Assessing the impact of the new auditor’s report

David C. Hay · David Lau

131 citations0/0 files storedPacific Accounting Review

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Auditing, Earnings Management, Governance Corporate Governance and Financial Management Financial Reporting and XBRL

Abstract

Purpose Changes to the auditor’s report have been proposed and issued internationally to provide more relevant information to users and enhance the perceived value of financial statement audits. This paper aims to investigate the impact of audit reporting changes on audit quality and audit fees in the New Zealand context. Design/methodology/approach The authors examined audit quality measured by absolute abnormal accruals and audit fees for New Zealand listed companies. Findings The evidence suggests the enhanced audit reports were followed by an improvement in audit quality as proxied by a reduction in absolute abnormal accruals upon the adoption of the new audit reporting requirements. There was also a significant increase in audit fees. Practical implications Although the new auditor reporting requirements are associated with improvements in audit quality, such benefit does not come without cost. Originality/value The study provides evidence about the impact of this recent substantial reform to auditing.

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References

1991Earnings Management During Import Relief Investigations 2005Performance matched discretionary accrual measures 2002Audit committee, board of director characteristics, and earnings management 1998The Effect of Audit Quality on Earnings Management*2014A review of archival auditing research 1980The Pricing of Audit Services: Theory and Evidence 1994Debt covenant violation and manipulation of accruals 2006Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches

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