Do Firms That Have a Common Signing Auditor Exhibit Higher Earnings Comparability?

54 Pages Posted: 26 Jun 2019

See all articles by Jeff Zeyun Chen

Jeff Zeyun Chen

Texas Christian University

Mei-Hui Chen

National Defense University

Chen‐Lung Chin

National Chengchi University

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Date Written: June 9, 2019

Abstract

We hypothesize that if individual auditors possess unique audit styles that they consistently apply to different audit engagements, then client firms with a common signing auditor will exhibit higher earnings comparability. Using a large sample of Chinese firms, we find that client firms report more comparable earnings when they are audited by the same individual auditor than when they are audited by (1) different audit firms, (2) the same audit firm but different audit offices, and (3) the same audit office but different individual auditors. The individual auditor style effect is stronger for larger audit firms, senior signing auditors, and signing auditors with more stable teamwork experience. We also document that having a common signing auditor is associated with lower analyst earnings forecast error and dispersion for client firms. This study contributes to the literature by showing that individual auditors have a significant impact on client firms’ earnings comparability.

Keywords: individual auditor style, earnings comparability, auditor demographic characteristics, teamwork experience

JEL Classification: M41, M42

Suggested Citation

Chen, Jeff Zeyun and Chen, Mei-Hui and Chin, Chen Lung and Lobo, Gerald J., Do Firms That Have a Common Signing Auditor Exhibit Higher Earnings Comparability? (June 9, 2019). Available at SSRN: https://ssrn.com/abstract=3408517 or http://dx.doi.org/10.2139/ssrn.3408517

Jeff Zeyun Chen (Contact Author)

Texas Christian University ( email )

2900 Lubbock Ave
Fort Worth, TX 76109
United States

Mei-Hui Chen

National Defense University ( email )

No.70, Sec. 2, Zhongyang N. Rd.,
Beitou Dist.,
Taipei, 116
Taiwan

Chen Lung Chin

National Chengchi University ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei 11623
Taiwan

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

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