Abstract In this study, we leverage judgment decomposition and information acquisition theories to develop and test an intervention to improve group auditors' identification of and response to component‐level qualitative risk. Improving group auditors' response to qualitative risk is important because (1) group audits are prevalent today and require multiple qualitative risk assessments, (2) auditors have historically overlooked qualitative risks, and (3) prior interventions have failed to improve auditors' response to qualitative risk. In an experiment with 88 audit partners and managers, we find that a hybrid risk assessment approach that combines elements of judgment decomposition and notetaking improves auditors' group audit planning decisions. Specifically, auditors utilizing our hybrid approach are better able to identify and respond to component‐level qualitative risks than auditors who use a holistic approach. Importantly, the improvement in qualitative risk response does not come at the expense of auditors' response to quantitative risk.

ABSTRACT We investigate the effect of executives and directors with prior banking crisis experience on bank outcomes around the global financial crisis (GFC). Executives and directors with previous experience leading banks through a bank crisis may have been uniquely able to understand the risks, recognize the warnings signs early, and thus respond more effectively to the GFC. Controlling for other executive, director, and bank‐level characteristics, we examine whether bank performance, risk taking, and accounting quality in the period immediately before and during the GFC are affected by having executives or directors who previously served as bank executives or directors during the 1980s/1990s banking crisis (80s/90s crisis). Overall, we find that banks led by these crisis‐experienced executives and directors exhibit stronger performance, lower risk taking, and higher accounting quality in the period around the GFC. These effects are strongest among bank leaders for whom the 80s/90s crisis was most salient. Results are robust to propensity‐matched samples and other analyses performed to rule out alternative explanations. Our results suggest these individuals were able to learn from prior crisis experience.

Abstract 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.

ABSTRACT We study off-the-clock indiscretion accusations against corporate officers and directors and examine the extent, effectiveness, and context of auditors’ response. In the year that indiscretion allegations are first publicized, auditors charge higher fees and are more likely to resign. Auditors respond to allegations against both top executives and board members. Further, reactions are strongest when allegations demonstrate a lack of individual integrity and, separately, when the audit office has previously audited other similarly accused clients. Importantly, the resulting increase in auditors’ effort partially negates the association between indiscretions and lower financial reporting quality. However, auditors are primarily reactive, rather than proactive, and their response is stronger when the accused client is less important economically. These results suggest that company leadership’s off-the-clock indiscretions are signals to auditors of poor tone at the top, but the audit response is not uniform across all clients. JEL Classifications: M41; M42; M48; G34.