Audit Fees and Voluntary Disclosure: International Evidence on Disaggregated Earnings Forecasts

In this study, using a large sample of firms from 27 countries around the world, we
examine the relationship between disaggregated earnings forecasts and audit fees.
We find that the positive association between management earnings forecasts and
audit fees in prior studies is primarily driven by firms issuing management forecasts
that contain disaggregated performance measures. We further find that better
developed country-level institutions can weaken the positive relation between
disaggregated earnings forecasts and audit fees. Taken together, our findings support
the important role of disaggregated earnings forecasts in signalling the credibility of
prospective financial information provided by firms and shed light on the debate over
the positive association between management earnings forecasts and audit fees.