An Empirical Study of Audit Quality Change to the Procomp Event
Date Issued
2005
Date
2005
Author(s)
Shih, Chien-Lun
DOI
zh-TW
Abstract
On June 15, 2004, Procomp Informatics Ltd filed a restructuring proposal to the local district court in a surprise, as a result of the company's defaulting on its corporate bond payments. According to the Financial Supervisory Commission’s investigation report, Procomp had manipulated its finances before listing on the Taiwan Stock Exchange Corporation in 1999. In contrast with prior studies which explored the economic consequence of audit failure events with stock price reaction, this thesis uses discretionary accruals to investigate whether this event influences the CPAs’ audit quality as well as its contagion effect.
The empirical analysis results are as follows:
I. Not only the predecessors and the successors’ clients, but all the listed companies have reached a significantly lower magnitude of discretionary accruals after the Procomp event.
II. There is no significant difference between the engaged CPAs’ attitudes toward clients’ choices of accounting methods and the other CPAs’. In other words, the change levels of earnings quality among the clients of Big 4 auditors on 2004 semi-annual report are equivalent.
III. CPAs have held more conservative attitudes to the clients’ financial reporting who engage in the same industry with Procomp. The change level of earnings quality of the clients in electric industry is greater than those in other industries.
Subjects
盈餘管理
裁決性應計數
蔓延效果
Earnings management
Discretionary accruals
Auditor conservatism
Contagion effect
Type
other
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