Audit quality, earnings quality and the cost of equity capital

Li, Y; Stokes, D; Taylor, SL; Wong, L

Audit quality, earnings quality and the cost of equity capital

Li, Y Stokes, D Taylor, SL

Wong, L

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Publisher:: AFAANZ
Publication Type:: Conference Proceeding
Citation:: 2009 AFAANZ Conference, 2009, pp. 1 - 31
Issue Date:: 2009-01

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Field	Value	Language
dc.contributor.author	Li, Y	en_US
dc.contributor.author	Stokes, D	en_US
dc.contributor.author	Taylor, SL https://orcid.org/0000-0001-8870-4966	en_US
dc.contributor.author	Wong, L	en_US
dc.contributor.editor	Faff, R	en_US
dc.date	2009-07-05	en_US
dc.date.issued	2009-01	en_US
dc.identifier.citation	2009 AFAANZ Conference, 2009, pp. 1 - 31	en_US
dc.identifier.issn	1328-780X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/14174
dc.description.abstract	We investigate the influence of audit quality on the relation between earnings quality and cost of equity capital. We utilize total accruals as a measure of earnings quality and auditor choice, auditor effort and auditor opinion based audit quality proxies used in the prior literature for audit quality dimensions to estimate a cost of equity model for a sample of firm years where auditing and audit quality is likely to be in higher demand. We find that higher audit quality is associated with significant mitigation of the positive relation between total accruals and the cost of equity capital and the presence of a qualified audit opinion issued by the auditor increases the extent to which lower quality accruals are associated with an increased cost of equity capital.	en_US
dc.publisher	AFAANZ	en_US
dc.relation.ispartof	2009 AFAANZ Conference	en_US
dc.relation.ispartof	Accounting and Finance Association of Australia and New Zealand Conference	en_US
dc.title	Audit quality, earnings quality and the cost of equity capital	en_US
dc.type	Conference Proceeding
utslib.location	Australia	en_US
utslib.location.activity	Adelaide, Australia	en_US
utslib.for	150102 Auditing and Accountability	en_US
dc.location.activity	Adelaide, Australia	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	open_access
pubs.consider-herdc	false	en_US
pubs.place-of-publication	Australia	en_US
pubs.start-date	2009-07-05	en_US

Abstract:

We investigate the influence of audit quality on the relation between earnings quality and cost of equity capital. We utilize total accruals as a measure of earnings quality and auditor choice, auditor effort and auditor opinion based audit quality proxies used in the prior literature for audit quality dimensions to estimate a cost of equity model for a sample of firm years where auditing and audit quality is likely to be in higher demand. We find that higher audit quality is associated with significant mitigation of the positive relation between total accruals and the cost of equity capital and the presence of a qualified audit opinion issued by the auditor increases the extent to which lower quality accruals are associated with an increased cost of equity capital.

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http://hdl.handle.net/10453/14174