Abstract

This study investigates auditor independence and audit quality in auditor-client negotiation over financial reporting issues using Taiwan data. We find a significant negative relation between nonaudit services and the extent of client agreement with the auditor over financial reporting issues, consistent with non-audit services reducing independence. However, the interaction of non-audit fees with auditor tenure suggests that non-audit fees do not affect the auditor's ability to resist client management pressure when auditor tenure is longer. Clients are not more likely to agree with a Big 5 auditor, but are more likely to agree with auditors perceived to be industry specialists.

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Abstract

This paper provides an equilibrium analysis of a setting in which a manager is required to disclose GAAP earnings, but has discretion over the provision of information about earnings components that are disaggregated according to their persistence or value relevance. We find that the manager is more likely to disclose disaggregated earnings information when GAAP earnings fall. We derive intuitive comparative static results concerning the impacts of firm characteristics on the manager's equilibrium disclosure choice. We also discuss how the paper's main results are linked to empirical findings on pro forma earnings disclosures.

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Abstract

Prior studies examining the association between auditor concentration and intra-industry competition in the client industry have yielded opposite results. I attempt to reconcile these findings by using an additional measure of intra-industry competition (the speed of adjustment of abnormal profits) and controlling for industry size. I document a negative association between auditor industry concentration and intra-industry competition, regardless of the measure of auditor concentration used. Thus, although the average level of auditor industry concentration is generally high, there is some evidence that a more competitive industry has lower auditor concentration. Therefore, involuntary audit market changes that reduce the number of audit firms available, may counter the effect of client industry competition in limiting auditor industry concentration.

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Abstract

This study, employs a unique database of monthly portfolio holdings of Australian mutual funds to measure the monthly abnormal returns realised by mutual funds due to earnings information across all months in a typical year. We find evidence consistent with mutual funds realising abnormal returns due to earnings news in both the pre-announcement period and over the announcement window. The results suggest that earnings information explains approximately 25% of a mutual funds average monthly abnormal performance. Finally, we find that the contribution of earnings to the performance of mutual funds is greatest in the month in which earnings are announced.

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Abstract

This paper examines information disclosed in annual reports in a period surrounding the restructuring of the electricity industry. The purpose of the restructuring was to increase product market competition in both the wholesale and retail distribution sectors. A 22-item disclosure index is partitioned into four components: background data, current operating data, forward-looking data and segment data. We find that firms reduce forward-looking data and segment data components when competition increases, while only some decreases in background and current data occur (e.g., firms reduce information on their current derivative positions). We also find that the decrease in forwardlooking data in the wholesale industry reforms is only temporary.

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