Audit committee's propensity to challenge significant accounting estimates: the joint effects of audit report content and investor type

Drawing on two perspectives of accountability theory, this dissertation experimentally examines the joint effect of audit report content and investor type (i.e., primary shareholders of the firm) on audit committee members’ propensity to challenge management’s significant accounting estimates. Findings indicate that audit committee members engage in the highest level of questioning when sophisticated investors are the primary shareholders of the firm and a standard, unqualified audit report is issued with no additional information about management’s significant accounting estimate. By contrast, their questioning level is significantly lower when unsophisticated investors are the primary shareholders of the firm and/or when the audit report includes an explanatory paragraph about management’s significant accounting estimate. Further analysis suggests this pattern of results is more pronounced for audit committee members who are designated as financial experts. These findings have implications in terms of both research and practice inasmuch as facets of a recent PCAOB Exposure Draft advocates for widespread and required usage of explanatory paragraphs in audit reports that, herein, decrease audit committee’s propensity to challenge management and/or auditors.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Accountancy

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2012

Author dc:creator

• Kang, Yoon Ju

Contributors dc:contributor

• Pomeroy, Bradley
• Peecher, Mark E.
• Trotman, Ken
• Elliott, W. Brooke
• Viswanathan, Madhubalan

• audit committee
• audit committee effectiveness
• Accountability
• audit report
• investor type

Statement dc:rights

• Copyright 2012 Yoon Ju Kang

Language dc:language

en

Handle dc:identifier

http://hdl.handle.net/2142/31189

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/31189