Audit Quality and Properties of Analyst Earnings Forecasts

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

351 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)327-349
Journal / PublicationAccounting Review
Volume83
Issue number2
Publication statusPublished - Mar 2008
Externally publishedYes

Abstract

Under the assumption that audit quality relates positively to unobservable financial reporting quality, we investigate whether audit quality is associated with the predictability of accounting earnings by focusing on analyst earnings forecast properties. The evidence shows that analysts’ earnings forecast accuracy is higher and the forecast dispersion is smaller for firms audited by a Big 5 auditor. We further find that auditor industry specialization is associated with higher forecast accuracy and less forecast dispersion in the non-Big 5 auditor sample but not in the Big 5 auditor sample. Overall, our results suggest that high-quality audit provided by Big 5 auditors and industry specialist non-Big 5 auditors is associated with better forecasting performance by analysts.

Research Area(s)

  • audit quality, analysts’ forecasts, forecast accuracy and dispersion, industry specialization

Citation Format(s)

Audit Quality and Properties of Analyst Earnings Forecasts. / Behn, Bruce K.; Choi, Jong-Hag; Kang, Tony.
In: Accounting Review, Vol. 83, No. 2, 03.2008, p. 327-349.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review