The effect of audit adjustments on earnings quality: Evidence from China

• 成果类型: Article
• 署名作者: Lennox, Clive; Wu, Xi; Zhang, Tianyu
• 署名单位: University of Southern California; Central University of Finance & Economics; Chinese University of Hong Kong
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.08.003
• 发表日期: 2016
• 关键词: NONAUDIT SERVICES; Investor protection; partner tenure; firm tenure; management; Discontinuity; persistence; accruals

摘要

We examine how adjustments to earnings during year-end audits affect measures of earnings quality. There are four key findings. First, audit adjustments cause earnings to become smoother and more persistent. Second, the adjustments result in higher accrual quality. Third, audit adjustments have a larger negative effect on signed accruals than absolute accruals. Fourth, the adjustments do not reduce the discontinuity in the earnings distribution around zero. These findings are of interest to researchers who use earnings properties as proxies for earnings quality and audit quality. However, we caution that our findings for China may not generalize to other countries. (C) 2015 Elsevier B.V. All rights reserved.