This study tests whether critical-thinking skills can help explain the cross-sectional variation in student performance in principles of accounting. Prior research has used such measures as academic aptitude and demographic factors to explain performance in the principles of accounting class. We argue that success in principles of accounting also requires critical-thinking skills. We measured critical-thinking skills by using a holistic scoring process to evaluate student essays. Our results show that even after controlling for academic aptitude, our measure of critical-thinking skills contributes significantly to explaining the cross-sectional variation in student performance in an accounting principles class. Understanding the relationship between critical thinking and success in accounting may contribute not only to reducing the failure rate in principles of accounting, but also to encouraging an emphasis on critical thinking in the preparation of accounting professionals.

This study tests whether prior auditor-client tenure is associated with the audit fees paid to the successor auditor. In the past, studying the association between tenure with the prior auditor and fees charged by the successor was problematic because of the difficulty in controlling for the causes of the auditor change. However, the collapse of Andersen in late 2002 led to a significant number of exogenous auditor switches. Using a sample of former Andersen clients, our major finding is that audit fees charged by the successor auditor varied positively with the length of the prior auditor's tenure. Given that the audit market is efficient, the observed positive association between current fees and prior auditor tenure suggests to us that successor auditors perceived higher risk from new clients having longer tenure with their previous auditor.

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Directors’ monitoring and advising activities as agents were supposed to increase after the Dodd-Frank Act in 2010. The Dodd-Frank Act significantly increases the pressure on the board of directors to be more effective agents of the stockholders even after the Sarbanes-Oxley Act (2002) became effective. Director compensation, especially incentive-based compensation, is intended to align with the interests of shareholders and motivate director behavior. This paper empirically tests how banks respond to the Dodd-Frank Act by redesigning their director compensation plans. Our findings suggest that banks recognize the need for improved board monitoring by highlighting the importance of director workload and qualifications through the design of director compensation packages in the post-Dodd-Frank Act period. We also find that the negative impact of excessive director equity compensation on firm performance was attenuated after the passage of the Dodd-Frank Act. The findings of this study shed light on the rationale of director compensation policies for banking firms.