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1、本科毕业论文（设计）外 文 翻 译外文题目 Audit quality and the relationship between auditees agency problems and financial information quality 外文出处 Department of Accounting and Finance University of Vaasa 外文作者 Johanna Miettinen 原文：Audit quality and the relationship between auditees agency problems and financial inform
2、ation qualityAbstract This study examines the role of audit quality on the relationship between auditees agency problems and financial information quality. It contributes to the existing literature by considering agency theory and audit research concerned with audit quality. The following hypotheses
3、 are tested based on the underlying literature: 1) Auditees agency problems are positively associated with audit quality, 2) Audit quality is positively associated with financial information quality, and 3) Audit quality mediates the relationship between auditees agency problems and financial inform
4、ation quality. To provide insight on the above hypotheses a path analysis is employed for a sample of 932 S&P 1500 firms. Auditees agency problems are measured by leverage, management ownership and free cash flow. Moreover, audit quality is measured by audit fees and non-audit services fees (i.e. to
5、tal fees) paid to the incumbent auditor. Finally, financial information quality is measured by absolute discretionary accruals. The results reveal that auditees agency problems are positively associated with audit quality. In addition, it is found that audit quality increases financial information q
6、uality. Finally, it is documented that audit quality is a potential mediator in the relationship between auditees agency problems and financial information quality. These findings imply that auditees agency problems explain the demand for a high quality auditor. Furthermore, these results suggest th
7、at high audit quality successfully fulfils its role as a monitoring mechanism which purpose is to assure financial information quality. 1. INTRODUCTION This study investigates the role of audit quality on the relationship between auditees agency problems and financial information quality. Audit qual
8、ity is one of the most important issues in audit practice today. The quality of the financial information is dependent, among other things, on audit quality (ISB 2000). Several individuals and groups have an interest in the quality of audited financial information. External financial statement users
9、, including current and potential investors, creditors, and others need reliable financial information on which to base their resource allocation decisions. Auditees, including management, audit committees, and boards of directors have an interest in quality audits, for example, to help to reduce th
10、e cost of capital. In addition, regulators and standard setters can increase the effectiveness of capital markets by promulgating rules and regulations that help ensure that audits improve financial information quality (ISB 2000). However, there have been concerns about audit quality in the present
11、audit environment, where severe audit failures have come to light. It has been found that the perceived reliability of audited financial information has declined. In contrast, the perceived relevance of audited financial information has increased (Hodge 2003). Thus, it is evident that there is a nee
12、d for further research on audit quality and how it is related to financial information quality. Audit quality has received considerable interest in both agency and audit research. According to agency literature one implication of agency problems is management propensity to produce substandard financ
13、ial information (e.g. Warfield, Wild & Wild 1995; Chung, Firth & Kim 2005; Richardson 2006). Auditing provides assurance about the quality and credibility of companys financial information and thus, is considered a means to mitigate agency problems (Jensen & Meckling 1976). Consequently, studies on
14、agency issues have focused on the demand side of auditing and examined how the level of auditees agency problems affects the demand for audit quality (e.g. Jensen et al. 1976; DeFond 1992; Parkash & Venable 1993; Nikkinen & Sahlstrm 2004; Lennox 2005). On the other hand, audit research has concentra
15、ted on the supply side of audit quality and investigated how audit quality is reflected in financial information quality (e.g. Frankel, Johnson & Nelson 2002; Geiger & Rama 2003; Larcker & Richardson 2004).No previous research, however, has attempted to adapt both agency and audit research to invest
16、igate audit quality. Thus, the objective of this research is to combine the demand and supply side perspectives of audit quality. More specifically, this study produces an integrated model of the determinants of financial information quality which includes variables concerning agency problems and au
17、dit quality. The modeldepicts relationships between measures of auditees agency problems, audit quality and financial information quality.1.1. Research problem The purpose of this study is to examine the role audit quality plays on the relationship between agency problems and financial information q
18、uality. Although previous studies have uncovered important indicators of financial information quality, the paths between these indicators have not been explored. Accordingly, this research proposes and tests a model that establishes paths between auditees agency problems and audit quality as well a
19、s audit quality and financial information quality. In the proposed model, audit quality is expected to have a mediating role on the relationship between auditees agency problems and financial information quality. The mediating role maintains that audit quality is caused by agency problems and a caus
20、e of financial information quality. The model is summarized in figure 1. The theoretical concepts of the model are illustrated at the top of the figure. These are agency problems, audit quality and financial information quality. Operational measures for the variables are illustrated at the bottom of
21、 figure 1.Auditees agency problem is the independent variable in the model. Agency problems relate to potential conflicts of interests between management and shareholders or management and debt-holders. It is suggested that certain company specific characteristics affect the magnitude of agency prob
22、lems. In this research agency problems are measured by leverage, management ownership and free cash flow. The model suggests that a company faces more severe agency problems when it has high leverage, low management ownership and high free cash flow. It is suggested that agency problems increase the
23、 demand for audit quality. Audit quality is the mediating variable in the model. Audit quality is measured by total fees (i.e. audit fees and non-audit services fees) paid to the incumbent auditor. High levels of relative audit fees are expected to indicate higher audit engagement effort and thus hi
24、gher audit quality. Thus, audit quality determined by total fees, is expected to affect auditors ability to assure financial information quality positively. In addition, total fees are expected to mediate the relationship between agency problems and financial information quality. Financial informati
25、on quality is the dependent variable in the model. Financial information quality refers to how well financial statement information reflects the true economic circumstances of the company. Financial information quality is measured by absolute discretionary accruals. It is proposed that low magnitude
26、 of absolute discretionary accruals represents high earnings quality and, hence implicates high financial information quality.Collectively, the model is used to test following hypotheses: H1: Auditees agency problems are positively associated with audit quality. H2: Audit quality is positively assoc
27、iated with financial information quality. H3: Audit quality mediates the relationship between auditees agency problems and financial information quality.The hypotheses are examined by path analysis which involves estimating a series of regression models. The sample includes 932 S&P 1500 firms.The re
28、sults show that agency problems increase auditees incentives to hire high quality auditor. More specifically, a significant positive relationship is found between leverage and total fees as well as free cash flow and total fees. Moreover, a significant negative relationship is found between manageme
29、nt ownership and total fees. Thus, hypothesis 1 is supported.In addition, results reveal that audit quality has a positive relationship with financial information quality. To be exact, a significant negative relationship is found between total fees and absolute discretionary accruals. This result co
30、nfirms hypothesis 2.The results also reveal that audit quality has the potential to function as a mediator in the relationship between auditees agency problems and financial information quality. More specifically, it is found that total fees successfully mediate the relationship between leverage and
31、 absolute discretionary accruals as well as management ownership and absolute discretionary accruals. The ability of total fees to mediate the relationship between free cash flow and absolute discretionary accruals is, however, at the borderline. Thus, hypothesis 3 is partially supported.1.2. Contri
32、bution The objective of this research is to investigate the effect of auditees agency problems and audit quality on financial information quality. This study contributes to the existing research by combining agency literature and audit literature concerned with audit quality. So far, research has ex
33、amined relationships between auditees agency problems and audit quality (e.g. Jensen et al. 1976; DeFond 1992; Parkash et al. 1993; Nikkinen et al. 2004; Lennox 2005) as well as audit quality and financial information quality (e.g. Frankel et al. 2002; Geiger et al. 2003; Larcker et al. 2004). This
34、research attempts to place these relationships into a more holistic model. More specifically, the proposed model suggests a mediating role of audit quality on the relationship between auditees agency problems and financial information quality. 2. HYPOTHESIS DEVELOPMENT The prior agency and audit res
35、earch has determined relationships between auditees agency problems and audit quality as well as audit quality and financial information quality. These relationships will be discussed in this section. In the end of this section, a model combining the relationships will be introduced. 2.1. Agency pro
36、blems and audit quality Agency literature suggests that certain company specific characteristics increase management incentives to act against shareholders or debt-holders interests. Agency problems can increase management propensity to produce substandard financial information in order to cover act
37、ions that have not been in the best interest of the shareholders or debt-holders (Jensen et al. 1976). Prior research has determined a variety of company specific variables which potentially cause agency problems. This research focuses on agency problems generated by leverage, management ownership a
38、nd free cash flow. Firstly, the agency problem of leverage postulates that managers (acting on behalf of shareholders) have incentives to transfer wealth from debt-holders by taking various actions such as paying dividends to shareholders at the expense of profitable projects or restructuring of deb
39、t (Jensen et al. 1976; Chow 1982; DeFond 1992; Parkash et al. 1993). Some of these actions can result in a decline in firm value because they involve suboptimal investment policies (Chow 1982). Moreover, the literature suggests that firms with high leverage are more likely to face bankruptcy and suc
40、h firms are more likely to engage in earnings management since they are closer to debt covenant violations (Gul & Tsui 2001).Secondly, agency literature recognizes that low management ownership gives rise to an asymmetric information problem meaning that very often the manager is better informed abo
41、ut the activities and payoffs of the firm than the owner (Ng 1978; Ng & Stoeckenius 1979). Separation of ownership from management creates monitoring difficulties giving the potential for management to take non-value-maximizing actions.Thus, low management ownership creates an increased demand for a
42、ccounting-based contractual constraints which are used to discourage managers from non-value-maximizing actions. Management may be motivated to mitigate these constraints by strategically choosing accounting policies and determining accounting accruals (Jensen et al. 1976). Accordingly it has been f
43、ound that management ownership is positively associated with earnings explanatory power for returns and negatively related to the magnitude of discretionary accruals (Warfield et al. 1995).Thirdly, the agency problem of the free cash flow postulates that in the presence of high free cash flow manage
44、ment has opportunities to make expenditures that have negative Net Present Values (NPVs) rather than pay dividends to shareholders or purchase stock. The free cash flow agency problem can be implicated by firms poor financial performance and consequently poor stock market valuations. The free cash f
45、low agency problem is also implicated by a relation between companys free cash flow and accrual activities. Managers in firms with high free cash flow may have incentives to smooth earnings in order to shirk the full impact of wasteful expenditures on earnings. Prior research has documented negative
46、 relation between free cash flow and the magnitude of discretionary accruals. These results can be explained by following rationale: income-decreasing accruals occur if managers wish to shift profits to future years when the full impact of expenditures hits earnings (Chung et al. 2005; Richardson 20
47、06). According to agency theory auditing services are required to reduce agency problems arising from conflict of interests between shareholders and managers or debt-holders and managers (Jensen et al. 1976). Studies focusing on agency issues predict that as agency problems become more severe manage
48、ment will demand higher audit quality in an effort to assure financial information credibility to shareholders, debt-holders or other investors (Chow 1982; Francis & Wilson 1988; DeFond 1992; Lennox 2005).Early studies used auditor reputation (size or brand name) as a measure of audit quality and do
49、cumented that companies facing agency problems hire auditors with better reputation (Francis et al. 1988; DeFond 1992; Lennox 2005). More recent research has used audit fees as a proxy for audit quality. For example Nikkinen et al. (2004) examined the relationship between agency problems and total fees paid to incumbent auditor. They
