Economic theory suggests that demand uncertainty should influence producer behavior. In this study, we empirically examine the impact of demand uncertainty on the production of audit services. Auditors must make resource allocation decisions in advance of exact demand being known, and because a...

The majority of audit litigation research has focused on juror judgments. We examine how jurors' negligence judgments and attorneys' out-of-court settlements are differently impacted by two features of a materially misstated accounting estimate — the amount of estimate uncertainty and whether...

We examine whether tax audits become more efficient if tax auditors have access to audited financial statements and information about statutory audit adjustments. We extend the standard tax compliance game by a statutory auditor to analyze the strategic interactions among a firm issuing...

Studies on demand side mechanisms related to experience goods argue that demand is driven by recommendation and reputation. In an auditing context, research showed that both of these mechanisms play an important role in determining partner selection, however, only when the mechanisms are...

The critical global role of audit firms, combined with the scarcity of qualified staff and downward pressure on fees, has increased the importance of understanding efficiency in this industry. This paper examines the technical and allocative inefficiencies of audit firm staffing using data from...

This study investigates the association between private company auditing and intertemporal income shifting. Using a large reduction in the Finnish corporate tax rate as a strong incentive for income shifting and financial statement data coupled with proprietary information from the tax...

This paper examines how accounting audits impact investment decisions in the presence of agency conflicts. Investors choose between a short-term risk-free asset and a long-term risky project. The manager in charge of the latter has incentives to inflate interim payoffs to be able to continue a...

This study examines whether boards of directors use external auditing to protect their reputation capital. We hypothesize and find that audit quality increases with the level of directors' reputation capital. More specifically, using ten-year panel data on Finnish listed companies, we find that...

This paper studies how legal liability due to negligence can weaken or strengthen an auditor's reputation concerns in the client market to provide high audit effort. A negligence liability rule relies on auditing standards to provide a threshold for the level of due care. When the negligence...

This paper studies the effect of losses due to audit error on audit quality when the auditor's report of earnings is used for managerial compensation and the auditor can learn about the firm's productivity environment by observing the manager's effort. If the auditor observes the manager's...