Article2008

The Impact of the Asian Financial Crisis on Auditors' Conservatism

Donald R. Herrmann · Sompong Pornupatham · Thanyaluk Vichitsarawong

28 citations0/0 files storedJournal of International Accounting Research

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Corporate Governance and Financial Management

Abstract

ABSTRACT: We examine differences in conservatism between companies audited by Big 4 and non-Big 4 auditors during the financial crisis and post-crisis periods in Thailand. The results indicate a significant increase in conservatism following the Asian financial crisis. Moreover, Big 4 audit clients were more sensitive to bad news than non-Big 4 audit clients, particularly during the crisis period. In the post-crisis period, both Big 4 and non-Big 4 audit clients reported more conservative earnings. Interestingly, we found no significant difference in conservatism between Big 4 and non-Big 4 auditors in the post-crisis period, possibly due to the conscientious adoption of International Accounting Standards, more stringent control by regulatory bodies, and improvements in corporate governance in Thailand.

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References

2002Audit committee, board of director characteristics, and earnings management 1997The conservatism principle and the asymmetric timeliness of earnings1 2000The effect of international institutional factors on properties of accounting earnings 2003Conservatism in Accounting Part I: Explanations and Implications 2003Incentives versus standards: properties of accounting income in four East Asian countries 2000Corporate governance in the Asian financial crisis 2003Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis 1993Perceived Auditor Quality and the Earnings Response Coefficient

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