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Auditor conservatism and voluntary disclosure: Evidence from the Year 2000 systems issue
Author(s) -
Clarkson Peter M.,
Ferguson Colin,
Hall Jason
Publication year - 2003
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/1467-629x.00081
Subject(s) - audit , accounting , conservatism , business , reputation , accrual , auditor independence , incentive , auditor's report , audit substantive test , inherent risk (accounting) , actuarial science , external auditor , economics , joint audit , political science , earnings , internal audit , law , microeconomics , politics
This study further examines the phenomenon of conservative auditor behaviour by considering the level of voluntary disclosure of Year 2000 remediation information in company annual reports. Previous studies have provided evidence of conservative auditor behaviour by examining the link between Big 6 auditor choice and accruals (Francis and Krishnan 1999; Becker et al ., 1998; Defond and Subramanyam 1998). Protecting their reputation capital increases Big 6 auditor incentives to act conservatively to avoid litigation risk. We propose and find that Big 6 auditor clients disclose more Year 2000 remediation information than non–Big 6 auditor clients.
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