Mark T. Bradshaw

Do Analysts and Auditors Use Information in Accruals

type=main xml:lang=en> Existing research indicates that firms with high accruals are more likely to experience future earnings problems, but that investors expectations, as reflected in stock prices, do not appear to anticipate these problems. In this paper, we directly examine the published opinions of two types of professional investor intermediaries to see if they provide investors with information concerning the future earnings problems experienced by firms with high accruals. First, we examine the earnings forecasts of sell-side analysts. We show that analysts earnings forecasts do not incorporate the predictable future earnings declines associated with high accruals. Second, we examine the behavior of independent auditors. We find no evidence that auditors signal the future earnings problems associated with high accruals through either their audit opinions or through auditor changes. Overall, our evidence indicates that analysts and auditors do not alert investors to the future earnings problems associated with high accruals, thus corroborating previous findings that investors do not appear to anticipate these problems.

Will Harmonizing Accounting Standards Really Harmonize Accounting? Evidence from Non-U.S. Firms Adopting U.S. GAAP:

International harmonization of accounting standards appears to be inevitable. However, little evidence exists regarding whether harmonizing accounting standards will result in actual harmonization of accounting practices. Using a sample of non-U.S. firms that adopt U.S. Generally Accepted Accounting Principles (GAAP) to provide evidence on this issue, we find that most firms that adopt U.S. GAAP adjust their accounting methods to those required by U.S. GAAP. Properties of the firms accounting numbers also change significantly after adopting U.S. GAAP, but they do not fully converge toward that of U.S. firms. In the cross-section, regulatory oversight is associated with more successful implementation of U.S. GAAP; firm-specific capital market incentives are not. These results suggest that harmonizing accounting standards may result in more comparable accounting methods and numbers, but that effective regulatory oversight will be important in reaching this outcome.