Abstract Our study explores whether and how financial auditors—one of the most important information intermediaries markets—consider firms’ (i.e., their clients’) exposure to biodiversity risks when making audit pricing decisions. Based on risk‐oriented approach, we hypothesize that auditors price if these have an impact future economic conditions. Using a firm‐specific risk measure based textual analyses 10‐K statements, find is associated with higher fees. However, this positive...

In recent years, we have seen an increasing interest in the country‐level differences audit environments as they might a pervasive impact on how financial statement audits are conducted around world. We contribute to this emerging stream of research three important ways. Firstly, provide comprehensive synthesis determinants that been employed previous multinational auditing research. Secondly, document economically significant overall levels pricing between countries, which interpret...

In this study, we investigate whether auditors consider their clients' climate change-related external risks when making audit pricing decisions. Using county-level proxies based on the number of declared natural disasters and level societal change awareness, discover that clients with greater exposure to pay significantly higher fees. After performing several additional tests, conclude potential consequences as a systematic business risk is factored into For instance, demonstrate has become...

Abstract This study investigates the impact of cost stickiness on income smoothing. Prior literature at intersection between management and financial accounting has understood changes in behaviour as mere consequences short‐term earnings incentives. By considering smoothing more complex strategy, we argue that resource adjustment strategies underlying might also have an long‐term reporting choices. Specifically, asymmetric reactions costs to sales should increase volatility thus restrict...

ABSTRACTThis paper addresses the effects of clients' carbon risk on audit pricing. Using data from 438 EU companies for period 2013–2019, we find a positive relationship between (measured by level emissions) and fees. Furthermore, that participation in European Union's Emission Trading System, limited market regulation scheme to mitigate special industries' Greenhouse Gas emissions, strengthens Insights additional tests indicate auditors price particularly large clients are under greater...

This study investigates the relationship between audit staff satisfaction (measured by crowd-sourced employer reviews) and quality in private client setting. In this setting, extrinsic incentives to provide high audits – such as regulatory enforcement, reputational pressure, litigation costs are less pronounced than for listed audits. We find satisfaction, an important intrinsic motivational factor, is positively significantly associated with Consistent prior research, we no significant...

This study investigates the impact of cost stickiness on income smoothing. Prior literature at intersection between management and financial accounting has understood changes in behavior as mere consequences short-term earnings incentives. By considering smoothing more complex strategy, we argue that resource adjustment strategies underlying might also have an long-term reporting choices. Specifically, asymmetric reactions costs to sales should increase volatility thus restrict managers'...

This study presents evidence on the relationship between consumer sentiment and resource adjustment decisions. Consumer is an important piece of economic information, accepted as a reliable predictor future activity, which why it should influence managerial expectations underlying future-oriented In line with these considerations, I find that managers are more likely to retain slack resources following decrease in sales when about business prospects improving. Managers seem adopt consumers'...

Using data on the staggered adoption of board reforms across globe, we study effects corporate governance cost management. Boards discuss and decide a wide range issues with far-reaching implications for behavior. We find that reforms, which predominantly aim to increase independence as well establish committees, restrict managerial opportunism in terms While critics reform legislation note increases monitoring efficiency are rather "cosmetic", show staggered, worldwide results decrease...

This study presents evidence on the relationship between consumer sentiment and resource adjustment decisions. Consumer is an important piece of economic information, accepted as a reliable predictor future activity, which why it should influence managerial expectations underlying future-oriented In line with these considerations, I find that managers are more likely to retain slack resources following decrease in sales when about business prospects improving. Managers seem adopt consumers’...

This study explores the effectiveness and consequences of hedge accounting rules under ASC 815 by investigating relationship between derivative designation future investments. Finance theory argues that hedging helps firms to overcome underinvestment problems, as it reduces probability liquidity shortfalls. We argue this association holds only for derivatives designated accounting, which requires fulfilment strict criteria. find assets are positively associated with investments implying...

Our study explores whether and how auditors—one of the most important information intermediaries financial markets—consider firms' (i.e., their clients') exposure to biodiversity risks when making audit pricing decisions. Based on risk-oriented approach, we hypothesize that auditors price if these have an impact clients' future economic conditions. Using a novel firm-specific risk measure based textual analyses 10-K statements, find is associated with higher fees for large sample listed U.S....

In this study, we examine the impact of community social capital on asymmetric cost behaviour. Community captures strength norms and density networks in a region. As such, it is socio-economic factor that might affect managerial resource adjustment decisions via different channels. We find firms headquartered U.S. counties with high exhibit significantly less asymmetry restrains managers from taking opportunistic would induce stickiness. This line our additional finding, cooperative acting...

While the discussion of changes in financial accounting properties over time is already well-established, there a lack evidence whether changing firm compositions empirical samples might bias cost stickiness research. We document that with each additional listing cohort, U.S. public universe becomes more knowledge-intensive and, at same time, sticky. Higher reliance on temporary labor by newer cohorts partly mitigates this development. Our results call for use cohort-specific slopes to allow...

In recent years, we have seen an increasing interest in the country-level differences audit environments as they might a pervasive impact on how financial statement audits are conducted around world. We contribute to this emerging stream of research three important ways. Firstly, provide comprehensive synthesis determinants that been employed previous multinational auditing research. Secondly, document economically significant overall levels pricing between countries, which interpret...