Doctor of Philosophy (PhD)
First Advisor's Name
Steve Wen-Jen Lin
First Advisor's Committee Title
Second Advisor's Name
Xiao Chuan Huang
Second Advisor's Committee Title
Third Advisor's Name
Third Advisor's Committee Title
Fourth Advisor's Name
Fourth Advisor's Committee Title
Date of Defense
The purpose of this study is to provide evidence on the effects of the nature of accounting standards (i.e. principles- versus rules-based accounting standards) on audit quality and earnings attributes. I construct a comprehensive instrument to effectively measure rules-based characteristics in the U.S. GAAP following Mergenthaler (2011). I then construct a firm-level instrument to capture firms' reliance on principles-based accounting standards using the textual analysis approach developed by Folsom et al. (2017). Using data from S&P 500 companies during 2009-2014, I first examine whether principles- (or rules-) based standards in the FASB Accounting Standards Codification (ASC) system affect both the inputs (i.e. audit fees) and the outcomes (i.e. financial misstatements) of the audit process. The multivariate regression results show that firms applying more principles-based standards pay less audit fees but the nature of accounting standards doesn’t affect restatements. My finding suggests that auditors do consider the degree of precision and complexity in accounting standards when assessing the level of audit inputs, but audit quality is generally not compromised by the nature of accounting standards. I also investigate the influence on firms’ earnings attributes. More specifically, I examine the statistical association between firms’ reliance on principles- (or rules-) based accounting standards and the timely loss recognition (TLR) during the same sample period. Interestingly, I find that the timeliness in loss recognition is insensitive to firms’ choice of applying more principles- (or rules-) based accounting standards. The results of this study should be of interest to preparers, auditors, U.S. standards setters, and accounting researchers.
Ling, Ran, "How Does the Nature of Accounting Standards Affect Audit Quality and Earnings Attributes?" (2018). FIU Electronic Theses and Dissertations. 3764.
In Copyright. URI: http://rightsstatements.org/vocab/InC/1.0/
This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s).