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What are the implications of major customer dependency, i.e., the degree of a supplier firm’s dependency on its major customers, for external auditors? While the conventional view emphasizes the negatives of major customer dependency for client business risk, we find that suppliers with more concentrated customer bases spend less on audit fees. The evidence is consistent with reduced audit effort due to efficiency gains in the audit process, especially when suppliers with more concentrated customer bases share the same auditors with their long-standing major customers. The audit fee discount we identify does not imply that audit quality declines with customer-base concentration. In fact, we find that suppliers with more concentrated customer bases are less likely to experience material restatements of previously audited financial statements. Taking the external auditors’ perspective, our study provides new managerial insights on the costs and benefits of major customer relationships for supplier firms.

This cross-sectional study describes the prevalence and context of violence by sexual partners against female sex workers (FSWs, N = 589) in Andhra Pradesh and its association with alcohol use by FSWs and abusive partners. In all, 84% of FSWs reported alcohol use; 65% reported lifetime physical abuse by a sexual partner. Most abused women suffered abuse from multiple partners, often triggered by inebriation or FSW's defiance. In multivariate logistic regressions, frequency of FSW's alcohol use was associated with abuse by clients and primary partner, whereas partner's alcohol use was only significant for abuse by primary partner, not clients.

Male migrant workers (MMWs) in India are vulnerable to developing alcohol-related problems and engaging in unprotected sex, putting them at risk of HIV. Research has shown that alcohol-related expectancies mediate vulnerability to alcoholism. We examined which expectancies were associated with sexual risk and drinking. We surveyed 1085 heterosexual MMWs in two South Indian municipalities, assessing expectancies, sex under the influence, and unprotected sex with female sex workers (FSW) and casual female partners in the prior 30 days. Men more strongly endorsed positive than negative expectancies (t = 53.59, p

We examine how non‐financial misconduct by corporations impacts audit outcomes. We use a novel database of penalties received by firms from federal, state and local agencies for legal violations not directly related to their financial reports and find that auditors raise fees following these violations. The magnitudes are economically significant: violating firms pay about $162,000 or 6% more in audit fees than comparable firms without violations. Additionally, auditors charge more when the penalty amounts are higher and infractions are more egregious. Companies fined for non‐financial misconduct are also more likely to receive going concern opinions. Our results are robust to propensity score matching, falsification tests and firm‐fixed effects and are not attributable to lax firm culture or "tone at the top". These results highlight that firms' unethical conduct, even those that do not directly lead to financial reporting infractions, has consequences beyond just the penalties imposed by enforcement agencies. [ABSTRACT FROM AUTHOR]

This qualitative study examines the role of alcohol in sexual risk among male migrant workers and female sex workers in two South Indian states. Most men reported using alcohol for increased energy and courage prior to their sexual experiences and to reduce feelings of loneliness and isolation. Sex workers, on the other hand, often stated that they avoided alcohol prior to sex in order to stay alert and reduce the risk of violence. Both groups reported that drinking often increased male aggression and reduced condom use. Research is needed to examine the prevalence of these patterns as well as factors associated with sexual risk and violence, in order to develop targeted interventions for these groups. Future risk reduction programs may benefit from addressing safer ways of meeting the needs expressed by the participants. This may include strategies to defuse volatile situations, safe ways of improving the sexual experience, and interventions aimed at alleviating loneliness and isolation for migrants.

Prior research indicates that the CEO has a significant impact on financial reporting decisions. However, there is limited research on the implications of CEO succession origin (hiring a CEO from the inside as opposed to from the outside) for auditors. We find that on average, audit fees are greater by about 8% when a CEO is hired from the outside than when a CEO is promoted from within. We also find that the CEO's in-house experience (the number of years the CEO has worked in the firm before becoming the CEO) is negatively associated with audit fees, suggesting that the CEO's in-house experience enhances the CEO's competence in understanding how the firm's performance should map into the financial statements, resulting in lower audit risk. Finally, our findings suggest that the CEO's in-house experience plays an important role in mitigating audit risk in firms with poor corporate governance quality. [ABSTRACT FROM AUTHOR]

We contribute to the literature on the relation between client‐level abnormal (excess) audit fees and audit quality by offering a novel perspective. We posit that audit office‐level resource availability moderates the relation between client‐level audit fees and audit quality. This is because office‐level resources (audit partners, staff, technology and administrative support) are generally shared across engagements and can augment those engagements that are resource constrained. We first provide evidence that office‐level resource availability is informative about audit quality incremental to client‐level abnormal fees and several other client and auditor characteristics, including office size. More importantly, we find that client‐level abnormal fees are informative about audit quality only for audit offices that are resource‐constrained but not for offices that are not resource‐constrained. [ABSTRACT FROM AUTHOR]

SUMMARY: While component auditors audit a significant proportion of public companies, lenders may not be aware of their involvement before Form AP disclosure. We study whether the disclosure of component auditor use and the extent of their involvement is useful to lenders. We find that the loan spread is higher when firms' lead auditors use component auditors relative to engagements without component auditor participation. Further, for firms whose lead auditors use component auditors, we find a positive association between the extent of such participation and the loan spread. However, the positive effect of component auditor use on the loan spread is mitigated for firms with a high level of foreign operations, consistent with the notion that the use of component auditors is more beneficial for firms with significant foreign operations. Overall, our findings suggest that the disclosure of information on component auditor participation in global group audits is useful to lenders. Data Availability: All data used in this paper are publicly available. JEL Classifications: M42; G32. [ABSTRACT FROM AUTHOR]

Byline: Gopal. Krishnan, Dhananjaya. Bhat, B. Devi We appreciate the researchers, Sharief et al ., in undertaking a study to determine the risk factors that were prevalent in a group [...]

We examine the relationship between residual audit fees and the ability to predict future earnings. Recent research suggests that residual audit fees contain information about accounting quality. However, residual audit fees could either represent high accounting quality or a risk premium for low accounting quality. We extend this literature by providing evidence that residual audit fees are indicative of a lower quality information environment which has a negative impact on investors’ ability to anticipate future earnings. Specifically, we first show that residual audit fees are negatively associated with the ability of current earnings to predict future earnings. Furthermore, residual audit fees are negatively associated with analyst forecast accuracy and positively associated with the dispersion in analyst forecasts. Overall, our results are consistent with the notion that residual audit fees are indicative of poor earnings quality, and that this lower quality manifests itself in a lower quality information environment for investors and analysts. [ABSTRACT FROM AUTHOR]

The effects of the use of high-quality auditors and increased regulatory monitoring of R&D reporting on the level of R&D expenditure of Australian companies from 1992-2002 is investigated. Auditor quality appears to enhance the reliability of capitalized R&D costs under the returns model, while cumulative R&D asset is less relevant following monitoring according to the price model.