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این مقاله علمی پژوهشی (ISI) به زبان انگلیسی از نشریه الزویر مربوط به سال ۲۰۲۱ دارای ۱۶ صفحه انگلیسی با فرمت PDF می باشد در ادامه این صفحه لینک دانلود رایگان مقاله انگلیسی و بخشی از ترجمه فارسی مقاله موجود می باشد.
کد محصول: H734
سال نشر: ۲۰۲۱
نام ناشر (پایگاه داده): الزویر
نام مجله: Advances in Accounting
نوع مقاله: علمی پژوهشی (Research articles)
تعداد صفحه انگلیسی: ۱۶ صفحه PDF
عنوان کامل فارسی:
مقاله انگلیسی ۲۰۲۱ : هموارسازی درآمد و حق الزحمه های حسابرسی
عنوان کامل انگلیسی:
Income smoothing and audit fees
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Abstract
In this study, we examine the effect of income smoothing on auditors’ pricing decisions. Analyzing a sample of 12,823 firm-year observations from U.S. companies in non-regulated industries for the period 2000–۲۰۱۸, we find that income smoothing is negatively associated with audit fees, suggesting that auditors favorably view smoothed earnings. This result holds when we control for other variables that have been identified as determinants of audit fees in prior literature, including client-specific (e.g., client size, audit complexity, litigation risk, and corporate governance), auditor-specific (e.g., auditor quality, auditor tenure, and auditor expertise), and engagement-specific (e.g., audit opinion, busy season, reporting lag) factors. Our results also hold across (1) alternative smoothing measures (with and without considering the use of accruals to smooth earnings), (2) different sources of income smoothness (innate vs. discretionary components) and (3) various robustness tests. Overall, our evidence supports the notion that auditors perceive income smoothing as signaling rather than opportunistic behavior, and thus charge lower audit fees. To our knowledge, this is the first study that examines income smoothing directly from the perspective of auditors.
Keywords: Income smoothing, Audit fees, Earnings management, Signaling
۱.Introduction
Income smoothing is generally defined as “the intentional dampening of fluctuations” in earnings series over time (Beidleman, 1973). Prior literature and existing evidence suggest two different views regarding whether income smoothing is harmful or beneficial to market participants and/or corporate stakeholders. The “informational” view argues that managers use income smoothing to reveal their private information about firms’ future performance, which could enhance firm valuation and earnings informativeness (e.g., Badertscher, Collins, & Lys, 2012; Baik et al., 2020; Trueman & Titman, 1988; Tucker & Zarowin, 2006). However, the “opportunistic” view highlights the possibility that managers engage in income smoothing as an opportunistic behavior. This perspective implies that income smoothing is used to obfuscate information about firms’ true economic performance, which could result in earnings opacity and lead to value erosion. (e.g., LaFond, Lang, & Ashbaugh-Skaife, 2007; Leuz, Nanda, & Wysocki, 2003). We shed new light on this debate by exploring how auditors perceive income smoothing and whether they incorporate it into their pricing decisions. It is essential to evaluate firms’ earnings1 smoothing from the perspective of auditors since they have a better understanding of managerial incentives for income smoothing given their direct access to both management and corporate accounting records…
۶.Conclusions
In this study, we examine the effect of income smoothing on auditors’ pricing decisions. Income smoothing could lower bankruptcy risk yet increase earnings management risk. Thus, its impact on audit fees is an empirical question. We find a negative relationship between the degree of income smoothing and the amount of audit fees, suggesting that earnings streams with lower volatility are, in some sense, viewed favorably by auditors. We also find some evidence suggesting that the negative relationship is more pronounced when audit clients have (1) lower analyst coverage, (2) lower institutional ownership, and (3) smaller firm size. Overall, our evidence supports the notion that the perceived benefits of the reduced bankruptcy risk, possibly due to the signaling mechanism of income smoothing, outweigh the perceived costs of the heightened litigation risk with the opportunistic use of income smoothing…
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