Auditor Fees and Fraud Firms

The relationship between corporate social responsibility, financial misstatements and SEC enforcement actions

“…SEC enforcement actions have been an important topic in the literature on corporate fraud (e.g. Dechow et al ., , ; Dyck et al ., ; Kedia and Rajgopal, ; Markelevich and Rosner, ; Marcel and Cowen, ). The SEC is empowered to investigate and take enforcement action against firms, managers, auditors and other parties for violating SEC and federal rules.…”

Do Managers Successfully Shop for Compliant Auditors? Evidence from Accounting Estimates

“…We include OFFICESIZE because audits conducted by large offices are of higher quality (Francis and Yu 2009). We include OIMPORT, FIMPORT, and NAS to control for the effect of client importance and non-audit service on audit quality (Paterson and Valencia 2011;Markelevich and Rosner 2013). Finally, we include material weakness in internal control (WEAK_302) and total audit fees (AUDFEE) because firms with weak internal controls and firms where the auditor spend more effort are more likely to report misstatements (Hribar, Kravet, and Wilson 2014;Czerney et al 2014;Ettredge et al 2014).…”

Impacts of Conflicts of Interest in the Financial Services Industry

“…Kinney, Palmrose, and Scholz, 2004 find a positive association between unspecified non-audit services and poor quality audits (restatements of previously issued financial statements) in the United States, while Ahadiat (2011) corroborates this finding in the UK and Australia. Markelevich and Rosner (2013) find that fees for non-audit services are correlated with SEC sanction for fraud as a proxy for poor audit quality. Paterson and Valencia (2011) differentiate further among the types of services, and they find that repeated tax services actually improve audit quality, in terms of restatements, whereas one-time tax services and other non-audit services are associated with a decrease in audit quality.…”

“…There is mixed evidence regarding the impact that non-audit services have on auditor independence. Frankel, Johnson, and Nelson (2002), Kinney, Palmrose, and Scholz (2004), Ahadiat (2011), Markelevich and Rosner (2013), and Blay and Geiger (2013) find that non-audit services are associated with impaired auditor independence, but Antle et al (2006), Ashbaugh, LaFond, and Mayhew (2003), Larcker and Richardson (2004), and Koh (2013) fail to find such evidence. Several studies suggest that one potential explanation for an ambiguous relationship between non-audit services and audit quality is non-auditor institutional oversight and the regulatory environment (Abdel-Meguid, Ahmad, and Duellman, 2011;Lim, Ding, and Charoenwong, 2013).…”