Responsive regulation (RR) theory posits that effective regulators enforce compliance by escalating penalties only if persuasion fails, otherwise risking formation of a culture of resentment. Using RR theory as a lens, we examine the interactions between large audit firms and the PCAOB during...

Many legal jurisdictions, including the U.S. and U.K., have passed regulations to address the potential negative impacts of a lack of competition and high concentration in public company audit markets. One consequence of increased regulations, desired or not, is that they have presumably...

We examine the relation between low quality internal controls and audit fee premiums. Using a novel dataset of audit hours and audit fees we find, consistent with the audit risk model, that auditors increase their effort (hours) due to low internal control quality. We find that auditors also...

This study investigates the relation between audit regulation and the cost of equity capital. While a relation is intuitively appealing, there is a general lack of empirical evidence because changes in audit regulation are frequently accompanied by other major regulatory changes. We exploit...

Because internal control audits never existed before the passage of the Sarbanes-Oxley Act (SOX), and these audits became mandatory for all U.S. accelerated filer companies at the same time, it has been difficult to assess the extent of investor demand for these audits. To understand whether...

Regulators have expressed concerns about the “revolving door” between auditors and clients, whereby audit employees move directly from audit firms to audit clients (i.e., “direct alumni hires”). Regulators are concerned that these direct hires could compromise audit quality, partly...

Regulators have expressed concerns about the “revolving door” between auditors and clients, whereby audit employees move directly from audit firms to audit clients (i.e., “direct alumni hires”). Regulators are concerned that these direct hires could compromise audit quality, partly...

This study examines the relation between auditors and their client's investment efficiency. We hypothesize and find that auditor's characteristics that proxy for an auditor's knowledge and resources are associated with higher client investment efficiency, after controlling for the auditor's...

This study investigates the influence of management over auditor selection decisions during a period in which audit committees have “direct responsibility” for auditor selection. We find that contrary to the intent of SOX, management continues to have significant influence over auditor...

Prior research documents positive effects of PCAOB oversight on reporting and audit quality. However, to gain a clear understanding of the net benefits of regulation, it is important to also investigate corresponding costs. To this end, we investigate the relation between PCAOB inspection...