Long-Term Impact of Economic Conditions on Auditors' Judgment

• 成果类型: Article; Proceedings Paper
• 署名作者: He, Xianjie; Kothari, S. P.; Xiao, Tusheng; Zuo, Luo
• 署名单位: Shanghai University of Finance & Economics; Massachusetts Institute of Technology (MIT); Central University of Finance & Economics; Cornell University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52009
• 发表日期: 2018
• 页码: 203-229
• 关键词: market perception evidence; earnings management; INSTITUTIONAL ENVIRONMENT; partner rotation; QUALITY; INDEPENDENCE; uncertainty; COMMITTEE; career; availability

摘要

We find that economic conditions at the time an auditor enters the labor market have a long-term impact on her judgment and decision making. Specifically, engagement partners who started their career during economic downturns issue audit adjustments more frequently. For the subsample of company-years with no audit adjustments, downturn auditors are more likely to issue a modified audit opinion. In addition, companies audited by downturn auditors are less likely to violate financial reporting and disclosure regulations. Together, our findings suggest that the early career stage is a critical formative period for auditors.