Auditor benchmarking of client disclosures

Michael S. Drake, Phillip Lamoreaux, Phillip J. Quinn, Jacob R. Thornock

Research output: Contribution to journalArticle

Abstract

We examine auditors’ disclosure benchmarking, which we define as auditors’ acquisition of nonclient financial statement information for the purpose of evaluating a client’s financial statement information. Employing a novel dataset that captures auditors’ access of nonclient annual and quarterly SEC filings on EDGAR, we predict and find that auditors engage in disclosure benchmarking when auditing clients are faced with higher levels of authoritative guidance, financial-reporting uncertainty, and litigation risk. Lastly, we predict that auditors incorporate the information they obtain into their audit. Consistent with our prediction, disclosure benchmarking is positively associated with a client’s financial statement disaggregation, and client footnotes exhibit greater comparability to targeted nonclients’ footnotes after disclosure benchmarking. Overall, this study offers an empirical look into the “black box” of the audit process.

Original languageEnglish (US)
JournalReview of Accounting Studies
DOIs
StatePublished - Jan 1 2019

Fingerprint

Disclosure
Auditors
Benchmarking
Financial statements
Auditing
Prediction
Guidance
Black box
Audit process
Financial reporting
Litigation risk
Disaggregation
Audit
Uncertainty

Keywords

  • Audit process
  • Client financial reporting
  • Disclosure benchmarking
  • EDGAR filings
  • Information acquisition

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)

Cite this

Auditor benchmarking of client disclosures. / Drake, Michael S.; Lamoreaux, Phillip; Quinn, Phillip J.; Thornock, Jacob R.

In: Review of Accounting Studies, 01.01.2019.

Research output: Contribution to journalArticle

Drake, Michael S. ; Lamoreaux, Phillip ; Quinn, Phillip J. ; Thornock, Jacob R. / Auditor benchmarking of client disclosures. In: Review of Accounting Studies. 2019.
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