Former audit partners and abnormal accruals

• 成果类型: Article
• 署名作者: Menon, K; Williams, DD
• 署名单位: Boston University; University System of Ohio; Ohio State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2004.79.4.1095
• 发表日期: 2004
• 页码: 1095-1118
• 关键词: earnings management; nonaudit services; LITIGATION; Clients; BOARD

摘要

Audit clients often employ a former partner of their present auditor as an officer or a director. This revolving door practice presents a potential threat to auditor independence. Using the Jones (11991) model to calculate abnormal accruals for firms in 1998 and 1999, we find that firms employing former partners as officers or directors report larger signed and unsigned abnormal accruals than other firms, after controlling for other factors that plausibly affect abnormal accruals. To ensure that the results are not driven by performance characteristics of the former partner firms, we construct a performance-matched control sample and obtain consistent results. We also observe a disproportionately higher (lower) proportion of former partner firms than expected just meeting (missing) analysts' earnings forecasts.