Early Earnings Releases and the Role of Accounting Quality

Forthcoming at Auditing: A Journal of Practice and Theory

58 Pages Posted: 27 Oct 2021 Last revised: 13 Dec 2021

See all articles by James Whitworth

James Whitworth

University of South Florida

Scott Seavey

Florida Atlantic University - School of Accounting

Michael Imhof

Wichita State University - Barton School of Accountancy

Date Written: December 2, 2021

Abstract

More than half of U.S. public companies announce earnings before audit completion. We examine how accounting quality, as a measure of the ex-ante reliability of earnings, affects the decision to release earnings early. Using four proxies for accounting quality, we show that firms with higher accounting quality are more likely to release earnings before a completed audit, and that the association is stronger when market demand for timely earnings is high. We provide evidence that accounting quality remains important in the timing of earnings release even after controlling for other factors which affect earnings reliability, such as managerial ability, auditor tenure, and financial reporting problems in a prior period. Overall we emphasize the role of accounting quality in the complex process of when to release earnings relative to audit completion, and suggest that the importance of the audit in the earnings release decision varies based on firm-specific accounting quality.

Keywords: audit completion, earnings release, earnings reliability

JEL Classification: M40, M41, M42

Suggested Citation

Whitworth, James and Seavey, Scott and Imhof, Michael, Early Earnings Releases and the Role of Accounting Quality (December 2, 2021). Forthcoming at Auditing: A Journal of Practice and Theory, Available at SSRN: https://ssrn.com/abstract=3950037

James Whitworth

University of South Florida ( email )

Tampa, FL 33620
United States

Scott Seavey (Contact Author)

Florida Atlantic University - School of Accounting ( email )

University Tower
220 SE 2 Avenue
Boca Raton, FL 33431
United States

Michael Imhof

Wichita State University - Barton School of Accountancy ( email )

United States

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