We provide evidence of the impact of Auditing Standard No. 2 (“AS 2”), issued pursuant to the Sarbanes-Oxley Act of 2002 (“SarBox”), on the outcome of auditors in financial reporting litigation. Specifically, we focus on the existence of financial restatements and how and why they...

This paper investigates a particular scenario under the Brazilian Generally Accepted Accounting Principles before IFRS adoption, which require public companies to disclose individual financial statements (legal parent entity), together with consolidated financial statements (economic entity)....

We examine auditors' disclosure benchmarking, which we define as auditors' acquisition of non-client financial statement information for the purpose of evaluating a client's financial statement information. Employing a novel dataset that captures auditors' access of non-client annual and...

The Sarbanes-Oxley Act (SOX) prohibits companies from outsourcing internal audit work to their external audit provider. Competing predictions on the effects of this prohibition stem from two academic arguments relating to the provision of nonaudit services by the external auditor: knowledge...

The association of a country's investor protection regime with the quality of reported earnings is examined for a large sample of firms from 42 countries. Three attributes of earnings are evaluated: the magnitude of abnormal accruals, the likelihood of reporting losses, and earnings conservatism...

This paper investigates the effect of audit quality variables on abnormal accruals in the French context. The sample comprises 255 firm-years observations from SBF 120 Index companies (1999-2001). Abnormal accruals are estimated using a Jones cross-sectional Model, as well as a CFO Model (Jones...

We use the IPO setting to examine the relation between the auditor's exposure to legal liability, audit fees and audit quality. Consistent with the increase in litigation liability that an IPO audit implies, we find that auditors earn much higher fees for IPO engagements than for first-year,...

The dramatic increase in the number of restatements filed over the past years has been attributed to numerous causes, including the complexity of the accounting standards, internal control reviews, changes in materiality thresholds, the overly conservative nature of auditors, earnings...

Motivated by mixed findings in the auditing literature about the importance of related party transactions as red flags indicating potential fraud, this study examines 83 SEC enforcement actions involving both fraud and related party transactions. In addition to comparing the characteristics of...

In this study we conduct a field experiment to examine how qualifying an income-decreasing accounting change in years of strong financial performance affects user assessments of strategic reporting, current financial performance, and financial performance over the next three years (future...