Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom [What Do We Learn by Studying Accounting and Governance Practices in Other Countries? Discussion of “Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom”*]

Reid, LC; Carcello, JV; Li, C; Neal, TL; Francis, JR

Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom [What Do We Learn by Studying Accounting and Governance Practices in Other Countries? Discussion of “Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom”*]

Reid, LC Carcello, JV Li, C Neal, TL Francis, JR

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Publisher:: Wiley
Publication Type:: Journal Article
Citation:: Contemporary Accounting Research, 2019, 36, (3), pp. 1501-1539
Issue Date:: 2019-09

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Field	Value	Language
dc.contributor.author	Reid, LC
dc.contributor.author	Carcello, JV
dc.contributor.author	Li, C
dc.contributor.author	Neal, TL
dc.contributor.author	Francis, JR
dc.date.accessioned	2020-06-30T01:03:38Z
dc.date.available	2020-06-30T01:03:38Z
dc.date.issued	2019-09
dc.identifier.citation	Contemporary Accounting Research, 2019, 36, (3), pp. 1501-1539
dc.identifier.issn	0823-9150
dc.identifier.issn	1911-3846
dc.identifier.uri	http://hdl.handle.net/10453/141694
dc.description.abstract	Reid, Carcello, Li, and Neal (hereafter RCLN) study recent corporate governance changes in the United Kingdom, and investigate how the changes may have affected the quality of audited earnings. Starting in 2013, auditors in the United Kingdom are required to include a discussion of critical accounting matters (risks) as part of an extended audit report. In addition, audit committees of corporate boards are required to issue their own separate report on critical accounting matters, along with a general statement by the board that earnings are “fair, balanced, and understandable.” The evidence in RCLN suggests the UK governance changes improved the quality of earnings, though later I suggest the possibility the evidence could also indicate lower-quality earnings due to induced conservatism that biases earnings downward. There are two obvious questions to ask given the study’s UK setting. Why do we care about UK governance changes, and what do we learn from the analysis? My commentary begins by discussing different approaches to research using other country settings and their potential value and design challenges, and concludes with specific comments on the study by RCLN. I use the term other country research to characterize research in a country-specific setting, and the commentary explores the question of the audience for such research, and its broader relevance to an audience beyond that of the specific country being studied.
dc.language	en
dc.publisher	Wiley
dc.relation.ispartof	Contemporary Accounting Research
dc.relation.isbasedon	10.1111/1911-3846.12486
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1501 Accounting, Auditing and Accountability
dc.subject.classification	Accounting
dc.title	Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom [What Do We Learn by Studying Accounting and Governance Practices in Other Countries? Discussion of “Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom”*]
dc.type	Journal Article
utslib.citation.volume	36
utslib.for	1501 Accounting, Auditing and Accountability
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
pubs.organisational-group	/University of Technology Sydney
utslib.copyright.status	closed_access	*
pubs.consider-herdc	false
dc.date.updated	2020-06-30T01:03:33Z
pubs.issue	3
pubs.publication-status	Published
pubs.volume	36
utslib.citation.issue	3

Abstract:

Reid, Carcello, Li, and Neal (hereafter RCLN) study recent corporate governance changes in the United Kingdom, and investigate how the changes may have affected the quality of audited earnings. Starting in 2013, auditors in the United Kingdom are required to include a discussion of critical accounting matters (risks) as part of an extended audit report. In addition, audit committees of corporate boards are required to issue their own separate report on critical accounting matters, along with a general statement by the board that earnings are “fair, balanced, and understandable.” The evidence in RCLN suggests the UK governance changes improved the quality of earnings, though later I suggest the possibility the evidence could also indicate lower-quality earnings due to induced conservatism that biases earnings downward. There are two obvious questions to ask given the study’s UK setting. Why do we care about UK governance changes, and what do we learn from the analysis? My commentary begins by discussing different approaches to research using other country settings and their potential value and design challenges, and concludes with specific comments on the study by RCLN. I use the term other country research to characterize research in a country-specific setting, and the commentary explores the question of the audience for such research, and its broader relevance to an audience beyond that of the specific country being studied.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/141694