Date of Graduation
Doctor of Philosophy in Business Administration (PhD)
Cory A. Cassell
Linda A. Myers
Second Committee Member
James N. Myers
Third Committee Member
Jonathan E. Shipman
Social sciences; Assurance; Audits; Earnings management; Financial statements quality
In this paper, I explore the determinants and consequences of the level of assurance that a bank selects. Using a sample of small, privately held U.S. (United States) financial institutions (banks), I find that two differing types of banks are more likely to purchase more assurance. First, larger banks that are experiencing growth purchase relatively more assurance than other banks. Second, more complex banks with lower returns on assets, losses, and higher leverage are more likely to purchase an audit than a lower level of assurance. This may indicate the influence of regulators on banks’ assurance purchasing decisions. I also find that financial reporting quality is better when banks purchase higher levels of assurance. Specifically, banks that purchase an audit of their financial statements have lower levels of discretionary loan loss provisions, are less likely to just meet or beat prior year earnings using discretion, and are less likely to just avoid a loss using discretion. Banks that purchase directors’ examinations have lower levels of discretionary loan loss provisions and are less likely to just meet or beat prior year earnings using discretion. In addition, I find some evidence that suggests that banks that purchase reviews and compilations also have better financial reporting quality than banks that purchase no external assurance services. My results should be of interest to regulators and other stakeholders as they consider the costs and benefits of audits in privately held financial institutions.
Douglass, Ashley Warwick, "Does Assurance Matter? Evidence from U.S. Financial Institutions" (2016). Theses and Dissertations. 1703.