Journal article
Do Supply Chain Auditors Compromise? Evidence From the Association of Supplier Aggressive Revenue Management and Major Customer Dependence
Journal of accounting, auditing & finance, v 34(4), pp 639-666
01 Oct 2019
Abstract
Our study examines whether aggressive revenue management by a supplier is greater when the supplier and their major customer engage the same office-level auditor and when significant purchases are made by the major customer from the supplier. We posit that the auditor is more accommodating to clients who are jointly audited by the same office-level auditor because of the implicit threat of losing not just the supplier client but also the major customer client. The threat arises from the potential loss of synergies of a jointly planned audit engagement when significant purchases are made by the major customer. We find that income-increasing discretionary revenue is positively associated with the major customer's percentage of purchases from the supplier when the same office-level auditor is engaged by the supplier and their major customer. We fail to find a statistically significant association when they engage a different office-level auditor or a different audit firm. Our findings provide evidence that office-level auditors tolerate greater aggressive revenue management when they have clients who are partners in the same supply chain and when greater audit synergies are at stake. In addition, our results are partly explained by supplier clients who have interlocking directors with major customers and significant influence.
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Details
- Title
- Do Supply Chain Auditors Compromise? Evidence From the Association of Supplier Aggressive Revenue Management and Major Customer Dependence
- Creators
- Hsihui Chang - Drexel UniversityHsin-Chi Chen - Tunghai UniversityJengfang Chen - Department of Accounting and Corporate GovernanceKenneth J. Reichelt - Louisiana State University
- Publication Details
- Journal of accounting, auditing & finance, v 34(4), pp 639-666
- Publisher
- Sage
- Number of pages
- 28
- Grant note
- Louisiana State University E. J. Ourso College of Business
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Accounting
- Web of Science ID
- WOS:000485270300007
- Scopus ID
- 2-s2.0-85045473070
- Other Identifier
- 991019168462904721
InCites Highlights
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance