Abstract This study examines the persistence and economic consequences of variations in reporting style across audit partners in individual engagements. Our results show that both aggressive and conservative audit reporting, measured by the pattern of prior Type 2 and Type 1 audit reporting error rates in auditor‐specific clienteles, persist over time and extend to other clients of the same partner. Analyses of abnormal accruals and persistence of client firms’ accrual estimates corroborate this finding, and hold both for private and publicly listed companies. Further, our results also show that the market penalizes client firms susceptible to aggressive audit partner reporting decisions. In particular, we find that our proxies for aggressive audit reporting are related to higher interest rates, worse credit ratings and less favorable forecasts of insolvency for private client companies, and a lower Tobin's Q for publicly listed client companies. Collectively, these results imply that audit partner aggressive or conservative reporting is a systematic audit partner attribute and not randomly distributed across engagements.

Abstract We examine the determinants and outcomes of Chief Executive Officers ( CEO s) accepting a $1 salary, a compensation practice that occurs relatively frequently in high‐profile firms and is debated by regulators, investors, and the media. Using a hand‐collected sample of 93 CEO s from 91 firms between 1993 and 2011, we examine the triggers preceding the $1 salary decision, the factors associated with the decision, subsequent stock returns, and the outcomes for the CEO s. Our evidence is consistent with two explanations for the phenomenon: (i) it is a gesture of sacrifice by CEO s of firms in crisis, and (ii) it is a signal of better future performance by CEO s of growing firms. Our analyses highlight the two different circumstances and shed light on an interesting debate that has thus far been supported only by anecdotal evidence.