Abstract
This proposed study explores how managerial tone management influences auditors' risk assessments, effort, and the resulting quality of financial reporting. Prior research suggests that managers strategically employ tone management to shape investor perceptions, with abnormal positive tone linked to poor future performance and events such as earnings restatements and just meeting or beating earnings targets. Building on this foundation, we develop hypotheses and propose research models to investigate whether auditors, tasked with mitigating information risk, adjust their efforts in response to tone management, as reflected in audit fees. Using an audit fee model and path analysis, this study aims to explore the relationships among tone management, auditor effort, and financial reporting quality, with a focus on abnormal tone in earnings announcements and conference calls. This research contributes to the literature by shedding light on how auditors respond to managerial tone management and how these responses, reflected in adjusted auditor effort, influence the quality of financial reporting.