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Assessing the impact of the new auditor’s report

Author

Listed:
  • Hong Li
  • David Hay
  • David Lau

Abstract

Purpose - Changes to the auditor’s report have been proposed and issued internationally to provide more relevant information to users and enhance the perceived value of financial statement audits. This paper aims to investigate the impact of audit reporting changes on audit quality and audit fees in the New Zealand context. Design/methodology/approach - The authors examined audit quality measured by absolute abnormal accruals and audit fees for New Zealand listed companies. Findings - The evidence suggests the enhanced audit reports were followed by an improvement in audit quality as proxied by a reduction in absolute abnormal accruals upon the adoption of the new audit reporting requirements. There was also a significant increase in audit fees. Practical implications - Although the new auditor reporting requirements are associated with improvements in audit quality, such benefit does not come without cost. Originality/value - The study provides evidence about the impact of this recent substantial reform to auditing.

Suggested Citation

  • Hong Li & David Hay & David Lau, 2019. "Assessing the impact of the new auditor’s report," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 31(1), pages 110-132, March.
    • Handle: RePEc:eme:parpps:par-02-2018-0011
    DOI: 10.1108/PAR-02-2018-0011
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    Citations

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    Cited by:

    1. Nien-Su Shih, 2024. "Does Using the Extended Audit Report Decrease Information Asymmetry in Family Firms?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(1), pages 1-3.
    2. Duboisée de Ricquebourg, Alan & Maroun, Warren, 2023. "How do auditor rotations affect key audit matters? Archival evidence from South African audits," The British Accounting Review, Elsevier, vol. 55(2).
    3. David Hay & Noel Harding & Chris Gan & Irene Ge & Linh Ho & Dinithi Ranasinghe & Harj Singh & Nigar Sultana & Shan Zhou, 2023. "Comments of the AFAANZ Auditing and Assurance Standards Committee on the Proposed Standard on Assurance Engagements over GHG Emissions Disclosure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4813-4820, December.
    4. Ma, Jin & Coram, Paul & Troshani, Indrit, 2024. "The effect of key audit matters and management disclosures on auditors’ judgements and decisions: An exploratory study," The British Accounting Review, Elsevier, vol. 56(2).
    5. Saeed Rabea Baatwah & Ehsan Saleh Almoataz & Khaled Salmen Aljaaidi, 2022. "Tightened it and ruined it: Earnings management trade-off as a consequence of key audit matters disclosure," Economics Bulletin, AccessEcon, vol. 42(2), pages 678-693.
    6. Qian Sai & Yanxi Li & Yanwen Liu & Heng Zhao & Shanshan Ouyang, 2024. "Audit report information improvement and earnings management," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 425-442, January.

    More about this item

    Keywords

    Auditing; Audit report; Enhanced audit report; Key audit matters; Partner signature; L13; L84; M40; M42;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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