Audit quality and accrual persistence: Evidence from the pre - and post-Sarbanes-Oxley periods

Dennis Chambers, Jeff Payne

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


Purpose: The purpose of this paper is two-fold: first, to examine whether the quality of accruals, as measured by accrual persistence, improved in the post-Sarbanes-Oxley (SOX) period, and second, to examine the degree to which SOX-related improvement in accrual persistence varies across companies depending on the degree of their auditor's independence. Design/methodology/approach: The paper compares accrual persistence in the pre- and post-SOX periods to test the first question. Then, partitioning on relative client importance as a measure of auditor independence, the paper compares the SOX-based improvement for clients of low and high independence audit firms. Findings: The study first demonstrates that accrual persistence increased significantly in the post-SOX period. The study also finds evidence that in the post-SOX period, the subsample of companies audited by Big-N auditors with lower-independence experienced the greatest improvement in accrual persistence. Originality/value: This is the first paper to evaluate SOX-related improvements in the quality of earnings as measured by accrual persistence. Prior studies test abnormal accruals and other earnings management metrics, however, persistence is a more general test of financial statement quality. This study also is the first to compare SOX-related improvements for clients of firms with differing levels of independence.

Original languageEnglish
Pages (from-to)437-456
Number of pages20
JournalManagerial Auditing Journal
Issue number5
StatePublished - May 2011


  • Auditing
  • Auditors
  • Quality

ASJC Scopus subject areas

  • Accounting
  • General Economics, Econometrics and Finance
  • General Business, Management and Accounting


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