Research Repository

FRC intervention, financial reporting quality and due diligence

Yuan, Shuai and Lan, Hao and Seufert, Juergen H (2020) 'FRC intervention, financial reporting quality and due diligence.' Research in International Business and Finance, 52. p. 101128. ISSN 0275-5319

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Abstract

This study provides evidence of the relationship between government intervention, financial reporting quality and due diligence. Specifically, the authors examine the consequences of the disclosure of inspection reports by the Financial Reporting Council (FRC) for individual audit firms inspected in the UK. Using a difference-in-differences design, it is found that clients are more likely to receive qualified audit opinions during the post-disclosure period. This significant impact on reporting decisions is more concentrated among clients of small audit firms. Moreover, despite general efficiency during the sample period, clients affected by an FRC intervention experience longer delays in receiving their audit reports. Overall, this study contributes to literature on corporate governance and audit regulation, and has implications for policy making. FRC inspections are of greater concern to small audit firms than large firms, as the latter have already built a strong reputation. In general, the transparent inspection process may be beneficial in enhancing auditor oversight.

Item Type: Article
Uncontrolled Keywords: FRC intervention; Financial reporting quality; Auditor report lag
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 13 Aug 2020 15:58
Last Modified: 06 Jan 2022 14:16
URI: http://repository.essex.ac.uk/id/eprint/28297

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