Suchergebnisse

Purpose
This study aims to extend recent research analyzing the effect of auditor busyness on audit quality. Specifically, this study explores the effect on audit quality of a change of fiscal year-end to or from an audit firm's busy period.


Design/methodology/approach
Empirical archival.


Findings
When firms change their fiscal year-end to a period when the auditor is less busy, client firms are rewarded with lower audit fees and auditors are rewarded with a reduction in required effort. This study finds no difference in the level of audit quality after a change in fiscal year-end.


Practical implications
There are significant implications for audit firms as they may gain cost advantages by successfully promoting off-season fiscal year-ends, and reduce the negative effect on employees associated with "busy season" stress. Similarly, client firms may find that audit costs are reduced when they adopt a less "busy" fiscal year-end.


Social implications
These results have policy implications for regulators because regulators often dictate the fiscal year-end for certain industries or traded securities. Such dictates may thus introduce inefficiencies into the market for audit services.


Originality/value
These results should guide regulators in their decisions to dictate fiscal year-ends and firms in their choice of reporting periods.

Purpose
The purpose of this study is to refine what is characterized as real earnings management. Research on real earnings management (REM) has expressed concerns that firms deviating from normal business practices may endure a negative impact on future performance. Not all studies have, however, found a negative impact of REM on future performance. As a consequence, a new stream of research is emerging that examines whether actions that would mechanically be identified as REM are truly earnings management or are simply efficient business activities. The authors further this stream of inquiry by identifying factors, i.e. restructurings and expectations of future sales growth, that can be useful in making a distinction between earnings management and "just business".


Design/methodology/approach
To measure REM, the authors rely on two of the proxies of Roychowdhury (2006), abnormal discretionary expenses and abnormal production costs, and regress interactions of these with measures of restructurings and expectations of future sales growth, on future performance.


Findings
The authors find that when they control for restructurings, reductions in discretionary expenses that would ordinarily be indicative of REM are instead associated with improved future return-on-assets and security returns. They further find that when they control for future sales growth, overproduction is also associated with improved return on sales as it is with future increases in cost of goods sold.


Originality/value
Together, the results may explain the contradictory results presented in prior research with respect to the impact of REM on future performance – that is, some of what has been identified as REM in prior studies may, in fact, be "just business".