Audit Time Pressure and Earnings Quality: An Examination of Accelerated Filings

85 Pages Posted: 19 Feb 2007 Last revised: 16 Oct 2016

See all articles by Tamara A. Lambert

Tamara A. Lambert

Lehigh University

Keith L. Jones

University of Kansas

Joseph F. Brazel

North Carolina State University - Poole College of Management - Department of Accounting

D. Scott Showalter

North Carolina State University

Multiple version iconThere are 3 versions of this paper

Date Written: October 14, 2016

Abstract

Using publicly available data from annual reports, we find that SEC rule changes (33-8128 and 33-8644) that impose time pressure on the audits of registered firms have a negative impact on earnings quality, which we interpret as evidence of lower audit quality. Consistent with our predictions, we find that the 10-K accelerations reduced audit quality only when it actually reduced the number of days from year-end to audit report date, and that this effect was more acute for smaller, accelerated filers and during the initial deadline change (relative to the second). We also provide insights into the quality of these audits by conducting a survey of thirty-two retired audit partners. Survey results underscore the challenges time pressure imposes on receiving and evaluating complex valuations (such as for derivatives, pensions, and goodwill) and resolving audit adjustments.

Keywords: accelerated SEC filings, audit delay, earnings quality, time pressure

JEL Classification: G38, J22, M41, M43, M44, M49

Suggested Citation

Lambert, Tamara A. and Jones, Keith Lamar and Brazel, Joseph F. and Showalter, D. Scott, Audit Time Pressure and Earnings Quality: An Examination of Accelerated Filings (October 14, 2016). Available at SSRN: https://ssrn.com/abstract=963402 or http://dx.doi.org/10.2139/ssrn.963402

Tamara A. Lambert (Contact Author)

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

Keith Lamar Jones

University of Kansas ( email )

1654 Naismith Drive
MS 5F4
Lawrence, KS 66045
United States
785-864-6997 (Phone)
785-864-5328 (Fax)

Joseph F. Brazel

North Carolina State University - Poole College of Management - Department of Accounting ( email )

Campus Box 8113
Nelson Hall
Raleigh, NC 27695
United States
919-513-1772 (Phone)

D. Scott Showalter

North Carolina State University ( email )

Hillsborough Street
Raleigh, NC 27695
United States

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