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The Association between audit quality, accounting disclosures and firm-specific risk : evidence from initial public offerings

Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/76987

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Title: The Association between audit quality, accounting disclosures and firm-specific risk : evidence from initial public offerings
Related: Journal of accounting and public policy, Vol. 22, Issue 5, p.377-400
DOI: 10.1016/j.jaccpubpol.2003.08.003
Publisher: Elsevier
Date: 2003
FoR/RFCD Code(s): 150100 Accounting, Auditing and Accountability
Author/Creator: Lee, Philip
Author/Creator: Stokes, Donald
Author/Creator: Taylor, Stephen
Author/Creator: Walter, Terry
Description: In an environment where expected litigation costs were relatively low and the provision of forward-looking accounting information was voluntary (Australia), we show that IPO firms voluntarily providing an earnings forecast within the offer document are significantly more likely to use a high quality auditor, consistent with the signaling role of auditor attestation being at least partially dependent on the extent of voluntary, audited disclosures. Any trade-off between auditor choice with either firm risk or retained ownership is confined to smaller IPOs and/or those using less prestigious underwriters, which are also those where support for the signaling role of auditors (and voluntary disclosure) is evident using a valuation model. Our results highlight the failure of “stylised” signaling models such as [Datar et al. (1991); Hughes (1986)] to recognize extensive interaction between various mechanisms, resulting in multiple signaling equilibria.
Description: 24 page(s)
Subject Keyword: 150100 Accounting, Auditing and Accountability
Subject Keyword: auditing
Subject Keyword: litigation risk
Subject Keyword: underwriter quality
Subject Keyword: initial public offering
Resource Type: journal article
Organisation: Macquarie University. Dept. of Accounting and Finance

Identifier: http://hdl.handle.net/1959.14/76987
Identifier: ISSN:0278-4254
Identifier: mq-rm-2008004735
Language: eng
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