Auditor Tenure and the Ability to Meet or Beat Earnings Forecasts*
Why is this work in the frame?
A frame that forgets how it found something cannot be audited. These are the routes that admitted this work.
No Canadian affiliation. An affiliation-only frame — the usual design — would never have seen this work. It is one of the works that make the case for inverting the frame.
Machine scores (provisional)
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
- Teacher spread
- 0.259 · how far apart the two teachers sit on this one work
- Validation status
score_only:v0-immature-baseline· verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it
Abstract
We examine the relation between auditor tenure and a firm's ability to use discretionary accruals to meet or beat analysts' earnings forecasts. We find evidence over the period 1988-2006 that firms with both short and long tenure are more likely to report levels of discretionary accruals that allow them to meet or beat earnings forecasts. These results suggest that while regulatory mandates for periodic auditor turnover have negative effects, sustained long-term auditor-client relationships may also be detrimental to audit quality. Further, although we observe a positive relation between tenure and the use of discretionary accruals to meet or beat earnings in the pre-Sarbanes-Oxley (SOX) period, we do not observe such a relation in the post-SOX period. This latter finding is consistent with regulatory reforms and heightened scrutiny of financial reporting in the post-SOX period resulting in less aggressive efforts at managing earnings by client firms and/or increased diligence on the part of auditors. These findings may not generalize to firms that are not covered by analysts, because these firms do not face the same public pressure to manage earnings in order to meet or beat expectations. © CAAA.
Fetched live from OpenAlex and de-inverted. Abstracts are not stored in this database: the inverted indexes are 8.6 GB of the frame’s 9.3 GB of text, and the host has 13 GB free.
The record
- Venue
- Contemporary Accounting Research
- Topic
- Auditing, Earnings Management, Governance
- Field
- Business, Management and Accounting
- Canadian institutions
- —
- Funders
- —
- Keywords
- EarningsAuditWrightAccountingLibrary scienceCitationManagementPolitical scienceHistoryEconomicsLawArt historyComputer science
- Has abstract in OpenAlex
- yes