Auditors’ Response to Analysts’ Forecast Properties: Some Evidence from Audit Fee Pricing
47 Pages Posted: 27 Jun 2016
Date Written: June 27, 2016
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: Suggested Citation