Can Audit Quality Predict Earnings Persistence?

Abstract

Research on the impact of audit quality on earnings persistence is of interest to managers, investors, and researchers. However, the results have been inconsistent. Therefore, this study was undertaken to examine the link between audit quality and earnings persistence with audit firm size as a measure of audit quality. Quantitative analysis was adopted to analyse a sample of 228 listed firms in the Vietnamese stock market between 2014 and 2017. Findings suggested that audit quality has a positive effect on earnings persistence. This trend was also true for firm size and cash ratio, while debt ratio and firm age negatively impacted earnings persistence. The research contributes to current literature by proposing viable solutions for functional government agencies, audit companies, and enterprise managers in improving the quality of auditing and information disclosed.