more pronounced for NSOEs than for SOEs with high and low audit quality. We find empirical evidence consistent with these hypotheses. Our findings indicate that (1) while high-quality auditors play a governance role in China, that role is limited to a subset of firms, and (2) even under the same legal jurisdiction, the effects of audit quality (in the form of lower earnings management and cost of equity capital) vary across firms with different ownership structures. Our study extends prior research by focusing on the economic consequences of SOEs' and NSOEs' auditor choices and underscores the importance of controlling for ownership type when conducting audit research.
Book Synopsis Essays on Audit Quality, Auditor Choice, and Equity Valuation by : Kim Pettersson
Download or read book Essays on Audit Quality, Auditor Choice, and Equity Valuation written by Kim Pettersson and published by . This book was released on 2011 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Audit Firm Tenure and the Equity Risk Premium by : Jeff P. Boone
Download or read book Audit Firm Tenure and the Equity Risk Premium written by Jeff P. Boone and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Although investor perceptions of audit quality play a critical role in maintaining systemic confidence in the integrity of financial accounting reports (Levitt 2000), prior research on the effects of auditor tenure from an investor perspective is relatively sparse. In this study, we investigate whether investors price audit firm tenure for Big Five audits by examining the relation between tenure and the ex ante equity risk premium, i.e., the excess of the company-specific ex ante cost of equity capital over the risk-free interest rate. Based on prior research, whereas the quot;auditor learningquot; argument predicts that audit quality will change in only one direction (i.e., improve) with tenure, the quot;auditor-client closenessquot; argument suggests that audit quality may decrease beyond some (albeit unspecified) length of tenure due to impaired auditor independence and objectivity. Consistent with prior theoretical arguments, we find some evidence of a non-linear relation between audit firm tenure and the ex ante equity risk premium, i.e., we find that the equity risk premium decreases in the early years of tenure but increases with additional years of tenure. These findings persist after we control for well-known risk factors and company characteristics that have been shown in prior research to be related to the cost of equity capital. The implications of our findings are discussed.
Book Synopsis Audit Tenure and the Equity Risk Premium by : Rana Baker
Download or read book Audit Tenure and the Equity Risk Premium written by Rana Baker and published by LAP Lambert Academic Publishing. This book was released on 2010-10 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: it is observed that most firms in Jordan retain the audit firm for long period of time, this long auditor-client relationship can have adverse effect on perceived audit quality; as long-term relationships between companies and their auditors create a level of closeness that impairs auditor independence and reduces audit quality, this close relationship may create a conflict of interest for the auditor and can adversely affect the auditing process (opinion/integrity); The auditor could identify closely with management's perspective and not exhibit sufficient professional skepticism. In addition, management can take advantage of the auditor's conflict by making a personal appeal for compassion and support. This leads us to the following question: Does long audit firm tenure affect perceived audit quality? This study will investigate whether audit firm tenure affect perceived audit quality by examining the relation between audit firm tenure and the client -specific equity risk premium -that is, the excess of client specific cost of equity capital over the risk free interest rate.
Book Synopsis Audit Quality and Earnings Management by : Aini Qiu
Download or read book Audit Quality and Earnings Management written by Aini Qiu and published by . This book was released on 2004 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effect of Auditor Quality on Financing Decisions by : Xin (Simba) Chang
Download or read book The Effect of Auditor Quality on Financing Decisions written by Xin (Simba) Chang and published by . This book was released on 2013 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a model and provide empirical evidence showing that auditor quality affects companies' financing decisions, and that better audit quality reduces the impact of market conditions on client financial decisions and capital structure. Consistent with our analytical predictions, we find that companies audited by Big 6 firms are more likely to issue equity as opposed to debt than are those audited by small audit firms. We also find that companies audited by Big 6 auditors are able to make larger equity issues than are those audited by small auditors, but the difference narrows when market conditions improve. Additional results show that the debt ratios of companies decrease less in response to favorable market conditions when auditor quality is high, at least over the medium term.
Book Synopsis Integrated Reporting and Audit Quality by : Chiara Demartini
Download or read book Integrated Reporting and Audit Quality written by Chiara Demartini and published by Springer. This book was released on 2017-04-13 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book analyzes the relationship between integrated reporting and audit quality within the European context, presenting empirical evidence and drawing on a broad review of the available literature in order to evaluate the ability of integrated reporting to enhance audit risk assessment. Dedicated sections first elucidate the concepts of integrated reporting and audit quality. The main integrated reporting frameworks are compared, the role of integrated reporting within a firm’s disclosure is examined, and all aspects of audit risk are discussed. The key question of the impacts of integrated reporting on the components of audit risk is then addressed in detail, with reference to empirical findings, their practical implications, and their limitations. The concluding section explores the future of corporate reporting and the development of the next integrated reporting framework and summarizes the insights that the analysis in the book offers into the relationship between integrated reporting and audit quality in the European setting.
Download or read book Audit Quality written by Jonas Tritschler and published by Springer Science & Business Media. This book was released on 2013-10-31 with total page 251 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arising from the author’s experience as a practicing CPA, this book is quite different from other research in this field, as it confronts the subject of audit quality from a pragmatic perspective. The first goal of Jonas Tritschler is to develop an audit quality metric on national audit firm level. Financial reporting errors, as detected by the German enforcement institutions during examinations, which subsequently are published in the German Federal Gazette by the involved companies, are the data basis for this measurement. Using the developed audit quality metric, the second goal of this study is to analyze audit quality differences of selected audit firms by comparing their deployed audit input factors such as employee’s competence (ratio of certified professionals to total audit staff), experience of employees (average tenure of employees in years) and client-specific experience (client fluctuation rate). Results indicate a correlation between audit quality according to the developed metric and the operationalized audit input factors mentioned above.
Book Synopsis Evidence on Audit Quality Differences Across Big N Audits by : Anwer S. Ahmed
Download or read book Evidence on Audit Quality Differences Across Big N Audits written by Anwer S. Ahmed and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence on the determinants of the choice of an industry specialist auditor and the effect of this choice on cost of equity for a sample of firms that are audited by Big N auditors. We find that firms with more severe conflicts of interest between managers and shareholders are more likely to use an industry specialist auditor. Furthermore, we document that firms that use an industry specialist auditor have a significantly lower cost of equity after controlling for firms' endogenous decision to use an industry specialist auditor.
Author :Suil Pae Publisher :National Library of Canada = Bibliothèque nationale du Canada ISBN 13 : Total Pages :154 pages Book Rating :4.F/5 ( download)
Book Synopsis Firm Value, Audit Quality, and Social Welfare in the Presence of Costly Litigation Against Auditors by : Suil Pae
Download or read book Firm Value, Audit Quality, and Social Welfare in the Presence of Costly Litigation Against Auditors written by Suil Pae and published by National Library of Canada = Bibliothèque nationale du Canada. This book was released on 1996 with total page 154 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Role of Asset Reliability and Auditor Quality in Equity Valuation by : Yaser Fallatah
Download or read book The Role of Asset Reliability and Auditor Quality in Equity Valuation written by Yaser Fallatah and published by . This book was released on 2006 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper brings together the auditor quality, asset reliability and firm valuation literatures by examining the role of auditor quality in equity valuation. The study broadly follows the Richardson et al. (2005) categorization of the reliability of accounting accruals of balance sheet components and conjectures that the role of auditor quality in equity valuation is more pronounced when asset reliability is not high. Auditor quality is measured using reputation, industry specialist and tenure metrics. The underlying assumption is that auditor quality enhances the market's perception of firm value; as such, auditor quality may mitigate the cost of security mispricing documented by Richardson et al. (2005) for low or medium reliability accruals. The results of the study provide some support that high quality auditors contribute to the valuation of equity for assets. It is less clear as to whether the value is more pronounced for low or medium reliability assets.
Book Synopsis The Effect of Audit Quality on the Valuation of Stocks in an IPO. by : Hossein Shah Hosseini
Download or read book The Effect of Audit Quality on the Valuation of Stocks in an IPO. written by Hossein Shah Hosseini and published by . This book was released on 2014 with total page 11 pages. Available in PDF, EPUB and Kindle. Book excerpt: Price of the initial public offering stock of 80 companies listed in Tehran Stock Exchange during the 10-year period from 2003 to 2012 were studied regarding to the information of financial statements and documentary vision. Spss statistical software is utilized in order to for data analysis and the hypotheses testing. We used Kolmogorov-Smirnov test to examine data normality, linear regression model to test the research hypotheses and Pearson correlation coefficient for relationship between variables during this study.The results indicate that there is no relation between audit firm size, the type of audit opinion and amount of Explanatory Paragraphs of audit report (two audit quality elements) and the valuation of shares in an initial public offering, but there is a direct relationship between auditor specialization and quality of the information of audited financial statement (two other audit quality elements) and value of shares in initial public offerings.
Book Synopsis Audit Quality, Auditor Compensation and IPO Underpricing by : Xin (Simba) Chang
Download or read book Audit Quality, Auditor Compensation and IPO Underpricing written by Xin (Simba) Chang and published by . This book was released on 2007 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: By examining a sample of Australian firms going public over the period 1996 to 2003, we jointly study the impact of audit quality on auditor compensation and IPO underpricing. We find that quality (Big 4) audit firms earn significantly higher fees than Non-Big 4 auditors, and audit quality is positively associated with IPO underpricing. The positive relation between audit quality and underpricing is more pronounced for small issues, IPOs underwritten by non-prestigious underwriters, and those that are not backed by venture capitalists. Taken together, our results suggest that quality auditors serve as a signaling device that enhances post-issue market value of equity.
Book Synopsis Essays on the Quality of Audited Financial Statements by : Ulf Mohrmann
Download or read book Essays on the Quality of Audited Financial Statements written by Ulf Mohrmann and published by Logos Verlag Berlin GmbH. This book was released on 2016-02-15 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dissertation consists of four essays on the quality of audited financial statements. The first analysis investigates the association between several regulations of the audit market and earnings characteristics. The second essay differentiates between different drivers of audit quality after an auditor change by comparing the effects of voluntary and mandatory auditor changes. The third study analyses the different strategies of Big4 and non-Big4 auditors in dealing with Level 3 fair values. The fourth part examines banks' valuation behavior concerning Level 3 fair values.
Book Synopsis Financial Accounting and Equity Markets by : Philip Brown
Download or read book Financial Accounting and Equity Markets written by Philip Brown and published by Routledge. This book was released on 2013-06-19 with total page 443 pages. Available in PDF, EPUB and Kindle. Book excerpt: Philip Brown is one of the most admired and respected accounting academics alive today. He was a pioneer in capital markets research in accounting, and his 1968 article, co-authored with Ray Ball, "An Empirical Evaluation of Accounting Income Numbers," arguably had a greater impact on the course of accounting research, directly and indirectly, than any other article during the second half of the twentieth century. Since that time, his innovative research has focused on issues that bridge accounting and finance, including the relationships between net profit reports and the stock market, the long-run performance of acquiring firms, statutory sanctions and voluntary corporate disclosure, and the politics and future of national accounting standards to name a few. This volume brings together the greatest hits of Brown’s career, including several articles that were published in out-of-the-way places, for easier use by students and researchers in the field. With a foreword written by Stephen A. Zeff, and an introduction that discusses the evolution of Brown’s research interests and explains the context for each of the essays included in the volume, this book offers the reader a unique look inside this remarkable 50-year career.
