The U.S. Securities and Exchange Commission (SEC) recently made timely reviews of quarterly financial statements mandatory for all registrants. The objective is to improve corporate quarterly reporting. However, formal review reports are not required to be included in 10‐Q filings, and may not even be issued by auditors. A priori, one would expect these reports to be useful to investors if they imply added auditor diligence or if they contain modifications to the standard report. We find that only 5.7 percent of the companies in our sample attached the auditor's review report in their 10‐Q filings. Also the majority of these reports are “clean,” suggesting that clients may not be disclosing the reports when they are modified. After controlling for factors such as auditor type, agency costs, capital market transactions, and company size, we find a significant negative association between auditors' litigation risk and disclosure of the review report. In addition, we find that the disclosure of the review report is associated with auditor type and company size.
Skip Nav Destination
Research Article| December 01 2005
Auditor Litigation Risk and Corporate Disclosure of Quarterly Review Report
Online ISSN: 1558-7991
Print ISSN: 0278-0380
American Accounting Association
AUDITING: A Journal of Practice & Theory (2005) 24 (s-1): 115–138.
Jagan Krishnan, Yinqi Zhang; Auditor Litigation Risk and Corporate Disclosure of Quarterly Review Report. AUDITING: A Journal of Practice & Theory 1 December 2005; 24 (s-1): 115–138. https://doi.org/10.2308/aud.2005.24.s-1.115
Download citation file: