Title: The Effect of Audit Specialists on the Informativeness of Discretionary Accruals
Abstract:Prior literature finds evidence that clients of industry specialists have a lower level of discretionary accruals compared with nonspecialists. This finding suggests that industry specialists constrai...Prior literature finds evidence that clients of industry specialists have a lower level of discretionary accruals compared with nonspecialists. This finding suggests that industry specialists constrain the use of discretionary accruals. In addition to opportunistic reasons, however, managers also can use discretionary accruals to make earnings more informative. We examine the market pricing of discretionary accruals of clients of specialist and nonspecialist auditors. If industry specialists constrain opportunistic discretionary accruals but allow informative discretionary accruals, we expect a stronger relation between discretionary accruals and returns for clients of specialists. We use two different analyses based on Subramanyam (1996) and Tucker and Zarowin (2006) to investigate this issue. We find no evidence that the discretionary accruals of clients of industry specialists are more informative or more value relevant, although we do find that clients of specialists have more informative nondiscretionary accruals.Read More
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 28
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot