After a long period of universal mandatory audit, the UK reduced the regulatory burden of private firms by introducing size-based audit exemption in 1994; the size thresholds have subsequently been progressively increased. Both accounting bodies and credit rating agencies have expressed reservations...

We investigate whether gambling-motivated retail trading generates mispricing among firms with extreme negative news. Employing a novel accounting-based measure of failure propensity conveyed by the going-concern (GC) audit opinions, we show that gambling-induced trading in GC firms with...