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...

I examine factors influencing accounting firms' and their clients' decisions to pursue an auditing vs. consulting relationship. I employ the Sarbanes Oxley Act (SOX) prohibition on providing both services to the same clients as a natural experiment. Because Deloitte & Touche was the only Big 4...

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...

The Big 4 have acquired numerous consulting firms since the late 2000s, and regulators are concerned that a focus on consulting practices could negatively affect audit quality through audit firm culture. Audit firms counter by arguing that expertise gained through consulting can improve...

In 2014, the EU adopted a bill limiting the non-audit services of auditors, reflecting societal concern that non-audit services provided by auditors can compromise auditor independence. But different from the expectation that the provision of non-audit services by external auditors affects...