Audit Time Pressure and Earnings Quality: An Examination of Accelerated Filings
85 Pages Posted: 19 Feb 2007 Last revised: 16 Oct 2016
Date Written: October 14, 2016
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: Suggested Citation