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 Professor Yongtae Kim appears in The Accounting Review

Friday, Sep. 13, 2013

Professor of Accounting Yongtae Kim will have an article titled "Real Activities Manipulation and Auditors' Client Retention Decisions," published in the January 2014 issue of The Accounting Review.

The abstract of the paper is below: 

In this study, we examine the effect of clients’ real activities manipulation (RAM) on auditors’ client retention decisions. We find that, with the exception of RAM through overproduction, clients’ opportunistic operating decisions are positively associated with the likelihood of auditor resignations. We also provide evidence that auditors are especially sensitive to clients’ RAM to just meet or beat earnings benchmarks in their client retention decisions. In addition, we find that clients whose auditors resign from engagements tend to hire smaller auditors and these clients engage in RAM more aggressively. Our additional analysis shows that, with the exception of RAM through overproduction, clients’ abnormal operating decisions are significantly associated with litigation risk against auditors. Overall, our evidence suggests that auditors shed clients with aggressive RAM to avoid excessive risk.

Learn more about Professor Yongtae Kim»


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