Research indicates that auditors fail to curb classification shifting in countries with relatively weaker legal institutions. However, it is not known whether auditors are unable to detect misclassifications or if they are merely not motivated to report them. We conduct two experiments to...

The new PCAOB guidelines make it mandatory for listed companies to identify the audit partner in charge of an audit, thus increasing the focus on the role of an individual audit partner in providing a high-quality audit. Motivated by the PCAOB’s commitment to post-implementation review of its...

Classification shifting involves misclassifying operating expenses as non-recurring expenses to inflate the core earnings of the company. Managers are motivated to misclassify earnings because the market participants focus more on core earnings rather than just the bottom line GAAP earnings....