An Investigation of Auditors' Judgments When Companies Release Earnings Before Audit Completion

• 成果类型: Article
• 署名作者: Bhaskar, Lori Shefchik; Hopkins, Patrick E.; Schroeder, Joseph H.
• 署名单位: Indiana University System; Indiana University Bloomington
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12262
• 发表日期: 2019
• 页码: 355-390
• 关键词: goal commitment; client; MODEL; identification; INFORMATION; MATERIALITY; inference; revisions; COMMITTEE; SALIENCE

摘要

The majority of U.S. public companies release annual earnings prior to the completion of audit fieldwork. We investigate this phenomenon in a controlled experiment with audit partners and senior managers. We find that releasing earnings before completion of the audit pressures auditors to adopt the goals of management, thereby reducing the likelihood of post-announcement audit-adjustment recommendations. We also examine the effect of audit committee (AC) strength in improving auditors' judgments after annual earnings are released. When ACs are actively involved in accounting issues and proactively communicating with auditors-characteristics currently lacking in most ACs-the negative effects on auditors' judgments are completely mitigated. Our study provides evidence on potential unintended consequences of early release of earnings and the importance of investing in high-quality ACs to mitigate adverse effects of client pressures on audit judgment and financial reporting quality.