Audit committee's propensity to challenge significant accounting estimates: the joint effects of audit report content and investor type

Kang, Yoon Ju

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https://hdl.handle.net/2142/31189 Copy

Description

Title

Audit committee's propensity to challenge significant accounting estimates: the joint effects of audit report content and investor type

Author(s)

Kang, Yoon Ju

Issue Date

2012-05-22T00:34:23Z

Director of Research (if dissertation) or Advisor (if thesis)

Pomeroy, Bradley

Doctoral Committee Chair(s)

Peecher, Mark E.

Committee Member(s)

• Pomeroy, Bradley
• Trotman, Ken
• Elliott, W. Brooke
• Viswanathan, Madhubalan

Department of Study

Accountancy

Discipline

Accountancy

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• audit committee
• audit committee effectiveness
• Accountability
• audit report
• investor type

Abstract

Drawing on two perspectives of accountability theory, this dissertation experimentally examines the joint effect of audit report content and investor type (i.e., primary shareholders of the firm) on audit committee members’ propensity to challenge management’s significant accounting estimates. Findings indicate that audit committee members engage in the highest level of questioning when sophisticated investors are the primary shareholders of the firm and a standard, unqualified audit report is issued with no additional information about management’s significant accounting estimate. By contrast, their questioning level is significantly lower when unsophisticated investors are the primary shareholders of the firm and/or when the audit report includes an explanatory paragraph about management’s significant accounting estimate. Further analysis suggests this pattern of results is more pronounced for audit committee members who are designated as financial experts. These findings have implications in terms of both research and practice inasmuch as facets of a recent PCAOB Exposure Draft advocates for widespread and required usage of explanatory paragraphs in audit reports that, herein, decrease audit committee’s propensity to challenge management and/or auditors.

Graduation Semester

2012-05

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http://hdl.handle.net/2142/31189

Copyright and License Information

Copyright 2012 Yoon Ju Kang

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