We examine auditor switching conditional on the compatibility of clients and their auditors using a unique text-based measure of similarity of financial disclosures. We find clustering of clients within an audit firm based on this measure. We find that clients with the lowest similarity scores...

What is the function of auditing, and why is it important? In recent decades there have been a series of financial disasters, affecting thousands, if not millions, of people, many of whom have lost their life savings, and which have destroyed once successful companies, further damaging the...

In this paper we argue that audit firms rationally consider the potential reactions of their rivals when deciding how fiercely to compete in a given market. Based on prior literature in the field of industrial organization (Bernheim and Whinston [1990]), we hypothesize that competing with the...

Competition in audit markets is an important topic but direct tests of market competition have been limited. In this paper, we examine how audit firms behave when they are confronted with competition from another firm in a wide range of industry segments in a local market. Sharing a large number...