Audit Partners' Role in Material Misstatement Resolution: Survey and Interview Evidence

• 成果类型: Article
• 署名作者: Maksymov, Eldar; Peecher, Mark; Sutherland, Andrew; Weber, Joseph
• 署名单位: Arizona State University; Arizona State University-Tempe; University of Illinois System; University of Illinois Urbana-Champaign; Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12506
• 发表日期: 2024
• 页码: 275-333
• 关键词: decision-making research; corporate governance; client management; earnings management; equity incentives; nonresponse rates; quality insights; IMPACT; CONSEQUENCES; frequency

摘要

Auditors are expected to identify and resolve material misstatements (MMs) in management's financial statements. However, beyond the audit opinion, the audit process is opaque. To address this, we independently survey 462 audit partners and interview 24 audit partners, CFOs, and audit committee members on how partners assess and address MM risk, resolve MMs, and the consequences of MMs. Partners identify MMs in approximately 9% (15%) of public (private) engagements and use qualitative factors to waive apparent MMs. Loan covenant and going-concern issues increase MM risk more than earnings benchmark issues. Partners point to a variety of both auditor and client factors as threats to audit effectiveness. Partners often rely on rapport with management and involve the national office and audit committee in resolving MMs. Partner incentives around restatements are context specific. Our results provide new insights into the auditor's role in financial reporting that are relevant to academics, practitioners, and regulators.