Journal article
Auditor Industry Specialization, Political Economy and Earnings Quality: Some Cross-Country Evidence
Journal of International Financial Management and Accounting, Vol.23(1), pp.23-61
2012
Abstract
Using cross-country data, we evaluate the impact of investor protection on the association between earnings quality and audits by industry specialists. Our findings show that the positive association between industry specialist auditors and earnings quality as documented in the literature is affected by the political electoral system, which reflects investor protection rights in a country. We document that audits by industry specialists are associated with higher earnings quality in countries with the proportional electoral system, reflecting weak investor protection. Our results also confirm Kwon et al.'s findings that overall there is a positive association between earnings quality and audits by industry specialists in countries with weak legal enforcement. Our findings, however, indicate that Kwon et al.'s results are valid only for countries with weak investor protection reflected by the proportional electoral system and not for countries with strong investor protection reflected by the majoritarian electoral system. These findings thus suggest that higher earnings quality of firms audited by industry specialists across countries can especially be expected when investor protection is low and legal enforcement is also weak. In addition, our research suggests that future cross-country studies could explicitly consider the role of the political electoral system of a country in evaluating corporate governance, management and accounting issues.
Details
- Title
- Auditor Industry Specialization, Political Economy and Earnings Quality: Some Cross-Country Evidence
- Authors
- Bikki Jaggi (Author) - Rutgers UniversityFerdinand A. Gul (Author) - Monash University MalaysiaThomas Sing Chiu Lau (Author) - Hong Kong Polytechnic University
- Publication details
- Journal of International Financial Management and Accounting, Vol.23(1), pp.23-61
- Publisher
- Wiley-Blackwell Publishing Ltd.
- DOI
- 10.1111/j.1467-646X.2011.01053.x
- ISSN
- 1467-646X
- Organisation Unit
- University of the Sunshine Coast, Queensland; School of Business and Creative Industries
- Language
- English
- Record Identifier
- 99678895402621
- Output Type
- Journal article
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