A Re-examination of the Relationship Between Audit Quality and Earnings Response Coefficient

• Main Authors: Li, Shiuan-Jiun, 李宣進
• Other Authors: Chou Ling-Tai Lynette
• Format: Others
• Language: zh-TW
• Published: 1996
• Online Access: http://ndltd.ncl.edu.tw/handle/89276138396852573574

碩士 === 東吳大學 === 會計學系 === 85 === A high-quality audit lends credibility to clients'' earnings report. According to basic intuition, investors'' response to an earnings surprise will depend on the perceived credibility of the earning report. In this study, we examine whether the earnings response coefficient(ERC) differs between the firms audited by high-quality auditors and those audited by low- quality auditors. We use auditor size and reputation as the proxy of audit quality, and we adapt two methods to class auditors: Big Six(B6) and non-Big Six(NB6), Big Five(B5) and non-Big Five(NB5). The study finds that the ERCs of B6 clients are significantly higher than those of NB6 clients. The ERCs of B5 clients are higher than those of NB5 clients, but the difference is not statistically significant. In other words, this paper roughly supports that there is a positive relation between audit quality and ERC in Taiwan listed companies.