Auditors' decisions on audit differences that affect significant earnings thresholds

作者：Ng Terence Bu Peow^*

来源：Auditing-A Journal of Practice & Theory, 2007, 26(1): 71-89.

DOI：10.2308/aud.2007.26.1.71

• materiality
• audit adjustments
• earnings management
• thresholds
• auditor
• judgments
• guidance

I conduct an experiment to provide evidence on auditors' propensities to book (or waive) an audit difference that affects the client's ability to meet different earnings thresholds that are potential targets of clients' earnings management attempts. Results indicate that auditors have a higher propensity to book a quantitatively immaterial audit difference that affects the client's ability to meet recent earnings than one that affects the client's ability to meet analysts' expectations. However, these propensities are significantly lower than their propensity to book an audit difference (of the same nature and magnitude) that affects the client's ability to achieve positive earnings. I provide some evidence that the differences in auditors' decisions may be attributable to differential awareness of the different thresholds as well as to differential materiality and risk assessments. Auditors' propensity to book the audit difference decreases with its subjectivity, regardless of the earnings threshold affected. Further evidence suggests that the availability of explicit materiality guidance, which enhances auditors' awareness of the earnings thresholds, has the greatest impact in raising auditors' propensity to book an audit difference that affects the client's ability to meet analysts' expectations, followed by one that affects the client's ability to meet recent earnings, but not one that affects the positive earnings threshold.

• 出版日期2007-5
• 单位南阳理工学院