Auditor Materiality Threshold and Audit Quality—Evidence from the Revised ISA 700 in the United Kingdom
利用英国公司披露的审计师重要性阈值数据，研究发现较低的重要性阈值与更高的审计质量相关，表现为更低的异常应计、更高的应计质量以及更少地刚好达到或超过分析师盈利预期。
SYNOPSIS Using a broad sample of U.K. firms that are required to disclose auditor materiality thresholds under the International Standards on Auditing (United Kingdom and Ireland) 700, we examine whether the auditor materiality threshold is associated with audit quality. We document that a lower materiality threshold is associated with higher audit quality, as measured by lower absolute discretionary accruals, higher accruals quality, and a lower propensity to just meet or beat analysts’ earnings expectations. We also find some evidence that the negative association between the materiality threshold and audit quality is attenuated when the audit committee is more effective and when the auditor is more economically dependent on the client, and the negative association is more pronounced when management has a stronger incentive to manage earnings. Overall, our study extends the limited studies on large-sample archival evidence on the implications of audit materiality thresholds on audit outcomes. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M40; M41; M42.