We examine how various types of accounting policy changes affect financial misstatement risk and the ways auditors mitigate that risk. We find greater misstatement risk for both idiosyncratic and industry-wide accounting policy changes and that auditors play an important role in mitigating these...

Audit quality is thought to occur primarily due to litigation pressure. We report results from a study conducted in a low litigation environment (China) where a Big 4 audit firm (Deloitte) failed to detect a fraud involving a public company (Kelon). We find that Deloitte’s clients have...

Framing effects occur when an agent (e.g., a manager) constructs a description of some entity (e.g., a company) such that the way information is stated (framed) influences the decisions made by other agents (e.g., auditors, analysts, and investors). Auditors, in particular, are charged by...

There are political, social and economic incentives embedded within the audit setting which provide stimuli for compliant behavior of subordinate auditors to that preferred by the superior auditor. This study examines this compliant behavior under conditions of accountability. Specifically, this...

In recent years, public accounting firms have been caught in a media firestorm fuelled by corporate fraud, disappointed investors and aggressive regulators. The collapse of Arthur Andersen has triggered questions about how well accounting firms are managed. Some former Arthur Andersen partners...

In May 2005, the University of Lethbridge and the Institute of Chartered Accountants of Alberta sponsored the Banff Education Conference titled Professional Judgement: Can It Be Taught? The opening forum at the conference was a panel discussion on the topic presented by academics and...

For three centuries, Anglo-American Governments have been creating regulation and governance reforms (including mandatory audit requirements) in reaction to fraud. The most recent attempt in the U.S. is the Sarbanes-Oxley Act (SOX). The Capital Markets Leadership Task Force Report in Canada...