Demerjian (2011) argues that a shift by U.S. standard setters towards the balance sheet approach reduces the usefulness of balance sheet numbers for contracting. Consistent with this argument, he provides evidence of a decline in the use of balance sheet-based covenants in debt contracts, a...

We examine how Big N auditors' changing incentives impact their comment-letter lobbying on U.S. GAAP over the first thirty-four years of the FASB (1973-2006). In particular, we focus on the influence of auditors' lobbying incentives arising from two basic factors: managing expected litigation...