Are out-of-period adjustments a type of stealth restatement? An examination of nonaudit services and out-of-period adjustments

IF 2.8 3区 管理学 Q2 BUSINESS, FINANCE Managerial Auditing Journal Pub Date : 2024-02-13 DOI:10.1108/maj-02-2023-3821
Cori Crews, John Abernathy, Jimmy Carmenate, Divesh Sharma, Vineeta Sharma
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Abstract

Purpose

The purpose of this study is to investigate the association between nonaudit services (NAS) and out-of-period adjustments (OOPAs). Over the years, the number of OOPAs has risen while the number of restatements has decreased. This could indicate an improvement in financial reporting quality. It could also indicate the use of a type of stealth restatement for opportunistic purposes. These less prominent restatements are more likely to go undetected and could perpetuate opportunistic disclosure and mitigate the likelihood of unfavorable market reactions.

Design/methodology/approach

The authors use a two-stage multivariate regression analysis to examine the relationship between NAS and the reporting of an OOPA. The authors use prior research on NAS to guide the model development. The authors perform several robustness checks including different types of NAS and different characteristics of OOPAs.

Findings

The results indicate that NAS has a significantly negative association with the existence of OOPAs. The core findings suggest that NAS does not impair auditor independence. Rather, greater amounts of NAS may contribute to knowledge spillover, which leads to higher financial reporting and audit quality. The results are robust to several additional tests.

Research limitations/implications

The results raise interesting implications for regulators, executives, auditors, investors and future research. The authors provide insight into the relationship between NAS and auditor independence.

Originality/value

To the best of the authors’ knowledge, prior research has not considered the effect of NAS on OOPAs. The authors contribute to the literature by providing evidence that OOPAs, a form of stealth restatements, is an important consideration in audit quality research.

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期外调整是一种隐形重报吗?对非审计服务和期外调整的研究
本研究的目的是调查非审计服务(NAS)与期外调整(OOPAs)之间的关联。多年来,OOPAs 的数量一直在上升,而重报的数量却在下降。这可能表明财务报告质量有所提高。这也可能表明出于投机取巧的目的使用了一种隐形重报。这些不那么显眼的重报更有可能不被发现,从而使机会主义披露得以延续,并降低不利市场反应的可能性。 作者使用两阶段多元回归分析法来研究 NAS 与 OOPA 报告之间的关系。作者利用之前对 NAS 的研究来指导模型的建立。作者进行了多项稳健性检验,包括不同类型的 NAS 和不同特征的 OOPA。结果结果表明,NAS 与 OOPA 的存在存在显著负相关。核心研究结果表明,NAS 不会损害审计师的独立性。相反,更多的 NAS 可能有助于知识外溢,从而提高财务报告和审计质量。研究局限/启示研究结果对监管机构、高管、审计师、投资者和未来研究产生了有趣的影响。作者对 NAS 与审计师独立性之间的关系提出了自己的见解。原创性/价值据作者所知,之前的研究并未考虑过 NAS 对 OOPAs 的影响。作者提供的证据表明,作为隐形重述的一种形式,OOPAs 是审计质量研究中的一个重要考虑因素,从而为相关文献做出了贡献。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
5.40
自引率
13.80%
发文量
45
期刊介绍: The key areas addressed are: ■Audit and Assurance (financial and non-financial) ■Financial and Managerial Reporting ■Governance, controls, risks and ethics ■Organizational issues including firm cultures, performance and development In addition, the evaluation of changes occurring in the auditing profession, as well as the broader fields of accounting and assurance, are also explored. Debates concerning organizational performance and professional competence are also covered.
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