Pro Forma Disclosures, Audit Fees, and Auditor Resignations
No Thumbnail Available
Links to Files
Permanent Link
Collections
Author/Creator
Author/Creator ORCID
Date
2012
Type of Work
Department
Program
Citation of Original Publication
Chen, L., Krishnan, G., & Pevzner, M. (2012). Pro-Forma Disclosures, Audit Fees, and Auditor Resignations, Journal of Accounting and Public Policy, 31(3), 237-257 (lead article).
Rights
Subjects
Abstract
The disclosure of non-GAAP (pro forma) earnings numbers by managers in the post-SOX era continues to attract attention from regulators, media, and researchers. However, there is limited empirical evidence on how auditors view clients that emphasize pro forma earnings over GAAP earnings. We study the extent to which audit fees and auditor resignations are associated with opportunistic non-GAAP disclosures. We find that during the pre-SOX period, optimistic pro forma differences, measured using either IBES actual earnings or hand-collected pro forma earnings, are associated with higher audit fees and a higher likelihood of auditor resignations. Additional results indicate that auditors seem to be more concerned with non-GAAP earnings disclosures in the post-SOX period.