Assurance level choice, CPA fees, and financial reporting benefits: Inferences from US private firms

• 成果类型: Article
• 署名作者: Badertscher, Brad A.; Kim, Jaewoo; Kinney Jr, William R.; Owens, Edward
• 署名单位: University of Notre Dame; University of Oregon; University of Texas System; University of Texas Austin; Utah System of Higher Education; University of Utah
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2022.101551
• 发表日期: 2023
• 关键词: earnings management; auditor assurance; QUALITY; accruals; demand; equity; tests

摘要

Many U.S. private firms choose either a financial statement compilation or review rather than the higher assurance provided by an audit, yet little is known about these choices. We explore economic aspects of private firm choice of less-than-audit levels of assurance applied to GAAP-based financial statements. We find that CPA fees more than double for each increment in assurance. Commonly used financial reporting quality proxies are higher for both reviews and audits relative to compilations but are statistically indistin-guishable on average between reviews and audits. Cost of debt is significantly lower for reviews than for compilations and significantly lower for audits than for reviews. Finally, we find that assurance level choices are associated with bank debt, trade credit, and po-tential internal information reliability and control concerns. (c) 2022 Elsevier B.V. All rights reserved.