Accounting Conservatism and Auditor’s Mandatory Timely Interim Review: The Case of USA

Yalan Feng, Mohinder Parkash and Sha Zhao

On December 22, 1999, SEC adopted a new rule mandating companies to have independent auditors review the financial information on Form 10-Q (or 10-QSB) prior to filing the form with the SEC. This paper investigates whether mandatory timely auditor review on quarterly reports increases accounting conservatism. Using data of a large pool of US companies, a number of regressional models provide evidence for more conservative timely reviewed earnings. The result continues to hold when we analyze earnings variability and use subsamples.

DOI : https://doi.org/10.21102/graf.2017.03.81.02