This study suggests that audit fees, and hence audit quality, and corporate governance are jointly determined. To show this, we derive and test a framework that reflects two countervailing relations between governance and audit fees, namely, a fee increase because of exogenous changes in...

Section 104 of the Sarbanes-Oxley Act (SOX) created the Public Company Accounting Oversight Board (PCAOB). The PCAOB conducts inspections of registered public accounting firms that provide audits for publicly traded companies. The results of the inspection process are summarized in publicly...

Two key assumptions underlying the regulation of U.S. financial reporting are the need to mandate the certification of financial statements, and to require that this certification be performed by independent auditors. Private incentives to demand (and supply) certification are thought to be...

Mandatory certification of the financial reports of publicly-held corporations by independent auditors has been a key element in U.S. regulatory framework to improve financial reporting. The economic consequences of mandatory certification remain controversial. Although each market is unique,...

Certification of financial reports is tightly regulated with the intent to ensure the quality of this service. In order to place this market within a larger perspective, Part I of this paper presents archival data on certification activity in the economy. The finding of widespread availability...

Corporate disclosures of auditor fees (beginning in February 2001) caused considerable concern among regulators and investors about auditor independence because they revealed that nonaudit fees were a substantial proportion of total auditor fees. However, in 2003 the SEC introduced revised...

This study examines whether the effectiveness of the audit committee and the board of directors is associated with firms' timeliness in the remediation of material weaknesses (MWs) in internal control. The sample comprises accelerated filers that disclosed at least one MW from July 2003 to...

Boards of directors and compensation committees predominantly use financial measures reflecting executive managerial duties as inputs to executive compensation decisions. Yet, despite the fact that Holmstrom (1979) suggests that any readily available performance measure should be considered in...

Numerous corporate scandals in the past several years have fueled widespread debate over proposals for government action. The central challenge for government is how to restore corporate integrity and market confidence without overreacting and stifling the dynamism that underlies a strong...

Recent US reforms aimed at strengthening audit committees and their structure assign independent audit committees the responsibility to appoint, dismiss, and compensate auditors. We examine the association between audit committee characteristics and auditors' compensation and dismissals...