Issues raised by studying DeFond and Zhang: What should audit researchers do?

Donovan, John; Frankel, Richard M.; Lee, Joshua; Martin, Xiumin; Seo, Hojun

doi:10.1016/j.jacceco.2014.09.001

Cited by 66 publications

(14 citation statements)

References 46 publications

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“…Our findings also extend the emerging body of research on how auditor going‐concern assessments are affected by information contained in corporate disclosures as well as key financial ratios (Bruynseels and Willekens 2012; Bruynseels et al ). In doing so, we respond to Carson et al's () and Donovan et al's () call for more audit research in settings where auditors' access to private information would be salient in assessing the going‐concern uncertainties associated with information reflected in corporate disclosures.…”

Section: Introductionmentioning

confidence: 91%

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

Dhaliwal

Michas

Naiker

et al. 2020

Contemporary Accting Res

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In this study, we predict and provide evidence that distressed firms that rely more heavily on major customers for sales have a comparatively higher incidence of receiving going‐concern opinions (GCOs). Moreover, we find that the effect of increased reliance on major customers is driven by firms that are more distressed. We also theorize that variations in key characteristics of the relationship between a distressed firm and its largest major customer are incrementally linked to GCOs, and present evidence consistent with this. Specifically, we find that the effect of greater reliance on major customers is driven by firms that are relatively smaller than their largest major customer. Additionally, we find that greater reliance on major customers is positively (negatively) associated with GCOs when firms are in a shorter (longer) relationship with their major customer and when firms have a different auditor to (same auditor as) the largest major customer. Overall, our study indicates that supply chain relationships are relevant business risks associated with auditors' going‐concern assessments.

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Section: Introductionmentioning

confidence: 91%

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

Dhaliwal

Michas

Naiker

et al. 2020

Contemporary Accting Res

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“…The literature provides fewer examples of positive externalities for auditing (e.g., Donovan et al. [2014], Minnis and Shroff [2017]). Nevertheless, it is an empirical question whether reporting and auditing mandates help or hurt aggregate allocative efficiency.…”

Section: Introductionmentioning

confidence: 99%

“…It is a first attempt at assessing the net effects of reporting and auditing mandates on resource allocation at the industry level (see, e.g., Donovan et al. [2014], Leuz and Wysocki [2016], ICAEW [2016], Minnis and Shroff [2017], Roychowdhury, Shroff, and Verdi [2019] for calls for such research). Empirical evidence on these effects is key to understanding which among the many potential effects of financial‐reporting mandates dominate at the industry level.…”

Section: Introductionmentioning

confidence: 99%

How Does Financial‐Reporting Regulation Affect Industry‐Wide Resource Allocation?

Breuer

2021

J of Accounting Research

123

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This paper examines the impact of mandatory reporting and auditing of firms’ financial statements on industry‐wide resource allocation. Using threshold‐induced variation in the share of mandated firms in a given industry, I document that reporting mandates facilitate ownership dispersion in capital markets and spur competition in product markets. I, however, do not find that reporting mandates unambiguously improve the efficiency of industry‐wide resource allocation. With respect to auditing mandates, I find only that they impose a fixed cost on firms, deterring smaller entrants.

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“…DeFond and Zhang (2014) take a regulatory view, defining define audit quality as "greater assurance that the financial statements faithfully reflect the firm's underlying economics, conditioned on its financial reporting system and innate characteristics" (p. 276). Donovan, Frankel, Lee, Martin, and Seo (2014) take a more client/auditor-oriented view and propose that audit quality should be determined by client preferences and audit firm's efficient provision of services for which they hold a competitive advantage.…”

Section: Contemporary Management Research 56mentioning

confidence: 99%

Determinants of Audit Service Quality Perceptions of Supervisory Directors in Dutch Corporations

Ghebremichael

2018

CMR

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The purpose of this study is to investigate the effect of key quality attributes in the audit context on supervisory directors' assessment of audit quality. To this end, we identified, through survey questionnaires, audit quality attributes and dimensions (in terms of both their technical and service dimensions) based on the perception of supervisory board members in a sample of large and medium Dutch corporations. Factor analysis of the audit quality attributes produced four quality dimensions related to the core outcome of the audit service (auditor competence and independence) and five quality dimensions related to the relational (service) aspect. The paper, further, discusses the influence of these quality dimensions on the assessment of overall audit quality. The findings indicate that the technical and functional quality dimensions identified in this study do influence supervisory directors' perception of overall audit quality. The findings have both theoretical and policy implications. Our emphasis on supervisory board members, as current de jure and de facto clients of auditors, is a unique contribution of this study.

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Issues raised by studying DeFond and Zhang: What should audit researchers do?

Cited by 66 publications

References 46 publications

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

How Does Financial‐Reporting Regulation Affect Industry‐Wide Resource Allocation?

Determinants of Audit Service Quality Perceptions of Supervisory Directors in Dutch Corporations

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