The paper investigates the usefulness of accounting comparability for audit engagement. Comparability among peer firms in the same industry reflects the similarity and the relatedness of firms operating environment and accounting reporting. From two perspectives of inherent business risk and external information efficiency, comparability is helpful for auditors to assess client business risk and lowers the cost of information acquisition, processing, and testing. For a given firm, I hypothesize that the availability of information about comparable firms is helpful for auditors by improving audit accuracy and audit efficiency. The comparability proxy is based on a variety of measures including pair-wise earnings-return similarity (De Franco, Kothari and Verdi 2011), historical covariance of stock returns and cash flows, and earnings comparability controlling accounting choice differences. The empirical results show that accounting comparability is positively associated with audit quality and audit reporting accuracy as of a clean or a going-concern opinion. Meanwhile, comparability is negatively related to audit delay, audit fees, and the likelihood of auditors issuing a going-concern opinion. In totality, the study shows that industry-wise comparability enhances the utility of accounting information for external audit.
| Identifer | oai:union.ndltd.org:LSU/oai:etd.lsu.edu:etd-04062012-214523 |
| Date | 11 April 2012 |
| Creators | Zhang, Joseph Hongbo |
| Contributors | Detre, Joshua, Reichelt, Kenneth J., Lin, Ji-Chai, Cheng, C.S.Agnes |
| Publisher | LSU |
| Source Sets | Louisiana State University |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lsu.edu/docs/available/etd-04062012-214523/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached herein a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to LSU or its agents the non-exclusive license to archive and make accessible, under the conditions specified below and in appropriate University policies, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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