Staff View
Information intermediaries – auditors and financial analysts: cases of decreased effectiveness

Descriptive

TitleInfo
Title
Information intermediaries – auditors and financial analysts: cases of decreased effectiveness
Name (type = personal)
NamePart (type = family)
Calabrese
NamePart (type = given)
Kristyn
DisplayForm
Kristyn Calabrese
Role
RoleTerm (authority = RULIB)
author
Name (type = personal)
NamePart (type = family)
Brown-Liburd
NamePart (type = given)
Helen
DisplayForm
Helen Brown-Liburd
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
chair
Name (type = personal)
NamePart (type = family)
Palmon
NamePart (type = given)
Dan
DisplayForm
Dan Palmon
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
internal member
Name (type = personal)
NamePart (type = family)
Levine
NamePart (type = given)
Carolyn
DisplayForm
Carolyn Levine
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
outside member
Name (type = personal)
NamePart (type = family)
Yezegel
NamePart (type = given)
Ari
DisplayForm
Ari Yezegel
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
outside member
Name (type = corporate)
NamePart
Rutgers University
Role
RoleTerm (authority = RULIB)
degree grantor
Name (type = corporate)
NamePart
Graduate School - Newark
Role
RoleTerm (authority = RULIB)
school
TypeOfResource
Text
Genre (authority = marcgt)
theses
OriginInfo
DateCreated (qualifier = exact); (encoding = w3cdtf); (keyDate = yes)
2019
DateOther (type = degree); (qualifier = exact)
2019-05
CopyrightDate (encoding = w3cdtf); (qualifier = exact)
2019-05
Language
LanguageTerm (authority = ISO 639-3:2007); (type = text)
English
Abstract
Auditors and financial analysts serve to reduce information asymmetries in capital markets. The role of the independent auditor is to obtain reasonable assurance on whether a client’s financial statements are free of material misstatement and to express an appropriate opinion (PCAOB, AS1001). The role of the sell-side analyst is to obtain and analyze financial information and provide this information to investors in the form of research reports. This dissertation consists of three essays that examine settings where these parties may fall short in their roles as information intermediaries.

The first essay investigates whether time pressure on the audit increases the cost and/or reduces the quality of professional audit services. I examine this question in the context of the accelerated filing regulation passed by the Securities and Exchange Commission in 2002. I identify client engagements that may experience audit time pressure given their audit report dates in the years prior to regulatory implementation. I analyze audit fees as an input cost to measure changes in audit effort and/or perceived audit risk. I then investigate the relationship between audit fees and restatements, an output measure of audit quality. I find time-pressure engagements are associated with significantly lower audit fee increases during implementation years when compared to other engagements. Initially, lower fee changes are associated with higher audit quality; however, this benefit is lost during further deadline reductions. Findings suggest changes in audit effort to meet the shortened deadlines with mixed implications for quality. This study may be of interest to both academics and regulators concerned with potential unintended consequences of audit time pressure.

The second essay investigates a possible unintended consequence of audit workload and time pressures, the shifting of auditor effort. I investigate this in the context of the accelerated filing regulation and Section 404(b) of the Sarbanes Oxley Act, implemented during the years 2003-2004. These regulations shortened the filing deadlines and increased audit production requirements for accelerated filers, imposing time and resource pressures on auditors. Given non-accelerated filers were not subject to these regulations, auditors may reallocate effort (resources) away from this group and toward their accelerated filer clients. Results show a significant increase in the audit report lags of non-accelerated filers during this period. The increase is more pronounced for clients whose audit firms and offices have a greater proportion of accelerated filers in their portfolio (high-pressure auditors), clients with greater reporting slack (resource availability), and clients of audit offices with neighbor offices in proximity (resource transferability). Overall, high-pressure auditors at the firm level maintain higher audit quality on non-accelerated engagements; however, high-pressure auditors at the office level are associated with greater absolute changes in discretionary accruals. Furthermore, resource availability and resource transferability play a role in reducing negative quality effects. Findings are suggestive of audit resource reallocations with a downside of reduced audit timeliness and quality.

The third essay investigates the overlooked subset of analyst recommendation revisions for which investors react in the opposite direction. In a sample from 2000-2016, I find approximately 32% of all recommendation downgrades (upgrades) are associated with a positive (negative) market reaction for which I use the term “conflicting reaction.” I investigate the determinants of a conflicting reaction and whether revisions with conflicting reactions are related to future earnings surprises. Results indicate that low firm-relevant news media attention or opposing news media sentiment are positively associated with a conflicting reaction. Investor inattention, changes in investor sentiment, information redundancy, information leakage, and weak analyst signals are also positively associated with a conflicting reaction. Further, revisions for stocks with larger analyst following, higher volatility, and greater analyst disagreement are positively associated with a conflicting reaction. Finally, revisions made by less experienced/reputable analysts and smaller brokerages are positively associated with a conflicting reaction. Looking at future earnings surprise, results suggest that analyst recommendations are equally helpful in identifying earnings surprises in the conflicting and non-conflicting subsamples. Trading portfolios that take advantage of the contradictory reaction earn approximately 7% to 14% per annum, providing evidence of price reversals. Findings suggest that revisions with conflicting reactions have important information that is initially overlooked by investors.
Subject (authority = local)
Topic
Information intermediaries
Subject (authority = RUETD)
Topic
Management
Subject (authority = LCSH)
Topic
Auditors -- Rating of
Subject (authority = LCSH)
Topic
Quantitative analysts -- Rating of
RelatedItem (type = host)
TitleInfo
Title
Rutgers University Electronic Theses and Dissertations
Identifier (type = RULIB)
ETD
Identifier
ETD_9767
PhysicalDescription
Form (authority = gmd)
InternetMediaType
application/pdf
InternetMediaType
text/xml
Extent
1 online resource (viii, 189 pages)
Note (type = degree)
Ph.D.
Note (type = bibliography)
Includes bibliographical references
RelatedItem (type = host)
TitleInfo
Title
Graduate School - Newark Electronic Theses and Dissertations
Identifier (type = local)
rucore10002600001
Location
PhysicalLocation (authority = marcorg); (displayLabel = Rutgers, The State University of New Jersey)
NjNbRU
Identifier (type = doi)
doi:10.7282/t3-s33n-gm14
Back to the top

Rights

RightsDeclaration (ID = rulibRdec0006)
The author owns the copyright to this work.
RightsHolder (type = personal)
Name
FamilyName
Calabrese
GivenName
Kristyn
Role
Copyright Holder
RightsEvent
Type
Permission or license
DateTime (encoding = w3cdtf); (qualifier = exact); (point = start)
2019-04-10 21:22:07
AssociatedEntity
Name
Kristyn Calabrese
Role
Copyright holder
Affiliation
Rutgers University. Graduate School - Newark
AssociatedObject
Type
License
Name
Author Agreement License
Detail
I hereby grant to the Rutgers University Libraries and to my school the non-exclusive right to archive, reproduce and distribute my thesis or dissertation, in whole or in part, and/or my abstract, in whole or in part, in and from an electronic format, subject to the release date subsequently stipulated in this submittal form and approved by my school. I represent and stipulate that the thesis or dissertation and its abstract are my original work, that they do not infringe or violate any rights of others, and that I make these grants as the sole owner of the rights to my thesis or dissertation and its abstract. I represent that I have obtained written permissions, when necessary, from the owner(s) of each third party copyrighted matter to be included in my thesis or dissertation and will supply copies of such upon request by my school. I acknowledge that RU ETD and my school will not distribute my thesis or dissertation or its abstract if, in their reasonable judgment, they believe all such rights have not been secured. I acknowledge that I retain ownership rights to the copyright of my work. I also retain the right to use all or part of this thesis or dissertation in future works, such as articles or books.
Copyright
Status
Copyright protected
Availability
Status
Open
Reason
Permission or license
Back to the top

Technical

RULTechMD (ID = TECHNICAL1)
ContentModel
ETD
OperatingSystem (VERSION = 5.1)
windows xp
CreatingApplication
Version
1.7
ApplicationName
Microsoft® Word for Office 365
DateCreated (point = end); (encoding = w3cdtf); (qualifier = exact)
2019-04-10T21:16:42
DateCreated (point = end); (encoding = w3cdtf); (qualifier = exact)
2019-04-10T21:16:42
Back to the top
Version 8.3.13
Rutgers University Libraries - Copyright ©2020