This study reports the results of experiments using laboratory markets designed to test several predictions of economic behavior generated by DeAngelo's (1980, 1981) characterization of the auditor-client contractual relationship. These predictions address (1) auditor pricing behavior in the face of start-up costs and transactions costs incurred by the client when switching auditors and (2) the effect of start-up costs and transactions costs on auditor independence. The research was motivated by the recent concern expressed by policy-makers regarding the link between auditor pricing behavior and independence and the unobservability of auditor prices and independence in the naturally-occurring market. It was reasoned that, given the difficulty of obtaining data in the real world, laboratory market research would be a good "first step" in evaluating theories linking auditor pricing behavior to independence. The laboratory markets used to test the predictions were run in two stages. In the first stage, which used a sealed offer auction, subjects offered to sell an imaginary service to a computerized buyer in a series of five-auction markets, with certain payoffs. The contract prices in the first phase of the experiment were used to measure equilibrium predictions in conditions of certain payoffs. The second stage of the experiment, which tested predictions concerning independence and equilibrium prices in a world of uncertain payoffs, was identical to the first stage, except that payments were conditional on outcomes which depended on a decision rule specified by the sellers after each auction. The results of the experiments show significant decreases in independence as theoretical quasi-rents available to the incumbent seller increased. Furthermore, evidence on the relationship between lowballing and independence was inconclusive, due to the inequality of quasi-rents observed in cells where lowballing was allowed or restricted. With respect to pricing behavior, lowballing was observed in all markets where it was permitted, and increased as the theoretical quasi-rent stream increased. In addition, theoretical equilibrium price predictions under conditions of certain payoffs are weakly predictive of winning offers made by sellers. However, in settings with conditional payoffs, equilibrium predictions were not achieved in the experiment, perhaps due to design artifacts, or to the existence of an unspecified, alternative equilibrium.

This study estimates the effect that the auditor's assessment of his business risk has on his acquisition of evidence and his pricing of audit services. Auditor's business risk (ABR) is defined as the uncertainty in the auditor's cash flows that arises because there is some probability of the auditor incurring a loss from litigation, adverse publicity or other events arising in connection with his examination of the client's financial statements. The portion of ABR that evidence can reduce is referred to as evidence-sensitive ABR. The portion of ABR that cannot be reduced with evidence is referred to as insurance ABR. The auditor is expected to respond to evidence-sensitive ABR by acquiring costly evidence and to insurance ABR by including a risk premium in his fee offer. Both the amount of evidence and the risk premium are expected to affect the auditor's offer. Audit effort is used to measure evidence and the price per unit of effort is used to measure the risk premium. Audit effort is hypothesized to be positively correlated with evidence-sensitive ABR. The price per unit of effort is hypothesized to be positively correlated with insurance ABR. The regression results support both hypotheses. All four variables selected to represent evidence-sensitive ABR have positive coefficients as predicted. Three of the evidence-sensitive ABR variables are significant at the 0.01 level and the fourth is significant at the 0.06 level. Four of the five variables selected to capture insurance ABR have positive coefficients as predicted. The levels of significance for these coefficients range from 0.01 to 0.13. An unexpected result is that the fifth variable, relating to a client as a going concern, has a negative and significant coefficient.

No description available.

I examine the determinants and implications of false news on client business risk and firm credibility. False news is defined as information presented as factually accurate, but which contains fabricated facts and is deliberately made public to mislead the reader. Importantly, it is later denied by a credible source. There is a significant concern about the influence of false news on individuals’ decision-making and judgment processes. However, our knowledge regarding false news and its implications for financial markets is minimal. I investigate false news by focusing on negative false news that is not initiated from within the company. Building on financial and political motives behind incidents of false news, I examine whether industry competition and media coverage play a role in making a firm a target for false news. I further examine the impact of false news on the firm’s financial reporting behavior and investigate whether the firm’s auditor prices false news. Lastly, based on the argument that false news increases distrust and uncertainty, I examine whether false news decreases the credibility of the firm’s disclosures and test whether the earnings response coefficient (ERC) is lower after the release of false news. I find that lower competition and higher media coverage are associated with higher likelihood of false news. Consistent with my predictions, I also find that false news target firms have higher abnormal accruals, higher abnormal real earnings activities, and higher audit fees. However, I do not find support for the notion that false news reduces credibility of firm’s disclosure. / Includes bibliography. / Dissertation (Ph.D.)--Florida Atlantic University, 2019. / FAU Electronic Theses and Dissertations Collection

Thesis (Ph. D.)--University of Oregon, 2000. / Typescript. Includes vita and abstract. Includes bibliographical references (leaves 88-93). Also available for download via the World Wide Web; free to University of Oregon users.

Auditing has grown substantially in recent times, expanding into different parts of the world through a network of international audit firms (dominated mainly by the Big Six or more recently the Big Five). The growth of auditing and audit firms has not been hindered significantly by consistent criticism, doubts and debates about the value of the auditing function and what it can deliver in countries with long established audit traditions. Much of such criticism and debates usually surface in the aftermath of major financial scandals and corporate collapses and have increasingly been captured of the term of the "audit expectation gap" -a phrase referring to the difference between what auditors perceive as their duty and what the users of financial statements expect from auditors. Research has examined the main elements of the audit expectations gap, including the nature of assurance, audit reporting, auditor independence and regulation/liability of auditors. Few research studies, however have focused on examining the audit function through a case study of a major financial scandal. Even fewer studies have paid attention or researched the audit function in non- Anglo-American contexts. This is the primary aim of the thesis. To explore such a research area, this study uses the scandal that surrounded Grupo Torras, the Kuwait Investment Office's (KIO) investment holding group in Spain. The collapse of the group in 1992 offers the opportunity to examine auditing in Spain, a country with notably high expectations of auditing in recent times, and Kuwait, a developing country recently having returned to democracy. The issue of the audit expectations gap in Kuwait is also explored using a questionnaire survey of the views of auditors, directors and users in Kuwait. Such survey represents the first comprehensive survey of auditing expectations in the Gulf region - an increasingly significant economic area given the growth in oil revenues. The case study reveals different response to the scandal. In Spain, criticism and debates started to surface immediately after the scandal while in Kuwait no major criticism or debate about the audit function has taken place. The case study shows how auditing was unable to cope in a complicated financial and political environment, where senior powerful managers, were involved in mismanagement and fraud. Despite the limitations of the auditing function in practice, the questionnaire survey shows only a limited audit expectations gap in Kuwait and considerable degree of satisfaction among people in Kuwait with auditing. This shows that the image of auditing is mostly based on perception rather than on its ability to perform in practice and raises a range of important issues for the future, especially giving the growing doubts about the uniform nature of auditing service provided by "multinational" audit firms.

Thesis (PhD)--University of South Australia, 1997

Diss. Stockholm : Stockholms universitet, 2007.

Diss. Uppsala : Uppsala universitet, 2004.

Thesis (doctoral)--Universität München.