Partner cross-contagion in audit offices and client reporting quality

IF 2.8 3区 管理学 Q2 BUSINESS, FINANCE Managerial Auditing Journal Pub Date : 2022-10-19 DOI:10.1108/maj-11-2021-3375
John Goodwin, P. Kent, R. Kent, J. Routledge
{"title":"Partner cross-contagion in audit offices and client reporting quality","authors":"John Goodwin, P. Kent, R. Kent, J. Routledge","doi":"10.1108/maj-11-2021-3375","DOIUrl":null,"url":null,"abstract":"\nPurpose\nThe purpose of this study is to examine if partner cross-contagion in audit offices is associated with client reporting quality. To this end, the authors test if the presence in an audit office of a partner with a highly aggressive style is associated with the reporting quality of other partners’ clients. Partners with a highly aggressive style are identified by their tendency to approve favorable client reporting. The authors add to the existing literature that provides limited and equivocal evidence on audit office cross-contagion.\n\n\nDesign/methodology/approach\nPartner style is determined in an estimation period from 2010 to 2014. Aggressive style is identified when partners tend to approve favorable client reporting, which is shown by a positive value for their clients’ median discretionary accruals. Partners are considered to exhibit a highly aggressive style if they have positive median client discretionary accruals within the 90th percentile. Cross-contagion analysis is then conducted in a test period from 2015 to 2019 by determining if the presence in an office of a partner with a highly aggressive style is associated with the reporting quality of other partners’ clients. Two measures of client reporting quality used. These are the accuracy of current-period accruals in predicting period-ahead cash flows and earnings management related to benchmark beating.\n\n\nFindings\nThis study finds partner cross-contagion of highly aggressive style in Big 4 offices that is associated with lower client reporting quality for non-Metals and Mining industry clients. This cross-contagion only occurs when the contagious partner has a very high level of aggressive style. This study finds Big 4 partners are susceptible to aggressive style cross-contagion regardless of their own idiosyncratic style. The results of this study show more cross-contagion in small Big 4 offices and mitigation of cross-contagion for economically important clients. Cross-contagion in non-Big 4 offices is observed for Metals and Mining industry clients.\n\n\nOriginality/value\nBy determining style from partners’ past clients’ discretionary accruals, this study extends prior cross-contagion research that relies on restatements to identify style. This study examines several other cross-contagion issues not addressed in prior studies. These include differences in cross-contagion for Big 4 and non-Big 4 offices and for large and small Big 4 offices, partners’ susceptibility to cross-contagion and the influence of client importance.\n","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.8000,"publicationDate":"2022-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Managerial Auditing Journal","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.1108/maj-11-2021-3375","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0

Abstract

Purpose The purpose of this study is to examine if partner cross-contagion in audit offices is associated with client reporting quality. To this end, the authors test if the presence in an audit office of a partner with a highly aggressive style is associated with the reporting quality of other partners’ clients. Partners with a highly aggressive style are identified by their tendency to approve favorable client reporting. The authors add to the existing literature that provides limited and equivocal evidence on audit office cross-contagion. Design/methodology/approach Partner style is determined in an estimation period from 2010 to 2014. Aggressive style is identified when partners tend to approve favorable client reporting, which is shown by a positive value for their clients’ median discretionary accruals. Partners are considered to exhibit a highly aggressive style if they have positive median client discretionary accruals within the 90th percentile. Cross-contagion analysis is then conducted in a test period from 2015 to 2019 by determining if the presence in an office of a partner with a highly aggressive style is associated with the reporting quality of other partners’ clients. Two measures of client reporting quality used. These are the accuracy of current-period accruals in predicting period-ahead cash flows and earnings management related to benchmark beating. Findings This study finds partner cross-contagion of highly aggressive style in Big 4 offices that is associated with lower client reporting quality for non-Metals and Mining industry clients. This cross-contagion only occurs when the contagious partner has a very high level of aggressive style. This study finds Big 4 partners are susceptible to aggressive style cross-contagion regardless of their own idiosyncratic style. The results of this study show more cross-contagion in small Big 4 offices and mitigation of cross-contagion for economically important clients. Cross-contagion in non-Big 4 offices is observed for Metals and Mining industry clients. Originality/value By determining style from partners’ past clients’ discretionary accruals, this study extends prior cross-contagion research that relies on restatements to identify style. This study examines several other cross-contagion issues not addressed in prior studies. These include differences in cross-contagion for Big 4 and non-Big 4 offices and for large and small Big 4 offices, partners’ susceptibility to cross-contagion and the influence of client importance.
查看原文
分享 分享
微信好友 朋友圈 QQ好友 复制链接
本刊更多论文
审计办公室中的合作伙伴交叉传染和客户报告质量
目的本研究的目的是检验审计事务所合伙人交叉传染是否与客户报告质量有关。为此,作者测试了在审计办公室出现具有高度侵略性风格的合伙人是否与其他合伙人客户的报告质量有关。具有高度侵略性风格的合伙人倾向于批准有利的客户报告。作者补充说,现有文献提供了有限的和模棱两可的证据,审计办公室的交叉传染。设计/方法论/方法合作伙伴风格在2010年至2014年的估计期间确定。当合伙人倾向于批准有利的客户报告时,识别出侵略性风格,这表明他们的客户的可自由支配应计利润中位数为正值。如果合伙人在第90个百分位数内的客户可自由支配应计收益中位数为正,则被认为表现出高度进取的风格。然后在2015年至2019年的测试期间进行交叉传染分析,以确定具有高度侵略性风格的合伙人在办公室的存在是否与其他合伙人客户的报告质量有关。使用了两种衡量客户报告质量的方法。这些是当期应计项目在预测期前现金流量和盈余管理方面的准确性。研究发现:在四大事务所中,对于非金属和采矿业客户来说,高度咄咄逼人的风格与客户报告质量较低有关。这种交叉传染只发生在具有传染性的伴侣具有非常高的攻击性风格时。这项研究发现,四大合伙人很容易受到攻击性风格的交叉感染,而不管他们自己的风格如何。这项研究的结果表明,在“四大”的小型办公室中,交叉传染的情况更多,而在经济上重要的客户中,交叉传染的情况有所缓解。在金属和采矿业客户中,可以观察到非四大办公室的交叉传染现象。独创性/价值通过从合伙人过去客户的可支配性应计收益中确定风格,本研究扩展了先前依赖重述来确定风格的交叉传染研究。本研究考察了先前研究未涉及的其他几个交叉传染问题。其中包括四大和非四大、四大和小四大在交叉传染方面的差异、合伙人对交叉传染的敏感性以及客户重要性的影响。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 去求助
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.
期刊最新文献
How hours allocated to year-round auditing procedures affect audit quality Ambiguity in international financial reporting standards (IFRS) and its impact on judgments of auditors The impact of remote auditing on audit quality: the moderating role of technology readiness CEO inside debt and industry specialist auditor Investor response to engagement quality review hours
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
现在去查看 取消
×
提示
确定
0
微信
客服QQ
Book学术公众号 扫码关注我们
反馈
×
意见反馈
请填写您的意见或建议
请填写您的手机或邮箱
已复制链接
已复制链接
快去分享给好友吧!
我知道了
×
扫码分享
扫码分享
Book学术官方微信
Book学术文献互助
Book学术文献互助群
群 号:481959085
Book学术
文献互助 智能选刊 最新文献 互助须知 联系我们:info@booksci.cn
Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。
Copyright © 2023 Book学术 All rights reserved.
ghs 京公网安备 11010802042870号 京ICP备2023020795号-1