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U.S. and Canadian Audit Markets: Segmentation and Earnings Quality
Mohinder Parkash, Oakland University
Rajeev Singhal, Oakland University
ABSTRACT. Canadian and US similar accounting and auditing standards were the underlying assertions for implementing the Multi-Jurisdiction Disclosure System (MJDS) initiative with Canadian firms cross-listing their securities in the US using the reporting and disclosure required by Canadian regulators. We document that the Canadian firms cross-listed in the US pay lower audit, audit-related and total auditor fees than US listed firms. This evidence is consistent with US and Canadian audit market segmentation. Further, only cross-listed Canadian companies utilizing MJDS pay significantly lower audit, audit-related and total auditor fees than US firms implying that the auditor market segmentation results from utilization of MJDS. Our empirical results provide evidence that the earnings quality of Canadian cross-listed firms is at least as good as the earnings quality of U.S. firms irrespective of the disclosure mode used by Canadian firms.
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