The volatility of other comprehensive income and audit fees

Hua Wei Huang, Steve Lin, K. Raghunandan

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

The volatility in other comprehensive income (OCI) reflects how market-related price movements, such as exchange rate and equity price changes, affect a firm’s future profits. Hence, firms with higher volatility of OCI are likely to have higher inherent risk. Using hand-collected data from 2002-2006, we find that the volatility of OCI is positively associated with audit fees and provides significant incremental explanatory power for audit fees over and above the level of OCI and the volatility of net income. We also find that the effect of the volatility of each component of OCI on audit fees is consistent with the prediction of how it might affect a firm’s future profits. Our results support recent efforts by the International Accounting Standards Board (IASB) to require firms to present separately OCI components that may affect future earnings from those that may not affect future earnings.

Original languageEnglish
Pages (from-to)195-210
Number of pages16
JournalAccounting Horizons
Volume30
Issue number2
DOIs
Publication statusPublished - 2016 Jun

Fingerprint

Audit fees
Other comprehensive income
Profit
Prediction
Exchange rates
Price changes
Incremental
Inherent risk
Equity prices
Net income
International Accounting Standards Board

All Science Journal Classification (ASJC) codes

  • Accounting

Cite this

Huang, Hua Wei ; Lin, Steve ; Raghunandan, K. / The volatility of other comprehensive income and audit fees. In: Accounting Horizons. 2016 ; Vol. 30, No. 2. pp. 195-210.
@article{e3528f0a65f84d4e90713ed02a0c6999,
title = "The volatility of other comprehensive income and audit fees",
abstract = "The volatility in other comprehensive income (OCI) reflects how market-related price movements, such as exchange rate and equity price changes, affect a firm’s future profits. Hence, firms with higher volatility of OCI are likely to have higher inherent risk. Using hand-collected data from 2002-2006, we find that the volatility of OCI is positively associated with audit fees and provides significant incremental explanatory power for audit fees over and above the level of OCI and the volatility of net income. We also find that the effect of the volatility of each component of OCI on audit fees is consistent with the prediction of how it might affect a firm’s future profits. Our results support recent efforts by the International Accounting Standards Board (IASB) to require firms to present separately OCI components that may affect future earnings from those that may not affect future earnings.",
author = "Huang, {Hua Wei} and Steve Lin and K. Raghunandan",
year = "2016",
month = "6",
doi = "10.2308/acch-51357",
language = "English",
volume = "30",
pages = "195--210",
journal = "Accounting Horizons",
issn = "0888-7993",
publisher = "American Accounting Association",
number = "2",

}

The volatility of other comprehensive income and audit fees. / Huang, Hua Wei; Lin, Steve; Raghunandan, K.

In: Accounting Horizons, Vol. 30, No. 2, 06.2016, p. 195-210.

Research output: Contribution to journalArticle

TY - JOUR

T1 - The volatility of other comprehensive income and audit fees

AU - Huang, Hua Wei

AU - Lin, Steve

AU - Raghunandan, K.

PY - 2016/6

Y1 - 2016/6

N2 - The volatility in other comprehensive income (OCI) reflects how market-related price movements, such as exchange rate and equity price changes, affect a firm’s future profits. Hence, firms with higher volatility of OCI are likely to have higher inherent risk. Using hand-collected data from 2002-2006, we find that the volatility of OCI is positively associated with audit fees and provides significant incremental explanatory power for audit fees over and above the level of OCI and the volatility of net income. We also find that the effect of the volatility of each component of OCI on audit fees is consistent with the prediction of how it might affect a firm’s future profits. Our results support recent efforts by the International Accounting Standards Board (IASB) to require firms to present separately OCI components that may affect future earnings from those that may not affect future earnings.

AB - The volatility in other comprehensive income (OCI) reflects how market-related price movements, such as exchange rate and equity price changes, affect a firm’s future profits. Hence, firms with higher volatility of OCI are likely to have higher inherent risk. Using hand-collected data from 2002-2006, we find that the volatility of OCI is positively associated with audit fees and provides significant incremental explanatory power for audit fees over and above the level of OCI and the volatility of net income. We also find that the effect of the volatility of each component of OCI on audit fees is consistent with the prediction of how it might affect a firm’s future profits. Our results support recent efforts by the International Accounting Standards Board (IASB) to require firms to present separately OCI components that may affect future earnings from those that may not affect future earnings.

UR - http://www.scopus.com/inward/record.url?scp=84969916968&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84969916968&partnerID=8YFLogxK

U2 - 10.2308/acch-51357

DO - 10.2308/acch-51357

M3 - Article

AN - SCOPUS:84969916968

VL - 30

SP - 195

EP - 210

JO - Accounting Horizons

JF - Accounting Horizons

SN - 0888-7993

IS - 2

ER -