This study uses experimental economic markets to investigate the impact of risk and the potential for loss on managers … preferences. We predict risk, the potential for loss, and their interaction will each decrease manager demand for high audit …; specifically, increased risk, the potential for loss, and to a lesser extent their interaction, significantly reduce managers …

We use experimental economic markets to investigate the impact of risk and the potential for loss on managers' demand … available auditor in the market. We also find evidence that the potential for loss, and to a lesser extent its interaction with … potential for loss, provide evidence that risk aversion and loss aversion influence managers' audit quality demand. In …