Audited financial reporting and voluntary disclosure: International evidence on management earnings forecasts

Liu, Rubing; Kong, Xiangting; San, Ziyao; Tsang, Albert

doi:10.1111/ijau.12118

Cited by 11 publications

(12 citation statements)

References 67 publications

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“…In addition to the two input measures of country-level institutional development examined in Table 6 Panel A, we further follow T A B L E 6 Audit fee and management earnings forecasts disaggregation, and country-level institutional characteristics Liu et al (2018) and use an output measure of country-level institutional development, MarketDevelopment, in examining cross-sectional variation in the relationship between audit fees and disaggregated earnings forecast. This variable is constructed in a way that a higher index indicates better development in capital markets of a country.…”

Section: Resultsmentioning

confidence: 99%

“…6 6 In their study conducted in an international setting, Liu et al (2018) also document a positive relationship between audit fees and the incidence and frequency of earnings forecasts. However, unlike the incidence and frequency of earnings forecasts which more likely speak to the level of the firms' voluntary disclosures, earnings forecast disaggregation tends to have a stronger implication about the credibility of the firms' voluntary disclosures.…”

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confidence: 98%

“…In general, auditors tend to charge higher audit fees on engagements in which they assess the risk of material misstatements to be high and the pre-audit financial reporting quality of the firm to be low.3 The finding holds for the US firms as well.4 This is because if issuing disaggregated earnings forecasts effectively reduces auditors' concerns about earnings management(Dutta & Gigler, 2002), there should be a weaker relationship between disaggregated earnings forecasts and audit fees relative to that between non-disaggregated earnings forecasts and audit fees.5 The literature shows that management forecasts affect stock prices(Pownall et al, 1993) and analysts' forecasts(Baginski & Hassell, 1990). SeeHirst et al (2008) for a comprehensive review of the management earnings forecast literature.6 In their study conducted in an international setting,Liu et al (2018) …”

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confidence: 99%

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Management earnings forecasts disaggregation and audit fees: International evidence

2021

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In this study, using a large sample of firms from 27 countries around the world, we examine the relationship between disaggregated earnings forecasts and audit fees. We find that the positive association between management earnings forecasts and audit fees in prior studies is primarily driven by firms issuing management forecasts that contain disaggregated performance measures. We further find that better developed country‐level institutions can weaken the positive relation between disaggregated earnings forecasts and audit fees. Taken together, our findings support the important role of disaggregated earnings forecasts in signalling the credibility of prospective financial information provided by firms and shed light on the debate over the positive association between management earnings forecasts and audit fees.

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Section: Resultsmentioning

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Management earnings forecasts disaggregation and audit fees: International evidence

2021

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“…For example, Rivera et al (2017) found that external assurance has a positive impact on the level of disclosure in integrated reports and that such assurance is necessary to ensure complete, correct and comparable information. Liu et al (2018) tested the relationship between audited information and disclosure. They observed that a higher level of auditing (the amount of fee is high) is positively associated with market response.…”

Section: Audit Quality and Integrated Reportingmentioning

confidence: 99%

Integrated reporting, audit quality: presence of environmental auditing in an international context

Hichri¹

2023

EBR

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Purpose This paper aims to investigate the effect of audit quality and environmental auditing on integrated reporting and the effect of environmental auditing on audit quality. Design/methodology/approach Data was collected from a sample of 300 international companies during the period 2010–2019. The author collected the data from the Thomson Reuters Eikon database, sustainability reports and annual reports. A multiple regression analysis was performed to test the hypotheses. Findings The finding of this study confirms a positive and significant relationship between audit quality and integrated reporting. It is also found that environmental auditing has a positive and significant effect on integrated reporting. Thus, this study found a positive and significant relationship between environmental auditing and audit quality. Practical implications The findings in this paper identify strategies for improving integrated reporting as a crucial element in the processing of financial and nonfinancial information, to help managers and investors and shareholders take a long-term perspective. Therefore, the results encourage companies to invest in economic, environmental and social aspects. This enables accounting professionals, stock exchange authorities and users of environmental and social information to be aware of the factors associated with environmental reporting, to improve the efficiency of those producing the audit service. Originality/value The originality of this study lies in its consideration of a particular aspect of auditing, namely, environmental auditing. However, despite the large body of research on auditing and integrated reporting, to the best of the author’s knowledge, this is the first study to examine the relationship between environmental auditing and integrated reporting. Furthermore, in this research, the author has emphasized the importance of the role played by environmental auditing on audit quality. This design has been neglected in previous studies. Finally, the choice of the field of investigation for the reliability of the data used and the generalization of the results obtained, enables us to make important contributions to the user of the information.

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“…Audit risk has been analysed mainly in the context of voluntary reporting, in which financial and non-financial reporting are conceived as complements; the truthfulness of auditable financial information reduces the risk that non-auditable forward-looking voluntary reporting will be unreliable (Athanasakou and Hussainey, 2014; Graham et al , 2005; Liu et al , 2018). The truthfulness of disclosure is becoming increasingly important in light of the international trend related to the integration of both financial and non-financial reporting in a single report (CSRD, 2021; ISSB, 2022).…”

Section: Introductionmentioning

confidence: 99%

Does voluntary non-financial reporting matter for the evaluation of audit risk after a crisis period? Perceptions from Italian auditors

Trucco

Demartini

McMeeking

et al. 2022

MEDAR

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Purpose This paper aims to investigate the effect of voluntary non-financial reporting on the evaluation of audit risk from the auditors’ viewpoint in a post-crisis period. Furthermore, this paper analyses whether auditors perceive that voluntary non-financial reporting impacts audit risk differently for old clients as compared with new clients. Design/methodology/approach This study is conducted on a sample of Italian audit firms through a paper-based questionnaire. Both Big4 and non-Big4 audit firms have been included in the sample. Findings Results show that integrated reporting is perceived to be the most relevant reporting method and intellectual capital statement the least relevant. Surprisingly, empirical findings over the sample period show that auditors do not perceive statistically significant differences between old and new clients. Practical implications Auditors can identify opportunities to adapt their assessment model to include voluntary non-financial report information. Moreover, they can use different assessment models regarding the research variables in the case of new and old clients. Originality/value Empirical findings highlight the growing role of voluntary non-financial reporting in the auditors’ perception of their client’s audit risk. All the observed voluntary non-financial reporting forms, except for intellectual capital, are considered as relevant by auditors in the evaluation of their client’s audit risk when compared to an indifference point. In addition, findings reveal that female auditors perceive a reduced gap in the relevance between integrated reports and intellectual capital reports compared to their counterparts.

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Audited financial reporting and voluntary disclosure: International evidence on management earnings forecasts

Cited by 11 publications

References 67 publications

Management earnings forecasts disaggregation and audit fees: International evidence

Management earnings forecasts disaggregation and audit fees: International evidence

Integrated reporting, audit quality: presence of environmental auditing in an international context

Does voluntary non-financial reporting matter for the evaluation of audit risk after a crisis period? Perceptions from Italian auditors

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