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The Impact of Audit Quality Indicators on the Timeliness of Goodwill Impairments: Evidence from the German Setting

Albersmann, Benjamin T. ; Quick, Reiner (2023)
The Impact of Audit Quality Indicators on the Timeliness of Goodwill Impairments: Evidence from the German Setting.
In: Abacus : a journal of accounting, finance and business studies, 2020, 56 (1)
doi: 10.26083/tuprints-00017793
Article, Secondary publication, Publisher's Version

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Item Type: Article
Type of entry: Secondary publication
Title: The Impact of Audit Quality Indicators on the Timeliness of Goodwill Impairments: Evidence from the German Setting
Language: English
Date: 14 November 2023
Place of Publication: Darmstadt
Year of primary publication: 2020
Place of primary publication: Oxford
Publisher: John Wiley & Sons
Journal or Publication Title: Abacus : a journal of accounting, finance and business studies
Volume of the journal: 56
Issue Number: 1
DOI: 10.26083/tuprints-00017793
Corresponding Links:
Origin: Secondary publication DeepGreen
Abstract:

This study investigates whether goodwill impairments are perceived as timely and whether specific auditor characteristics affect the perceived timeliness. It therefore contributes to central questions in accounting research: is managerial discretion over accounting numbers (accounting choice) good or bad for stakeholders and does audit quality have an impact on this relationship? It is motivated by the IASB's post‐implementation review on business combinations and the Goodwill and Impairment project based on it, the ongoing debate on the decision usefulness of impairment testing, and the question whether auditors have an impact on firms’ reporting of impairment losses. Based on a sample of German listed firms for the period 2006 to 2013, the results indicate that goodwill impairments are not recognized in a timely manner and delayed by at least one to two years. Moreover, the findings suggest that the recognition of impairment losses is influenced by auditor characteristics. In particular, firms seem to report goodwill impairments in a more timely fashion when they are audited by a Big 4 auditor, whereas the timeliness seems to decrease with a higher non‐audit fee ratio and a longer auditor tenure. Moreover, additional analyses indicate that higher audit fees lead to more timely impairments.

Uncontrolled Keywords: Accounting choice, Audit quality, Auditor characteristics, Conservatism, Goodwill impairments, Timeliness
Status: Publisher's Version
URN: urn:nbn:de:tuda-tuprints-177936
Additional Information:

The authors gratefully acknowledge the comments and suggestions of Christian Friedrich, Stewart Jones, David Lont, and the participants of the 6th Workshop on Audit Quality.

Classification DDC: 300 Social sciences > 330 Economics
Divisions: 01 Department of Law and Economics > Betriebswirtschaftliche Fachgebiete > Fachgebiet Rechnungswesen, Controlling und Wirtschaftsprüfung
Date Deposited: 14 Nov 2023 14:10
Last Modified: 19 Jul 2024 10:13
SWORD Depositor: Deep Green
URI: https://tuprints.ulb.tu-darmstadt.de/id/eprint/17793
PPN: 51321822X
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