فشار زمانی حسابرسی و کیفیت سود: بازرسی فشرده سازی شده Audit time pressure and earnings quality: An examination of accelerated filings

1. Introduction Securities and Exchange Commission (SEC) rules 33-8128 and 33-8644 substantially reduced the 10-K filing period for large accelerated filers and accelerated filers by 15 days, from 90 days after fiscal year-end to 60 and 75 days, respectively (SEC 2002, 2005).1 For many firms and their auditors, such regulation led to exogenously imposed year-end time pressure to meet the new filing deadlines. This setting provides a natural experiment that we use to provide archival evidence on the effect of time pressure on audit/earnings quality. We also provide rich qualitative information related to the pressure audit firms experienced during the acceleration periods, areas in which time pressure resulted in audit difficulties, the ways in which audit firms attempted to alleviate the pressure, and the resulting quality of accelerated audits. The combination of our archival and qualitative data allows us to further explore the impact of regulatory-induced pressure on audit firms and contribute to an emerging stream of literature that explores the impact of controversial regulatory changes on the quality of information supplied to financial statement users. Experimental and survey research has shown that increasing audit time pressure may limit the extent to which auditors employ a questioning mind and critically evaluate evidence (e.g., McDaniel, 1990; Otley & Pierce, 1996; Willett & Page, 1996; Asare, Trompeter, & Wright, 2000; Braun, 2000; Coram, Ng, & Woodliff, 2004; Nelson, 2009; PCAOB, 2012). Archival evidence illustrates that fewer audit hours, in general, are associated with lower quality earnings (Caramanis & Lennox, 2008). Our setting is one in which we know the extent and source of time pressure and allows us to contribute archival results to complement and triangulate existing experimental/survey research exploring the effect of time pressure on audit quality. We extend prior studies which make use of this setting (e.g., Bryant-Kutcher, Peng, & Weber, 2013; Doyle & Magilke, 2013; Impink, Lubberink, van Praag, & Veenman, 2011; Krishnan & Yang, 2009) by examining whether it is the extent of time pressure placed on the audits that is associated with lower earnings quality. We also identify conditions under which firms that were seemingly affected by the acceleration did not experience a reduction in earnings equality (i.e., firms that needed to file earlier, but did not need to reduce audit delay to do so). Our analyses enable us to more definitively describe the effects of the SEC 10-K accelerations and to identify the conditions under which such accelerations do not impair the quality of earnings. This allows us to speak to how future accelerations and/or other regulatory activity may impact financial reporting quality based on the extent to which they would place time pressure on contemporary audits. Thus, this research should assist U.S. and international regulatory organizations considering future accelerations of financial reports.