G st pierre and anderson 1984 additionally incentives

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Unformatted text preview: ure based on the discovery of a prior-year misstatement. Twenty-five percent of our sample firms have a prior-year misstatements, and approximately 50 percent of those have misstatements in both years. 11 Alternatively using an indicator variable approach with two indicator variables to capture the three levels of MI yields similar inferences to the single variable approach we report in the paper. Auditing: A Journal of Practice & Theory, November 2005 57 The Impact of Management Integrity on Audit Planning and Evidence Prior research suggests the auditor is more likely to be sued if the client is publicly held (e.g., St. Pierre and Anderson 1984). Additionally, incentives to overstate financial standing and results of operations are suggested to be greater for managers of public firms due to market driven compensation (O’Keefe et al. 1994). We control for this by including an indicator variable (PUBLIC) that takes on a value of 1 for public firms, and 0 otherwise. We expect PUBLIC to obtain a positive association with RMM. To control for potential systematic differences between industry groups, we include an indicator variable representing the two industry categories in our sample (biotech and hightech) (INDUSTRY). Because we do not have any evidence concerning major changes in audit approach by the data-granting firm between industry groups, there is no expectation for the coefficient on INDUSTRY. An auditor may address specific client characteristics by adjusting the evidential plan. This can be accomplished by altering the persuasiveness of evidence collected, the timing of evidence collection, and the extent of audit procedures conducted. To test H2, we examine the marginal impact of MI on the persuasiveness, timing, and extent of audit procedures independently when RMM is included in the model by employing OLS analysis in the following form: 12 PERSUASIVENESSi MIi 0i 1 RMMi TENUREi 4 INDUSTRYi 7 TIMINGi 0i MIi 1 2 RMMi PYERRi 5 EXTENTi 0i MIi 1 PYERRi 5 6 2 5 PYERRi 3 6 PUBLICi ei; REVENUEi...
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This note was uploaded on 11/11/2010 for the course MIS BMBM31101 taught by Professor Ms.sara during the Spring '10 term at Asian Institute of Management.

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