[Experienced auditors tend to structure their knowledge of financial statement errors with audit objective as the primary organizing dimension and transaction cycle as secondary. Yet, many audit tasks are structured in the opposite manner, requiring auditors to assess whether objectives are met for each transaction cycle. Our paper reports the results of an experiment which indicates that this mismatch between knowledge structure and task structure may hinder auditors' ability to draw on previous experiences when making conditional probability judgments and when allocating audit hours to various objectives within cycles. These results suggest one instance where knowledge structures that are often functional may have adverse effects when they do not match the task structure to which they are applied.]

This study examines whether certain types of financial reporting fraud result in a higher likelihood of litigation against independent auditors. We expect that auditors are more likely to be judged responsible for failing to detect commonly occurring frauds of those that stem from fictitious transactions. We examine companies with SEC Accounting and Auditing Enforcement Releases and designate whether each fraud present in their financial statements in common and/ or arises from fictitious transactions. We then examine whether these types of fraud are related to auditor litigation in analyses that control for various client, auditor and case characteristics. Our results provide some support for our two primary hypotheses - auditors are more likely to be sued when the financial statement frauds are of a common variety or when the frauds arise from fictitious transactions.

[This study examines whether certain types of financial reporting fraud result in a higher likelihood of litigation against independent auditors. We expect that auditors are more likely to be judged responsible for failing to detect commonly occurring frauds or those that stem from fictitious transactions. We examine companies with SEC Accounting and Auditing Enforcement Releases and designate whether each fraud present in their financial statements is common and/or arises from fictitious transactions. We then examine whether these types of fraud are related to auditor litigation in analyses that control for various client, auditor and case characteristics. Our results provide some support for our two primary hypotheses-auditors are more likely to be sued when the financial statement frauds are of a common variety or when the frauds arise from fictitious transactions.]

Examines the effectiveness of two types of decision aids designed to alleviate the effects of one type of task-knowledge mismatch on auditors' judgments. Organization of audit planning tasks; Content and organization of auditors' knowledge; Specific processing problems caused by mismatch between task organization and knowledge organization.

Since 1999 regulators have attempted to improve the monitoring of financial reporting by exerting significant pressure on firms to appoint accounting financial experts (AFEs) to their audit committees. Yet, many firms have been reluctant to do so, which has made these firms more prone to financial reporting problems. We examine appointments of AFEs to the audit committees of S&P 1500 firms during the period 1999–2008 to explore whether concerns about the status of these experts discouraged firms from appointing them. We find that typical AFEs (CFOs and retired audit partners) have lower director status (board seats, trusteeships, social club memberships, and elite education) than other types of directors, and that this status gap is greater for higher status firms (larger, better connected, and more admired firms). Moreover, we find that higher status firms are less likely to appoint AFEs, suggesting that status-related concerns reduce the demand for accounting financial expertise on audit committees. Data Availability: All data are publicly available from sources identified in the text.

*University of Southern California; tUniversity of Colorado at Boulder. We would like to thank Gilbert Bloom of KPMG Peat Marwick, Bob Rosen of Ernst & Young, Wayne Gazur, Robert Jamison, Sally Jones, Stewart Karlinsky, and David Mason for their assistance in validating the instruments; Eugene Willis and the AICPA for allowing us to collect data at the National Tax Education Program; Stephen Conrad of Arthur Andersen, John Lanning of KPMG Peat Marwick, Jerry Marrs of Ernst & Young, and Randy Stein of Coopers & Lybrand for allowing us to collect data at their respective firms; Minou Bohlin, Linda Levy, David Mason, and Paul Walker for their research assistance; and Vairum Arunachalam for his assistance in collecting data. The authors also gratefully acknowledge the helpful comments of three anonymous referees, Alison Ashton, Robert Ashton, C. Brian Cloyd, David Frederick, Joan Luft, Robert Libby, Laureen Maines, Mark Nelson, Michael Roberts, Frank Selto, D. Shores, Ira Solomon, Rick Tubbs, S. Mark Young, and workshop participants at Arizona State University, Cornell University, Duke University, Indiana University, the University of Illinois Tax Symposium, the Journal of Accounting Research Conference, University of Texas at Arlington, University of Utah, and University of Wisconsin. Finally, the financial support of the KPMG Peat Marwick Foundation and the University of Colorado is gratefully acknowledged. 1 We infer expertise in this study from the level of performance in a specific task, here issue identification in tax planning. This inference is consistent with much of the literature on expertise in accounting and other disciplines (e.g., Bonner and Lewis [1990],

Information relevance advisory services offer growth opportunities for accountants in CPA firms, but we know little about the types of knowledge needed to provide high-quality advice. In a two-stage experiment, accountants with different management and public accounting experiences (that we suggest lead to different types of knowledge) receive task information in alternative formats, and develop relevant information for a client's decision. We find that participants are more likely to choose an appropriate problem representation when they receive an appropriate task format or when they have more management or public accounting experience (stage one). Also, when participants choose an appropriate problem representation, more management accounting experience improves their development of relevant information, but more public accounting experience does not (stage two). Our results suggest that tailored task presentation and domain experience that facilitates acquisition of multiple knowledge types improve accountants' information relevance advice.

We examine the effects of analysts' celebrity on investor reaction to earnings forecast revisions. We measure celebrity as the quantity of media coverage analysts receive in sources included in the Dow Jones Interactive database, and find that media coverage is positively related to investor reaction to forecast revisions. The effect of celebrity on the reaction to forecast revisions remains significant after controlling for forecast performance variables examined in prior studies (ex post forecast accuracy, ex ante accuracy, award status, and other variables shown to be related to forecast accuracy). While these results are consistent with the familiarity of the analyst's name affecting the market reaction, we cannot rule out that our measure of celebrity is correlated with error in the performance measures we examine and/or correlated with other unexamined dimensions of forecast performance. A content analysis of a random subsample of the media coverage of our sample analysts suggests that our findings likely are not due to the increased availability of forecast revisions. Finally, an investigation of the excess returns around the quarterly earnings announcement date suggests that market participants react too strongly to forecast revisions issued by analysts with high levels of media coverage. Taken together, these findings suggest that an analyst's level of media coverage can affect the initial market reaction to his forecast revisions.

The accuracy of sell-side analysts' forecast revisions is related to a number of factors, including characteristics of the analyst and the age of the forecast. In this study we examine whether there are differences in how sophisticated and unsophisticated investors use these factors to predict the relative accuracy of forecast revisions. We adapt the lens model methodological approach from the judgment and decision-making literature to investigate these differences in an archival setting. Our results suggest that sophisticated investors have greater knowledge overall about the relation of the factors to forecast accuracy. Further, our evidence is consistent with sophisticated investors relying more on the specific factors that provide the most benefits (relative to their costs) for predicting relative forecast accuracy.