ABSTRACT: In this paper, we examine religiosity as one determinant of tax avoidance by corporate and individual taxpayers. Prior research suggests a relation between risk aversion. Because aggressive strategies involve significant uncertainty possible penalties damage to reputation, predict that higher levels are associated with less (i.e., risky) positions. Consistent prediction, find firms headquartered in more religious U.S. counties likely avoid taxes. We also is consistently lower...

ABSTRACT We examine whether the December 2007 PCAOB disciplinary order against Deloitte affected Deloitte's switching risk, audit fees, and quality relative to other Big 4 firms over a three-year period following censure. Our findings suggest that censure was associated with decrease in ability retain clients attract new clients, fee growth rates. However, methodologies used extant archival studies yield little or no evidence different from of during window either before after Overall, our...

Although investor perceptions of audit quality play a critical role in maintaining systemic confidence the integrity financial accounting reports (Levitt [2000]), prior research on effects auditor tenure from an perspective is relatively sparse. In this study, we investigate whether investors price firm for Big Five audits by examining relation between and ex ante equity risk premium, that is, excess company-specific cost capital over risk-free interest rate. Based research, whereas “auditor...

SYNOPSIS As mandated by Sarbanes-Oxley, the SEC reviews financial reports of public companies and challenges appropriateness accounting that seems questionable or unclear. We investigate whether likelihood an comment (challenge), time needed to resolve such comments, depends upon either two characteristics underlying standard—rules estimates. find probability increases with rules-based in standard, but little evidence resolution is related characteristics. also extent estimates required...

Purpose – To examine whether auditor‐client relationships have an effect on the decision by auditor to remove audit qualification.

SUMMARY In this paper, we examine the relation between auditor litigation risk and abnormal accruals over 1989–2007 time period. We address potential endogeneity in prior studies by jointly modeling a simultaneous equation system. Our findings suggest that client-specific affects incentives to acquiesce client demands for earnings management, i.e., higher of litigation, greater auditor's restraining influence on reported client. also find evidence increase likelihood litigation. document...

This paper investigates three potential explanations for the puzzlingly weak value relevance of oil and gas asset present values documented in prior research: measurement error, model misspecification, time-period idiosyncrasy. I operationally define magnitude error as variance, estimated using an errors-in-variables two-stage regression similar to that used by Barth (1991) Choi et al. (1997). find (1) measure assets is on average less than historical cost measure; (2) measured at explain...

The number of accounting graduates has declined sharply following the near universal adoption 150-hour requirement for licensing and as a condition membership in American Institute Certified Public Accountants (AICPA). This decline led many observers to conclude that was mistake. Our study investigates extent which (rather than other causes) is responsible during 1990s. We document approximately 38 percent can be attributed requirement. 62 remains unexplained. underscores importance...

SUMMARY We examine the consequences of misconduct in a Big 4 firm's nonaudit practice for its audit practice. Specifically, we whether KPMG's suffered loss fees and clients and/or decline factual quality following 2005 deferred prosecution agreement (DPA) with Department Justice marketing questionable tax shelters. find little evidence that DPA adversely impacted by way either or likelihood client gains/losses, suggesting no harm to reputation. also had effect on quality, even those dropped...

SUMMARY We examine whether Deloitte's spatial location in local audit markets affected the firm's adverse fallout—in terms of decreased ability to retain new clients and maintain fees—from 2007 PCAOB censure. motivate our inquiry by notion that auditor-client alignment auditor-closest-competitor distance can help differentiate incumbent Big 4 auditor from other auditors thus provide market power, i.e., inhibit shopping for another supplier because lack a similar provider market....

SYNOPSIS We examine the relation between accounting estimation intensity (AEI) ingrained in a company’s financial reports and propensity to meet or beat analyst earnings forecasts whether this is attenuated by auditor’s expertise at city-office national level. Although we find positive AEI forecasts, little evidence suggest that weakened auditor expertise. Along same lines, audit fees affected Our findings are of potential interest regulators concerned about insufficient skepticism...