We use Benford's Law to provide evidence that German firms round up both their net income and earnings per share. We use the introduction of the euro to show that round earnings numbers are likely the result of earnings management. The incentive to round up comes from stakeholders' left-digit...

Although the role of auditing is to increase the reliability of financial statements, surprisingly little is known about addressees’ perceptions of the auditor-client relationship. Using a sample of more than 1,000 U.S. bank-years from 2008 to 2011, we analyze the economic consequences of the...

The main objectives of recent audit market regulations are to (1) increase audit quality, (2) decrease audit market concentration, and (3) foster competition between audit firms. However, the empirical evidence on whether such regulations fulfill these goals is limited. We construct a unique...

On February 3-4, 2016 SUERF – The European Money and Finance Forum –, Deutsche Bundesbank and Stiftung Geld und Währung jointly organized a Colloquium/Conference in Frankfurt in order to evaluate the experience with the SSM – the Single Supervisory Mechanism – during the first year of...

On 3 December EY hosted a SUERF conference on banking reform with Sir Howard Davies, the Chairman of RBS, and Dame Colette Bowe, the Chairman of the Banking Standards Board, as the two keynote speakers. Professor David Miles (Imperial College) gave the SUERF 2015 Annual Lecture on Capital and...

This paper investigates whether investors perceive high levels of auditor conservatism as excessive. Auditors can reduce their litigation risk by issuing going concern opinions to firms with relatively low default risk. However, this strategy is costly for investors. Investors cannot observe the...

While the accounting literature implies that increased discretionary accruals follow auditor changes, the underlying causal mechanism of this increase remains unclear. The potential reasons are the loss of the auditor's firm-specific knowledge or the firm's opportunistic choice of a new auditor....

We empirically explore the link between Level 3 fair value estimates and banks' default risk as well as default costs. Both variables are especially important to banks' creditors and the regulatory authorities that rely on the information in financial statements. In a fixed-effects panel model,...

Regulators frequently interpret a high audit market concentration as a threat to audit quality and want to foster competition. However, both the direction and the sign of the link between quality and concentration are unclear. This paper investigates the link between audit offices' market shares...

In its recently published Green Paper, the European Commission 2010 discusses various methods to enhance the reliability of audits and to re-establish trust in the financial market. The Commission primarily focuses on increasing auditor independence and on reducing the high level of audit market...