Abstract
This paper examines the effect of auditor tenure and provision of non-audit services on earnings conservatism. Following Basu (1997), we measure earnings conservatism by using the asymmetric timeliness of earnings model and the time-series test of timeliness in loss recognition model. Using a sample of 2,235 company-year observations from the period 2005-2008, we present evidence that auditor tenure and non-audit services are positively associated with earnings conservatism. These results are robust even after controlling for company size, leverage and growth. We further examine the influence of government-linked companies on the relationship between (1) auditor tenure, (2) provision of non-audit services, and earnings conservatism. We find that our main results hold for non-government linked companies. For government linked companies, we find no association between auditor tenure and earnings conservatism, while the provision of non-audit services is negatively associated with earnings conservatism. This result implies that high provision of non-audit services to government-linked companies lead to impairment of auditor independence. Our additional analysis also shows that auditor tenure and provision of non-audit services are associated with higher earnings conservatism, regardless of whether the companies are audited by industry specialist or non-industry specialist.
Original language | English |
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Title of host publication | 2010 AFAANZ Conference |
Place of Publication | Melbourne, Australia |
Publisher | Accounting and Finance Association of Australia and New Zealand |
Pages | 1-34 |
Number of pages | 34 |
Publication status | Published - 2010 |
Event | Accounting and Finance Association of Australia and New Zealand (AFAANZ) conference - Darwin, Darwin, Australia Duration: 3 Jul 2011 → 5 Jul 2011 http://www.afaanz.org/conferences |
Conference
Conference | Accounting and Finance Association of Australia and New Zealand (AFAANZ) conference |
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Abbreviated title | AFAANZ 2011 |
Country/Territory | Australia |
City | Darwin |
Period | 3/07/11 → 5/07/11 |
Internet address |