Sales growth versus cost control: audit implications

McNamara, Ray, and Whelan, Catherine (2006) Sales growth versus cost control: audit implications. Journal of American Academy of Business, Cambridge, 10 (1). pp. 14-20.

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Concerns raised by regulators, investors, and researchers over the independence implications of audit firms providing both auditing and consulting services, has led to the discontinuation by some firms of their consulting activities. The resulting decline in expertise may lead to an impairment of the ability of audit firms to adequately audit the revenues of listed firms. This research investigates the moderating effect of sales growth and cost control on the value-relevance of earnings and book value. The results demonstrate that the market responds differently to the revenue and cost component of earnings. In particular, the market perceives enhanced earnings quality in the presence of both sales growth and cost control. Consequently, audit procedures should provide assurance of both completeness and existence of revenue and expense items on the income statement.

Item ID: 36282
Item Type: Article (Research - C1)
ISSN: 1540-7780
Keywords: sales growth, audit implications, cost control
Date Deposited: 29 Nov 2016 01:38
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1501 Accounting, Auditing and Accountability > 150102 Auditing and Accountability @ 100%
SEO Codes: 90 COMMERCIAL SERVICES AND TOURISM > 9001 Financial Services > 900101 Finance Services @ 100%
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