Using a large sample of privately held Korean companies that are not required to obtain an external audit, this paper examines the value of voluntary external audits of financial statements with respect to the cost of debt. We find that private companies with an external audit pay a...

Using a large sample of privately held Korean companies that are not required to obtain an external audit, this paper examines the informational value of voluntary external audits of financial statements with respect to the cost of debt. We find that private companies with an external audit pay...

We analyze how variation in federal level legal liability associated with judge ideology affects the likelihood of firms receiving going-concern modified audit opinions. With auditors trading off between Type I and Type II reporting errors, the threshold value (of client bankruptcy probability)...

This paper analyzes the impact of Public Company Accounting Oversight Board (PCAOB)-type regulatory oversight on audit quality, audit value, and the audit market under different legal systems. Conventional wisdom suggests that regulatory oversight may be just a simple addition to a legal system...

We develop a measure to capture an audit firm's competitive position in a local audit market based on the transaction costs of changing audit firms included in DeAngelo's (1981) multi-period audit pricing model. Our competition measure reflects the size difference between the largest audit firm...

Conventional wisdom holds that joint audits would improve audit quality by enhancing audit evidence precision, because “Two heads are better than one,” and by enhancing auditor independence, because it is more expensive for a company to “bribe” two audit firms than one. Our paper...

Based on the economics literature that informal institutions, such as culture and norms, influence the rationalization of economic behavior, the corporate governance literature suggests that a firm's fraud risk is fundamentally rooted in its culture and shows a positive link between corporate...

We examine the role of discretionary investments that affect the production of audits of multiple clients. Given such investments and their associated joint fixed costs, the investment decision and production of audit services must be analyzed over a client portfolio, rather than on an...

We revisit the notion of audit quality and investigate how audit quality is related to auditor size and the structure of the auditing industry. We discuss a model of audit firm competition where both audit quality and audit firm size are endogenous. Based on this model, we predict how certain...

The extant auditing literature documents an inconsistent relationship between audit fees and market concentration. In this paper, we argue that the impact of market concentration on audit fees is auditor and auditee specific. Based on the fact that the audit services to an auditee are generally...