Auditors’ Response to Analysts’ Forecast Properties: Some Evidence from Audit Fee Pricing

47 Pages Posted: 27 Jun 2016

See all articles by William Foo

William Foo

Hong Kong Polytechnic University - Faculty of Business

Mark A. Bliss

Hong Kong Polytechnic University - Faculty of Business

Ferdinand A. Gul

Deakin University - Department of Accounting

Karen Lai

Monash University - Department of Accounting; Deakin University, Faculty of Business and Law, Deakin Law School, Students

Date Written: June 27, 2016

Abstract

This study investigates the association between analysts’ forecast properties (accuracy and dispersion) and audit fee pricing in U.S. publicly listed firms for years 2000 to 2012. Our findings provide evidence that analysts’ earnings forecast accuracy (dispersion) is negatively (positively) associated with audit fee pricing. These results suggest that analysts, as important financial intermediaries in the information environment, provide useful information to auditors in their assessment of client risk. We find that these associations are stronger for small firms and younger firms in line with these firms having a higher extent of information asymmetry.

Keywords: analysts’ forecasts, forecast accuracy and dispersion, audit fee pricing

JEL Classification: M42

Suggested Citation

Foo, William and Bliss, Mark A. and Gul, Ferdinand A. and Lai, Karen, Auditors’ Response to Analysts’ Forecast Properties: Some Evidence from Audit Fee Pricing (June 27, 2016). Available at SSRN: https://ssrn.com/abstract=2800904 or http://dx.doi.org/10.2139/ssrn.2800904

William Foo (Contact Author)

Hong Kong Polytechnic University - Faculty of Business ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Mark A. Bliss

Hong Kong Polytechnic University - Faculty of Business ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Ferdinand A. Gul

Deakin University - Department of Accounting ( email )

Melbourne
Australia

Karen Lai

Monash University - Department of Accounting ( email )

H3.43, Building H, Level 3
Monash University Caulfiled
Melbourne, VIC 3145
Australia

Deakin University, Faculty of Business and Law, Deakin Law School, Students ( email )

221 Burwood Highway
Burwood, Victoria
Australia

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