Does auditor style influence non-GAAP earnings disclosure?

• 成果类型: Article
• 署名作者: Heflin, Frank; Tan, Jacqueline; Ton, Karen; Wang, Jasmine
• 署名单位: University System of Georgia; University of Georgia; Villanova University; University of Virginia
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12952
• 发表日期: 2024
• 页码: 1639-1671
• 关键词: office size; Managers

摘要

Regulators and practitioners have concerns that the lack of standardization in non-GAAP disclosure can make it challenging for users to process non-GAAP earnings and use it in decision-making. We examine whether auditor style extends beyond mandatory disclosures to induce similarity in non-GAAP earnings disclosures. Specifically, we find that clients audited by the same auditor are more likely to disclose non-GAAP earnings in a similar manner. We assess disclosure similarity using (1) the decision to disclose non-GAAP earnings, (2) the disclosure prominence of non-GAAP earnings in the earnings press release, (3) the discussion of non-GAAP earnings in the management discussion and analysis of the annual report, (4) the choice to exclude recurring items, and (5) the receipt of SEC comment letters related to non-GAAP earnings. We find that the association between auditor style and non-GAAP disclosure is determined by Big 4 accounting firms and clients audited by the same audit office. The results are stronger for larger audit offices and smaller clients. We provide evidence that auditors facilitate non-GAAP disclosure, which can improve compliance with SEC requirements and increase the standardization of non-GAAP earnings disclosures. Our results are relevant to current policy discussions regarding auditor involvement in unaudited non-GAAP earnings reporting.