We conduct a comprehensive study on the associations between debt covenant violations (“violations”) and auditor actions for financially distressed and non-distressed firms. Our study is motivated by a lack of research on the consequences of violations resulting from auditors' actions. We...

We study regulation of the auditing profession in a model where audit quality is unobservable and enforcing regulation is costly. The optimal audit standard falls short of the first-best audit quality, and it is increasing in the riskiness of firms and in the amount of funding they seek. The...