Dr. Zhang accepted for publication in Contemporary Accounting Research
For release: November 1, 2016
Dr. Joseph Zhang, assistant professor of Accountancy, recently had his paper accepted for publication in the journal of Contemporary Accounting Research. The paper is entitled "Accounting Comparability, Audit Effort and Audit Outcomes."
In his paper, Dr. Zhang discusses accounting comparability among peer firms in the same industry. He finds that they reflect the similarity and the relatedness of firms' operating environments and accounting reporting. From the perspectives of "inherent audit risk" and "external information efficiency," comparability is helpful for auditors in assessing client audit risk and lowers the cost of information acquisition, processing, and testing. Dr. Zhang states that the availability of information about comparable clients helps improve audit efficiency and accuracy. Empirical results show that comparability is positively associated with audit opinion accuracy. Moreover, comparability is negatively related to audit effort (surrogated by audit fees and audit delay). These findings are robust to different specifications of regression models, particularly for the "endogeneity" issues due to the possible reverse causality that auditor style might influence client firms' comparability. In sum, the study shows that accounting comparability enhances the utility of accounting information for external audits..