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We find that non‐Big 4 audit offices with greater awareness of SEC enforcement are more likely to issue first‐time going‐concern reports to distressed clients; where SEC “awareness” is measured using (i) audit office proximity to SEC regional offices, and (ii) proximity to specific SEC enforcement actions against auditors. We also show that these non‐Big 4 audit offices issue more going‐concern opinions to clients who do not subsequently fail, indicating a conservative bias that reduces the informativeness of audit reports. This conservative reporting bias is also associated with higher audit fees and higher auditor switching rates. These findings are important because non‐Big 4 firms now audit 39 percent of SEC registrants and issue 88 percent of going‐concern audit reports. For Big 4 offices, we find some evidence that awareness of SEC enforcement may improve reporting accuracy by reducing Type II errors (failing to issue a going‐concern report to a company that fails), although the number of cases is small.

We investigate whether non-GAAP reporting affects the audit process and thereby the quality of the related financial statements. First, we provide evidence that auditors in numerous countries, including the United States and the United Kingdom, rely to varying degrees on non-GAAP profit before tax as a benchmark for determining quantitative materiality. Then, using Premium Listed companies on the London Stock Exchange, we document that U.K. auditor reliance on non-GAAP materiality benchmarks often re-

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We examine how audit partners' geographic proximity to clients affects audit quality. We use hand‐collected data to show that approximately half of audit partners are assigned to clients headquartered more than 100 km away from the partners' home locations. Few of these partners relocate after receiving their assignments and, as a result, more than one‐third of clients are audited by partners who must commute long distances to visit the client in person. We explore this phenomenon by first modeling how distance affects partner‐client matching. We find that partners' geographic proximity to a prospective client is an important matching criterion, but also that trade‐offs are made when other partner characteristics such as industry specialization are more likely to be important. Next, consistent with our prediction, we show that audit quality is lower when partners reside farther from their clients. We corroborate our primary findings by showing that the association between partner distance and audit quality is mitigated when partners have access to direct flights to their clients' headquarters and when clients are geographically dispersed. Our paper should be informative for regulators, practicing auditors, and academics interested in how partner‐client matching affects audit outcomes.

SUMMARY Recent research suggests that insiders of distressed firms, fearing legal jeopardy, pressure auditors not to issue going concern opinions (GCOs) for periods in which they undertake abnormally large sales of their shares. We propose and evaluate an alternative explanation that managers anticipate GCOs and time their trades to avoid insider sales in the GCO year (hereafter, the timing hypothesis). Consistent with the timing hypothesis, we find that insider sales increase two to four years prior to the issuance of a GCO and then decline in the year of GCO. Additional analysis suggests that insiders' anticipatory trading is enabled, at least in part, by early communication between auditors and their most important clients regarding the likelihood of a GCO. These early communications appear to reduce the likelihood of dismissal when auditors do eventually issue a GCO.

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