The recent claim that gain discount rates are higher than loss rates is reexamined using the intertemporal choice paradigm developed in Loewenstein (1988

Projects seeking to define, measure, and evaluate audit quality are on the agendas of auditing standards setters as well as audit firms. The Public Company Accounting Oversight Board (PCAOB) currently provides information regarding audit quality through the release of inspection reports, and the Board intends to establish and report audit quality indicators. To provide additional perspective on audit quality, we obtain auditors' and investors' views, definitions, and indicators of audit quality. We find that investors' definitions of audit quality focus more on inputs to the audit process than do auditors', and that investors view the number of PCAOB deficiencies as an indicator of overall firm quality. We find a consensus that auditor characteristics may be the most important determinants of audit quality, and that restatements may be the most readily available signal of low audit quality. We relate responses to a general audit quality framework, provide support for archival audit research, and identify additional disclosures that participants suggest could signal audit quality. Taken together, we provide evidence regarding the construct of audit quality in the post-SOX environment, evaluate many of the audit quality indicators proposed by the PCAOB, and suggest avenues for future research.Comprendre la qualit e de l'audit : points de vue de professionnels de l'audit et d'investisseurs R ESUM EDes projets visant a d efinir, mesurer et evaluer la qualit e de l'audit figurent au programme des instances de normalisation en mati ere d'audit de même que des cabinets d'audit. Le ) 2. We use the term "auditors or "audit professionals" throughout the paper to describe both partner and senior manager participants; over 80 percent of our audit professional survey responses are from partners. Untabulated analysis indicates that partners' and senior managers' responses are not statistically different (p > 0.10 in all univariate comparisons). Further, we use the term "investors" throughout the paper to describe our investor participants. These participants have educational background and reported investing experience that are equivalent to or greater than those of investor participants reported on in the prior literature (Elliott 2006;Frederickson and Miller 2004;Maines and McDaniel 2000), which suggests that they are experienced and knowledgeable investors. See section 3 for additional details. 3.Investor response rate was approximately 5 percent, consistent with Dichev, Graham, Harvey, and Rajgopal (2013). Because of confidentiality concerns, we were not provided the number of auditor participants solicited by each firm and thus auditor response rates are not available. However, the completion rate of auditors who started the survey was approximately 85 percent. See section 2 for additional discussion regarding data collection.

This study examines factors that influenced public companies to retain or dismiss their audit firms as tax service providers during the years immediately surrounding the passage of the Sarbanes-Oxley Act (SOX) in 2002. We find a positive relation between a company’s tax and operating complexity and the probability that it retained its auditor-provided tax services, suggesting that complexity increases the potential benefits from knowledge spillover relative to the costs from perceived auditor independence impairment. We find a positive relation between the strength of a company’s corporate governance and the probability that it retained auditor-provided tax services, suggesting that companies with strong governance expected benefits from knowledge spillover to exceed costs from perceived auditor independence impairment. Although we find no direct relation between auditor tenure and the decision to retain auditor-provided tax services, we do find a significant negative association between auditor retention and high nontax, nonaudit services (NAS) fees, and between auditor retention and the joint effect of long auditor tenure and high nontax NAS fees. Thus, firms with low auditor independence and long audit tenure are less likely to retain their auditor for tax services than are firms with high nontax NAS fees alone.

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This study examines the effect of audit committee connectedness through director networks on financial reporting quality, specifically the misstatement of annual financial statements. Using network analysis, we examine multiple dimensions of connectedness and find that after controlling for operating performance and corporate governance characteristics, firms with well-connected audit committees are less likely to misstate annual financial statements. In addition, our study demonstrates that audit committee connectedness through director networks moderates the negative effect of board interlocks to misstating firms on financial reporting quality. We conduct several tests to address identification concerns and find similar results. Our findings suggest that firms with better-connected audit committees are less likely to adopt reporting practices that reduce financial reporting quality. This paper was accepted by Suraj Srinivasan, accounting.