Keywords

PCAOB international inspection, voluntary disclosure, management forecast accuracy, audit regulation

Abstract

Survey evidence and academic research raise the possibility that audit regulation can impact not only the information contained in external financial reports but also the internal information used by management. We investigate this possibility by examining the improvement in management forecast accuracy around initiation of the Public Company Accounting Oversight Board's (PCAOB) international inspection program. Consistent with managers having improved information, we find that managers issue more accurate forecasts following PCAOB inspection access. Multiple additional analyses support that an improved information environment is the mechanism underlying our results, and this effect is distinct from, and incremental to, any effects of PCAOB inspection on external reporting quality. Our study provides evidence that audit regulation benefits an important internal stakeholder-managers.

Original Publication Citation

"Does audit regulation improve the underlying information used by managers? Evidence from PCAOB inspection access and management forecast accuracy", Accounting, Organizations and Society, Volume 106, Elsevier, 2023

Document Type

Peer-Reviewed Article

Publication Date

2023

Publisher

Accounting, Organizations and Society

Language

English

College

David O. McKay School of Education

Department

Accountancy

University Standing at Time of Publication

Full Professor

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