Management disclosure bias and audit services

Management disclosure bias and audit services This paper considers the level of bias observed in management disclosures of earnings forecasts and historic earnings data in Australian prospectuses. Management forecasts and naïve forecasts derived from managements’ normalised historic data are analysed. A key focus is upon the possible association between such forecast bias and differential audit services performed upon the data. Audit firm size and level of engagement are modelled against bias. The full sample revealed no overestimation bias for any of the forecast models, but underestimation was observed for elements of the management and random walk naïve forecasts. Cross-sectionally, a significant association was observed between forecast bias and audit firm size across all three forecast models. Specifically, the audit firm size variable (Non Big-5/Big-5) was inversely associated with the extent to which forecasted and normalised historic earnings data were upwardly biased. On the other hand, the level of engagement was not a significant discriminator for forecast bias. These outcomes are contrasted against others reported elsewhere in the literature and suggest a risk in generalising across contexts. The findings imply a level of ‘disclosure management’ regarding company IPO forecasts and normalised historic accounting data, with forecast overestimation and error size more extreme when the monitoring expertise and/or reputation of auditors is lower (JEL D80, G14, M41, N27). http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Management disclosure bias and audit services

Loading next page...
 
/lp/springer_journal/management-disclosure-bias-and-audit-services-07w5tf7Fbu
Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2006 by Springer Science + Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-006-7438-y
Publisher site
See Article on Publisher Site

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches

$49/month

Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.

$588

$360/year

billed annually
Start Free Trial

14-day Free Trial