We examine whether the readability of financial statement footnotes in the annual report is informative about audit engagement risk. Using various readability measures, we predict and find that firms with less readable footnotes have longer audit report lag, incur higher audit fees, and are more...

Prior research contends that financial misreporting has a spillover effect on the outcomes of peer firms within the same industry through investment decisions, information risk, and shareholder wealth. We predict and confirm a higher level of audit fees for peer firms when serious misreporting...