| This dissertation investigates the quality of non-GAAP earnings and the effects of auditor quality on non-GAAP earnings disclosure. Chapter 1 provides empirical evidence that auditors may play a role in the disclosure of non-GAAP earnings. Specifically, I find that firms with high quality auditors are more likely to disclose non-GAAP earnings and their non-GAAP exclusions are more persistent, indicating the exclusions are not one-time nonrecurring items. However, I do not find a significant association between auditor quality and the likelihood of non-GAAP earnings meeting or beating financial benchmarks. Taken together, the results indicate that firms with high quality auditors are more likely to opportunistically disclose non-GAAP earnings. These findings contribute to the literature on audit quality and non-GAAP earnings, as well as to the regulatory discussion of whether non-GAAP earnings should be audited.;Chapter 2 investigates the characteristics of actual, disclosed non-GAAP exclusions. The results indicate that impairment expenses, loss, mark-down, and mark-offs, and other exclusions that increase non-GAAP earnings, are associated with the next period's operating income, indicating that these exclusions are of low quality or may be opportunistic. Stock-based compensation, amortization expenses, and restructuring costs do not predict future operating income and therefore are one-time high-quality exclusions. In addition, I find that high-quality auditors are negatively related to the quality of non-GAAP increasing exclusions. However, I do not find evidence that firms with high-quality auditors are more likely to use non-GAAP increasing exclusions to meet or beat financial benchmarks, further supporting the results presented in Chapter 1. |
