Do PCAOB Inspections of Foreign Auditors Affect Global Financial Reporting Comparability?†

2021 ◽

pp. 0148558X2199265

Author(s):

Yan-Leung Cheung ◽

In-Mu Haw ◽

Weiqiang Tan ◽

Wenming Wang

Keyword(s):

Adverse Effect ◽

Financial Reporting ◽

Family Business ◽

Business Groups ◽

Divide And Conquer ◽

Alternative Measure ◽

Family Business Groups ◽

Audit Effectiveness ◽

Financial Reporting Comparability

Family business groups (FBGs) typically control several member firms and can hire a single auditor or multiple auditors to audit their member firms. This article examines what type of auditor appointment strategy constrains intragroup value transfers within FBGs. Analyzing related-party transactions (RPTs) within FBGs in Hong Kong, this study provides evidence that FBGs with multiple auditors undertake more intragroup value transfers than FBGs with a single auditor. However, the adverse effect of multiple-auditor appointments is mitigated by a stronger board and higher financial reporting comparability among member firms. Using an alternative measure of intragroup value transfers, we also find that the market perceives multiple-auditor appointments as impairing audit effectiveness. Overall, our findings offer the new insight that controlling families can exploit the appointment of multiple auditors as a “divide and conquer” strategy which undermines the monitoring role of auditors against intragroup value transfers, but stronger corporate governance of member firms can mitigate the adverse effect.

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Meta‐analysis of the Impact of Adoption of IFRS on Financial Reporting Comparability, Market Liquidity, and Cost of Capital

Abacus ◽

10.1111/abac.12237 ◽

2021 ◽

Vol 57 (3) ◽

pp. 502-556

Author(s):

Solomon Opare ◽

Muhammad Nurul Houqe ◽

Tony van Zijl

Keyword(s):

Financial Reporting ◽

Cost Of Capital ◽

Meta Analysis ◽

Market Liquidity ◽

The Impact ◽

Financial Reporting Comparability

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Financial Reporting Comparability in US Firms Issuing Debt in the US Primary Market

SSRN Electronic Journal ◽

10.2139/ssrn.3713075 ◽

2020 ◽

Author(s):

Paula Hill ◽

Gerald J. Lobo ◽

Shuo Wang

Keyword(s):

Financial Reporting ◽

The Us ◽

Financial Reporting Comparability

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The Effect of Institutional Investors on Financial Reporting Comparability in the U.S.: Evidence from Common Institutional Blockholders

SSRN Electronic Journal ◽

10.2139/ssrn.3383266 ◽

2018 ◽

Author(s):

Yun Lou ◽

Rencheng Wang ◽

Kaitang Zhou

Keyword(s):

Financial Reporting ◽

Institutional Investors ◽

Financial Reporting Comparability ◽

The U.S

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XBRL Tag Extensions and Tax Accrual Quality

Journal of Information Systems ◽

10.2308/isys-19-054 ◽

2020 ◽

Author(s):

Stephanie Walton ◽

Liu L Yang ◽

Yiyang Zhang

Keyword(s):

Financial Reporting ◽

Relative Rate ◽

Financial Statements ◽

Accrual Quality ◽

Business Reporting ◽

Prior Literature ◽

Tax Reporting ◽

Financial Reporting Comparability

The adoption of eXtensible Business Reporting Language (XBRL) requires management to label all information in their firm's financial statements and corresponding notes with either standardor custom extended tags. While prior literature has found that the rate of customization is associated with increased financial reporting complexity, there could be an unintended, beneficial consequence to tax reporting. We examine how the relative use of tax-related XBRL tag extensions could highlight unique tax activity characteristics, in turn increasing tax accrual quality and improving tax reporting transparency. We find that having a higher relative rate of extended tax tags is associated with higher tax accrual quality. That is, utilizing more tax tag extensions can assist in providing useful tax information, especially when a high number of total XBRL tags are used. Our results also suggest the need to reexamine the standard taxonomy to include more tax-oriented terms to improve financial reporting comparability.

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Do Global Audit Firm Networks Apply Consistent Audit Methodologies across Jurisdictions? Evidence from Financial Reporting Comparability

The Accounting Review ◽

10.2308/tar-2018-0294 ◽

2019 ◽

Vol 95 (6) ◽

pp. 151-179 ◽

Cited By ~ 4

Author(s):

Matthew S. Ege ◽

Young Hoon Kim ◽

Dechun Wang

Keyword(s):

Financial Reporting ◽

Cash Flows ◽

International Standards ◽

Global Network ◽

Global Networks ◽

Audit Firm ◽

Operating Cash Flows ◽

Audit Firms ◽

Financial Reporting Comparability

ABSTRACT Brand name audit firms are global networks of local audit firms. These networks claim to enforce consistent audit methodologies across their member firms, which, if true, should systematically affect client financial reporting. We find that clients from different countries have more (less) comparable accruals when they are audited by local audit firms from the same global network (different global networks). Furthermore, inferences are similar when we examine client accrual comparability around audit firm switches induced by the failure of Andersen, which serves as a shock that helps improve identification. In falsification tests, having auditors from the same global network is not associated with differences in operating cash flows. Results also suggest that the role of global network methodologies in global financial reporting comparability is more pronounced across stronger investor protection jurisdictions and across jurisdictions that have adopted International Standards on Auditing. JEL Classifications: M41; M42.

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