Striking a balance: the impact of component auditor involvement on analyst forecast accuracy

PurposeThis paper aims to investigate the impact of component auditor involvement on analyst forecast accuracy.Design/methodology/approachUsing a sample of US firms with PCAOB Form AP disclosures on component auditor involvement from the PCAOB AuditorSearch database for the years 2017–2024, the authors use ordinary least squares (OLS) regression model to examine whether the use of component auditors influences analyst forecast accuracy.FindingsThe study documents that while the use of component auditors enhances analysts’ forecast accuracy, too much component auditor participation in group audits has a detrimental effect. These findings provide deeper insights into how component auditor practices shape analyst expectations and capital market dynamics.Practical implicationsThis study carries decision-relevant implications for regulators, audit firms and capital market participants.Originality/valueThis study provides new evidence on how the use of component auditors influences analysts’ forecast accuracy at the consolidated level; a question that has received little attention despite its importance for investor decision-making. By linking audit structure to analysts’ information precision, the paper offers fresh insight into how component auditors shape the reliability of financial information in global audits.