Reporting Bias with an Audit Committee

• 成果类型: Article
• 署名作者: Caskey, Judson; Nagar, Venky; Petacchi, Paolo
• 署名单位: University of California System; University of California Los Angeles; University of Michigan System; University of Michigan; University of Massachusetts System; University Massachusetts Dartmouth
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2010.85.2.447
• 发表日期: 2010
• 页码: 447-481
• 关键词: internal control; nonaudit services; Sarbanes-Oxley; QUALITY; RISK; fees; CONSEQUENCES; INFORMATION; disclosure; trades

摘要

This study models a manager who privately reports earnings to an independent audit committee that, after its own due diligence, modifies the report for public release to investors. The audit committee alters the reporting and valuation dynamics by attempting to remove the manager's reporting bias, but then presents the information it has collected with its own bias. The audit committee's presence changes the impact of penalties and incentives on reporting, valuation, and due-diligence activities. For example, increasing penalties can sometimes degrade the reporting process. Our simultaneous consideration of the manager, audit committee, and investors provides a new framework for reporting and valuation, and sheds light on empirical earnings quality research that has largely studied the management and audit effects separately.