This study addresses the international debate over whether the rotation of audit firms should be mandatory. Mandatory rotation rules have been adopted by the European Union, but have not been established in the United States. Proponents of the policy believe that a long tenure auditor-client...

This paper examines the effect of environmental policy stringency on audit pricing. Exploiting the exogenous variation in environmental policies across 26 countries, we find that firms in countries with more stringent environmental policies incur lower audit fees. The inverse association is more...

Auditors must recognize problematic patterns among the assumptions underlying complex estimates to identify misstatements. Pattern recognition requires rich problem representations of complex estimates that auditors may be unable to develop given their lack of valuation expertise. I predict and...

The amount of estimation uncertainty contained in financial statement items may be obscured from investors, given that all estimates, regardless of their imprecision, are reported as precise figures on the face of the financial statements. Our study examines two disclosures expected to help...

In this paper, we study spatial competition in the U.S. audit market while accounting for its two-tiered nature. We provide evidence on the differential impact that market share distances within and between the players in the large and small audit markets have on competition. We find that the...

We examine differences in audit scope between family and non-family firms in Israel, using a unique database that includes both external and internal audit fees, hours, and billing rates. Consistent with prior literature, we argue that the number of audit hours reflects an auditor’s effort,...

The critical global role of audit firms, combined with the scarcity of qualified staff and downward pressure on fees, has increased the importance of understanding efficiency in this industry. This paper examines the technical and allocative inefficiencies of audit firm staffing using data from...

Economic theory suggests that demand uncertainty should influence producer behavior. In this study, we empirically examine the impact of demand uncertainty on the production of audit services. Auditors must make resource allocation decisions in advance of exact demand being known, and because a...

This study examines whether boards of directors use external auditing to protect their reputation capital. We hypothesize and find that audit quality increases with the level of directors' reputation capital. More specifically, using ten-year panel data on Finnish listed companies, we find that...

The majority of audit litigation research has focused on juror judgments. We examine how jurors' negligence judgments and attorneys' out-of-court settlements are differently impacted by two features of a materially misstated accounting estimate — the amount of estimate uncertainty and whether...