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The Effect of Auditor Changes on Audit Quality after SOX
auditor change,audit quality,discretionary accruals,analyst earnings forecast accuracy,analyst earnings forecast dispersion,
|Publication Year :||2011|
The Sarbanes-Oxley Act (hereafter referred as SOX) was enacted with the legislative intent to improve the quality of listed company’s financial statements so as to build up the investors’ confidence in the information obtained from such financial statements. The switching/changing of their audit firms by a number of listed companies after the passing of the SOX, however, seems to go against its legislative intent, resulting in the weakening of the company’s reporting quality. This study investigates whether the switch has caused adverse effects on audit quality. Specifically, I test the following two questions. First, does the quality of financial statements suffer as firms change their auditors from a Big 4 firm to a non-Big 4 firm? Second, what are the impacts of the auditor change on analysts’ forecast quality? Does the auditor change cause differences in analyst earnings forecast accuracy and/or forecast dispersion? This study uses two proxy variables for audit quality, i.e., degree of earnings management and analyst’ forecast quality, to investigate the influence of auditor change on audit quality in the post-SOX period. The result shows that discretionary accruals have significantly decreased after SOX, that is, the audit quality has indeed improved after the passing of SOX. However, no sufficient evidence is found to support that there is an adverse impact on the audit quality when companies change their auditor after the passing of SOX.
|Appears in Collections:||會計學系|
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