... costly audit effort than the standard. In this case, investors also prefer noncompliance, and earnings quality is lower than if there were no legal liability damages. When the standard is stringent, noncompliance is less costly for the auditor, and legal liability strengthens reputation incentives...

... of seeking a second opinion increases with a firm's earnings quality. Collectively, the results suggest that a second opinion is used to facilitate transactions. JEL Classifications: G34; G24; J33. Editor's note: Accepted by Mohan Venkatachalam, under the Senior Editorship of Mark L. DeFond...

...Anne Beyer; Ilan Guttman; Iván Marinovic ABSTRACT We study a model of earnings management and provide predictions about the time-series properties of earnings quality and reporting bias. We estimate the model to empirically separate two components of investor uncertainty: fundamental economic...

...Mark (Shuai) Ma ABSTRACT Based on the theoretical framework of Lambert, Leuz, and Verrecchia (2007) , I predict that higher earnings quality of economically related public firms reduces a firm's systematic market risk. Using alternative sets of economically related firms, this study provides...

.... To parse “discretionary accruals” from total accruals, researchers typically implement a variant of the Jones (1991) model. While accrual models play an important role in earnings management and earnings quality studies, accrual model misspecification remains a major concern. Specifically, the magnitudes...

...Kyle Peterson; Roy Schmardebeck; T. Jeffrey Wilks ABSTRACT We specify measures of accounting consistency both across time and across firms based on the textual similarity of accounting policy footnotes disclosed in 10-K filings. We first examine how these measures relate to earnings quality...

... 2012 October 2014 2015 PCAOB audit quality earnings quality other audit participants In 2011, the Public Company Accounting Oversight Board (PCAOB or Board) proposed a rule that would require registered accounting firms to disclose...

... higher earnings quality than nonfamily firms. Weakly governed family firms demand lower audit effort and exhibit earnings quality that is no different from that of nonfamily firms. Within family firms, we show that strongly governed family firms choose higher quality audits in the form of a greater use...

...Nilabhra Bhattacharya; Frank Ecker; Per M. Olsson; Katherine Schipper ABSTRACT Using path analysis, we investigate the direct and indirect links between three measures of earnings quality and the cost of equity. Our investigation is motivated by analytical models that specify both a direct link...