What Do We Learn by studying Accounting and Governance Practices in Other Countries? Discussion of “Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs:Evidence from the United Kingdom”

Jere R. Francis, Chan Li*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

29 Citations (Web of Science)

Abstract

While substantial revisions to auditor reporting requirements are being implemented internationally, the impact of these reforms on financial reporting quality is unknown. We exploit the United Kingdom's recent auditor reporting changes and find that the United Kingdom's new reporting regime is associated with an improvement in financial reporting quality as proxied by significant decreases in absolute abnormal accruals and the propensity to just meet or beat analyst forecasts, and a significant increase in earnings response coefficients. As for audit costs, we do not find a significant change in audit fees or audit delay surrounding the implementation of the new reporting regime. Taken together, the results of this study suggest that new auditor reporting requirements are associated with a significant improvement in financial reporting quality without detecting a significant increase in audit costs.

Original languageEnglish
Pages (from-to)1531-1539
Number of pages10
JournalContemporary Accounting Research
Volume36
Issue number3
DOIs
Publication statusPublished - Sep 2019

Keywords

  • EARNINGS QUALITY
  • INVESTOR PROTECTION
  • MATTER PARAGRAPHS
  • LITIGATION RISK
  • BIG-4
  • INDEPENDENCE
  • MANAGEMENT
  • FRAMEWORK
  • SERVICES
  • DECISION

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