Audit Rotation And Earnings Quality: An Analysis Using Discretionary Accruals

Silvestre, Adalene Olivia; Costa, Cristiano Machado; Kronbauer, Clóvis Antônio

doi:10.15728/bbr.2018.15.5.1

Cited by 16 publications

(17 citation statements)

References 28 publications

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“…Likewise, no impact on comparability measurements was found for the companies that voluntarily changed the audit firm. Thus, our findings showed that audit firm rotation did not influence comparability, contrary to the results of the study by Silvestre et al (2018), which detected a reduction in the quality of accruals associated with audit firm rotation. Our results also differ from the findings by Kim et al (2015), as the authors conclude that the improvement in accrual quality occurs only under mandatory rotation.…”

Section: Presentation and Analysis Of Resultscontrasting

confidence: 99%

The impact of audit rotation on the comparability of financial reports,

Sousa

Ribeiro

Vicente

2021

Rev. contab. finanç.

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This study aims to assess the effect of the rotation and tenure of audit firm and audit partner on the comparability and consistency of financial reports. Several studies have addressed the effect of auditor rotation on the quality of financial reports, but none of them focused specifically on the impact on the comparability and consistency of financial reports. Around the world, the impact of mandatory rotation of audit partner and audit firm is being discussed in academia and regulatory bodies. The peculiarity of the Brazilian regulatory environment allows us to contribute to the discussions on the effects of implementing mandatory auditor rotation. Our sample included 50 companies for which we analyzed data from 2012 to 2018. To measure comparability, we used the similarity of the accounting function model by DeFranco, Kothari and Verdi (2011), and to measure consistency we used the adaptations to this model proposed by Ribeiro (2014). For data analysis, we used descriptive statistics and multivariate panel analysis. Our results suggest that the rotation (mandatory and voluntary) of audit firm and audit partner does not affect the comparability and consistency of financial reports. Results also suggest that auditor-client relationships of up to three years contribute to a significant increase in comparability and consistency, indicating that mandatory rotation does not impair investors’ ability to compare the information concerning their investments. In addition, regulators are shown that a possible reduction in the mandatory rotation term (from five to three years, as in Italy) would be in line with market practices and would imply an increase in the comparability and consistency of financial information.

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Section: Presentation and Analysis Of Resultscontrasting

confidence: 99%

The impact of audit rotation on the comparability of financial reports,

Sousa

Ribeiro

Vicente

2021

Rev. contab. finanç.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…This has resulted in a permanent conflict of opinions between supporters and opponents of mandatory audit rotation (Silvestre et al, 2018). Despite the recent implementation of mandatory audit rotation in European legislation (Silvestre et al, 2018), some countries, which had done so earlier, abandoned it after identifying an absence of expected benefits (Raiborn et al, 2006, in Ryken et al, 2007). The Big Four audit companies Ernst & Young and PricewaterhouseCoopers are opponents of mandatory auditor rotation and believe that "costs of mandatory audit firm rotation would outweigh the perceived benefits of a required "fresh look" at the financial statements by a new audit firm" (PricewaterhouseCoopers, 2012, in Bamahros et al, 2015:146) and that mandatory audit partner rotation is more effective alternative (Ernst & Young, 2013, in Bamahros et al, 2015).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The Effect of Auditor Rotation on the Relationship between Financial Manipulation and Auditor’s Opinion

Filipović

Šušak

Lijić

2021

Business Systems Research Journal

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Background: Since external auditors possess the expertise necessary for detecting manipulations in financial statements, they should also take into account earnings management that could lead to it. In that context, auditor’s independence, which can be affected by auditor’s rotation, is of utmost importance. Objectives: This paper aims to examine the moderating effect of auditor rotation on the relationship between the extent of financial manipulation and the type of auditor’s opinion for companies listed on the Zagreb Stock Exchange in the Republic of Croatia. Methods/Approach: A panel analysis with logistic regression is conducted to test the research hypothesis. The sample consists of 210 observations during the three years from 2015 to 2017. Results: Results show a significant positive relationship between auditor rotation in a current financial year and auditor’s opinion. Furthermore, there is a negative, but the statistically insignificant moderating effect of auditor rotation in a current financial year on the relationship between financial manipulation and auditor’s opinion, as well as the statistically insignificant moderating effect of auditor rotation frequency over five years on the relationship between financial manipulation and auditor’s opinion. Conclusions: It is not likely that auditors take earnings management into account when generating their opinion on financial statements, and auditor rotation is not proven to be an adequate stimulus in that context.

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“…Isso foi conrmado por Defond e Subramanyam (1998) quando perceberam redução nas práticas de gerenciamento de resultados via accruals discricionários diante da troca das rmas de auditoria no mercado dos Estados Unidos da América. O mesmo resultado foi encontrado na recente pesquisa nacional realizada por Silvestre et al (2018).…”

Section: Qualidade Da Auditoriaunclassified

Qualidade da auditoria no futebol e seus reflexos no valor das marcas dos clubes brasileiros

Marçal

Alberton

2021

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Este estudo analisa a influência da qualidade da auditoria no valor das marcas dos clubes brasileiros de futebol. Para tal, foram realizadas regressões múltiplas com dados em painel diante de uma amostra de 20 diferentes clubes de futebol do Brasil entre 2014 e 2018. Os resultados indicam influência da qualidade da auditoria no valor das marcas dos clubes, sendo o tempo de permanência das firmas e o rodízio das firmas de auditoria fatores positivos nessa relação. Isto evidencia a relevância de uma auditoria de qualidade no âmbito do futebol, demarcado por práticas ruins de gestão. Em termos práticos, os resultados auxiliam stakeholders na avaliação do valor de mercado dos clubes, ao esclarecer aspectos dúbios para os torcedores, o que tem impacto na esfera social do esporte.

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Audit Rotation And Earnings Quality: An Analysis Using Discretionary Accruals

Cited by 16 publications

References 28 publications

The impact of audit rotation on the comparability of financial reports,

The impact of audit rotation on the comparability of financial reports,

The Effect of Auditor Rotation on the Relationship between Financial Manipulation and Auditor’s Opinion

Qualidade da auditoria no futebol e seus reflexos no valor das marcas dos clubes brasileiros

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