iXBRL Early Adoption, Audit Effort, and Audit Resource Allocation

• In Event: Dialogue 1

Abstract

This study examines how inline XBRL (iXBRL) early adoption impacts auditor effort and audit resource allocation. While iXBRL can make financial reporting information accessible to a wide range of external stakeholders, the presentation format change should have no impact on auditor behavior. Audit firms note that presenting XBRL metadata on top of audited financial statements could lead to an expectation gap where external stakeholders believe that the inline tags have been audited despite no procedures being required. We find that iXBRL early adoption is associated with higher audit fees. Further, among non-adopting firms, engaging with an audit partner with an iXBRL client(s) is associated with a negative audit effort spillover effect. Non-adopting clients with a partner exposed to iXBRL clients are associated with a greater likelihood of a financial misstatement and filing financial reports late. We provide timely information on iXBRL adoption’s unintended effect on audit outcomes.

Authors

• Yiyang Zhang, Youngstown State University

• Adi Masli, University of Kansas

• Stephanie Walton, Louisiana State University

• Mengmeng Wang, University of North Carolina-Greensboro