This study examines how disclosures impact lawyers' perceptions of independent auditors being sued for failure to detect fraud; specifically whether the auditor's opinion and disclosures required by the Sarbanes-Oxley Act of 2002 may be deemed to be red flags and deter litigation. A 3x1...

PurposeThe purpose of the paper was to investigate the usefulness of external audit of financial statements in detecting manipulation of financial statements in Poland. Design/method/approachThe study analyzes and summarizes common techniques used to manipulate financial statements of Polish...

This paper investigates how political and legal institutions affect the governance role of auditors for a sample of firms originating in 42 countries. Prior studies focus on investor protection, but I focus on political rights as well. Specifically, I investigate how institutions and audit...

I examine the effects of occupational licensing on the quality of Certified Public Accountants (CPAs). I exploit the staggered adoption of the 150-hour rule, which increased the educational requirements for a CPA license. My analysis shows that the rule reduces the number of entrants into the...

In a field experiment, we leverage differences in audit subordinates' job-relevant knowledge about clients, fraud brainstorming objectives, and “normal” audit partner leadership to explore whether and how knowledge moderates the effect of a partner-led intervention on brainstorming processes...

Exploiting a legal regime change in China in 2005 that significantly increased auditors' legal liability, we reexamine why auditors are more likely to issue modified audit opinions (MAOs) to clients who receive negative press coverage before audit report dates. We find that the probability for...

I examine the effects of occupational licensing on the quality of certified public accountants (CPAs). I exploit the staggered adoption of the 150-hour rule, which increases the educational requirements for a CPA license. The analysis shows that the rule decreases the number of entrants into the...

We study the effects of cross-listings on audit fees. We first develop a model in which legal environments play a crucial role in determining the auditor's legal liability. Our model and analysis predict that auditors charge higher fees for firms that are cross-listed in countries with stronger...

The Sarbanes-Oxley Act of 2002 (SOX) was enacted to “protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws…” The Public Company Accounting Oversight Board (PCAOB) was created as part of SOX and given a duty to impose...

The main role of the external auditor in the classical corporate governance scheme is to verify the accounting information provided by the firms’ managers. Lengthy audit engagements are viewed as a main threat to preserve auditor independence, and therefore regulators have established...