Journal article

The effect of audit specialists on the informativeness of discretionary accruals

D Mascarenhas, SF Cahan, V Naiker

Journal of Accounting Auditing & Finance | Published : 2010

Abstract

Prior literature finds evidence that clients of industry specialists have a lower level of discretionary accruals compared with nonspecialists. This finding suggests that industry specialists constrain the use of discretionary accruals. In addition to opportunistic reasons, however, managers also can use discretionary accruals to make earnings more informative. We examine the market pricing of discretionary accruals of clients of specialist and nonspecialist auditors. If industry specialists constrain opportunistic discretionary accruals but allow informative discretionary accruals, we expect a stronger relation between discretionary accruals and returns for clients of specialists. We use tw..

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University of Melbourne Researchers

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