Investor perceptions of the earnings quality consequences of hiring an affiliated auditor

• 成果类型: Article
• 署名作者: Baber, William R.; Krishnan, Jagan; Zhang, Yinqi
• 署名单位: Georgetown University; Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University; American University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-013-9244-9
• 发表日期: 2014
• 页码: 69-102
• 关键词: NONAUDIT SERVICES; information-content; INTERNAL CONTROL; MARKET RESPONSE; COMMITTEE; fees; determinants; expertise; OFFICERS; partners

摘要

The Sarbanes-Oxley Act (SOX) requires that firms wait 1 year before hiring an individual employed as a member of the external audit team. SOX's intent is to reduce the perceived loss of auditor independence due to affiliated hiring. SOX also requires fully independent audit committees and disclosure of directors with financial expertise. Using a sample of financial executive hires during the pre-SOX period, we find that earnings response coefficients (ERCs) decline following hires of individuals recently employed by the firm's external auditor, but ERCs do not decline following hires not recently employed by the external auditor. We also find smaller ERC declines following affiliated hires for firms with audit committee compositions consistent with subsequently imposed SOX requirements. Further investigation using measures of earnings quality suggests that differences in ERC changes are attributable to perceived, rather than real, changes in earnings quality following affiliated hires.