Can Audit Reforms Affect the Information Role of Audits? Evidence from the German Market*

The effect of cash flow forecasts on accrual quality and benchmark beating

“…We identify a sample of firms for which analysts do not forecast cash flows that are similar, along multiple relevant dimensions, to firms for which analysts do forecast cash flows. To identify control firms, we use a propensity-score matching procedure (Rosenbaum, 2002;Rosenbaum and Rubin, 1983;Armstrong et al, 2010;Gassen and Skaife, 2009). For each ''initial'' firm-year in our treatment sample described above, we select a matching firm (without a cash flow forecast) in the same year that has the closest ''propensity score''.…”

Agent or structure for principal–principal conflicts? Audit firms versus foreign ownership in the Asian context

“…In terms of the revenue of audit corporations, the market share of the Big 4 has been 60-80 per cent in many countries (Gassen and Skaife, 2009). In our sample Korean firms, the Big-4 market share is 61 per cent (see Table 1).…”

“…However, given that in many countries, the market share of the Big-4 audit firms is around 60-80 per cent (Gassen and Skaife, 2009;Le Vourc'h and Morand, 2011) and that their investment in education and subsequent quality are distinct from those of non-'Big-4' audit firms (DeFond and Subramanyam, 1998), we pay attention to the particular functions of the 'Big 4' (Jensen and Roy, 2008). As their oligarchic market share confers dominant market influence, they have relatively greater independence from controlling-shareholder pressure than small audit firms and consequently provide better audit quality.…”

Can Auditors Be Independent? – Experimental Evidence on the Effects of Client Type

“…In the U.K., the establishment of an audit committee is now mandated by the Disclosure Rules and Transparency Rules (Financial Services Authority, 2009), but previously only recommended by the Combined Code on Corporate Governance (Financial Reporting Council, 2008). In the German two-tier system, the supervisory board, which is an oversight board that is institutionally separated from the management board, has been responsible for monitoring the auditor and for issuing recommendations on auditor appointments since 1998 (German Federal Parliament, 1998;Gassen and Skaife, 2009).…”

“…Control and Transparency Act of 1998, the supervisory board became generally responsible for nominating the auditor for election at the annual shareholder meeting, appointing the auditor, and negotiating the compensation terms (Gassen and Skaife, 2009). Furthermore, the supervisory board is now the primary recipient of auditor's internal long-form audit report (Leuz and Wüstemann, 2004).…”