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Long-Term Impact of Economic Conditions on Auditors' Judgment

ABSTRACT We find that economic conditions at the time an auditor enters the labor market have a long-term impact on her judgment and decision making. Specifically, engagement partners who started their career during economic downturns issue audit adjustments more frequently. For the subsample of com... Full description

Journal Title: The Accounting review 2018-11-01, Vol.93 (6), p.203-229
Main Author: He, Xianjie
Other Authors: Kothari, S. P. , Xiao, Tusheng , Zuo, Luo
Format: Electronic Article Electronic Article
Language: English
Subjects:
Quelle: Alma/SFX Local Collection
Publisher: Sarasota: American Accounting Association
ID: ISSN: 0001-4826
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recordid: cdi_crossref_primary_10_2308_accr_52009
title: Long-Term Impact of Economic Conditions on Auditors' Judgment
format: Article
creator:
  • He, Xianjie
  • Kothari, S. P.
  • Xiao, Tusheng
  • Zuo, Luo
subjects:
  • Accounting
  • Adjustment
  • Auditing
  • Auditors
  • Auditors opinions
  • Audits
  • Career stage
  • Decision making
  • Disclosure
  • Economic conditions
  • Judgments
  • Labor market
  • Regulation
ispartof: The Accounting review, 2018-11-01, Vol.93 (6), p.203-229
description: ABSTRACT We find that economic conditions at the time an auditor enters the labor market have a long-term impact on her judgment and decision making. Specifically, engagement partners who started their career during economic downturns issue audit adjustments more frequently. For the subsample of company-years with no audit adjustments, downturn auditors are more likely to issue a modified audit opinion. In addition, companies audited by downturn auditors are less likely to violate financial reporting and disclosure regulations. Together, our findings suggest that the early career stage is a critical formative period for auditors. JEL Classifications: J24; M42.
language: eng
source: Alma/SFX Local Collection
identifier: ISSN: 0001-4826
fulltext: fulltext
issn:
  • 0001-4826
  • 1558-7967
url: Link


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descriptionABSTRACT We find that economic conditions at the time an auditor enters the labor market have a long-term impact on her judgment and decision making. Specifically, engagement partners who started their career during economic downturns issue audit adjustments more frequently. For the subsample of company-years with no audit adjustments, downturn auditors are more likely to issue a modified audit opinion. In addition, companies audited by downturn auditors are less likely to violate financial reporting and disclosure regulations. Together, our findings suggest that the early career stage is a critical formative period for auditors. JEL Classifications: J24; M42.
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subjectAccounting ; Adjustment ; Auditing ; Auditors ; Auditors opinions ; Audits ; Career stage ; Decision making ; Disclosure ; Economic conditions ; Judgments ; Labor market ; Regulation
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abstractABSTRACT We find that economic conditions at the time an auditor enters the labor market have a long-term impact on her judgment and decision making. Specifically, engagement partners who started their career during economic downturns issue audit adjustments more frequently. For the subsample of company-years with no audit adjustments, downturn auditors are more likely to issue a modified audit opinion. In addition, companies audited by downturn auditors are less likely to violate financial reporting and disclosure regulations. Together, our findings suggest that the early career stage is a critical formative period for auditors. JEL Classifications: J24; M42.
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