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Management earnings forecasts disaggregation and audit fees: International evidence
Author(s) -
Shan Liwei,
San Ziyao,
Tsang Albert
Publication year - 2021
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/ijau.12225
Subject(s) - credibility , audit , earnings , accounting , earnings management , business , sample (material) , earnings response coefficient , audit committee , chemistry , chromatography , political science , law
In this study, using a large sample of firms from 27 countries around the world, we examine the relationship between disaggregated earnings forecasts and audit fees. We find that the positive association between management earnings forecasts and audit fees in prior studies is primarily driven by firms issuing management forecasts that contain disaggregated performance measures. We further find that better developed country‐level institutions can weaken the positive relation between disaggregated earnings forecasts and audit fees. Taken together, our findings support the important role of disaggregated earnings forecasts in signalling the credibility of prospective financial information provided by firms and shed light on the debate over the positive association between management earnings forecasts and audit fees.