Audit Office Experience with SOX 404(b) Filers and SOX 404 Audit Quality

• 成果类型: Article
• 署名作者: Anantharaman, Divya; Wans, Nader
• 署名单位: Rutgers University System; Rutgers University New Brunswick; Memorial University Newfoundland
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52275
• 发表日期: 2019
• 页码: 1-43
• 关键词: internal control; corporate governance; earnings quality; large clients; COMMITTEE; determinants; BOARD; weaknesses; expertise; judgments

摘要

We measure two dimensions of SOX 404 audit quality: (1) whether auditors identify and report material weaknesses (MWs) in a timely fashion, and (2) on identifying MWs, whether auditors identify misstatements arising from MWs in a timely fashion. We find that audit practice-offices with a large base of SOX 404(b) clients and those with a long history of conducting control evaluations for that client are more likely (1) to identify and report MWs in a timely manner (i.e., before resulting restatements come to light), and conditional on identifying MWs, (2) to detect MW-related misstatements in a timely manner (i.e., before the misstatements become restatements). Audit office industry expertise also matters, but only to timely MW reporting. Our results inform on the drivers of variation in SOX 404 audit quality, and highlight the key role that auditors play in identifying internal control weaknesses and assessing their impact on financial statement reliability.