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

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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
Director of Research: Pomeroy, Bradley
Doctoral Committee Chair(s): Peecher, Mark E.
Doctoral Committee Member(s): Pomeroy, Bradley; Trotman, Ken; Elliott, Brooke; Viswanathan, Madhu
Department / Program: Accountancy
Discipline: Accountancy
Degree Granting Institution: University of Illinois at Urbana-Champaign
Degree: Ph.D.
Genre: Dissertation
Subject(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.
Issue Date: 2012-05-22
URI: http://hdl.handle.net/2142/31189
Rights Information: Copyright 2012 Yoon Ju Kang
Date Available in IDEALS: 2012-05-22
Date Deposited: 2012-05
 

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