Reported deficiencies continue to persist in audits of fair value measurements and other complex accounting estimates (hereafter, “FVMs”), despite improvements in auditor performance observed by regulators. The persistence of reported deficiencies in audits of FVMs suggests that factors underlying this trend may be more complicated and multidimensional than previously suggested by regulators and academic research, which has focused largely on auditors' unsatisfactory performance as the principal source of reported deficiencies. Drawing from the judgment and decision‐making expertise literature, we gather field‐based data from audit experts to identify additional factors that are likely to be contributing to differences of opinion between audit and inspection experts and the persistence of reported deficiencies in audits of FVMs. We find evidence that audit experts interpret standards and evaluate audit evidence differently than inspectors, and thus perceive there to be a gap between what auditors and inspectors regard as sufficient appropriate audit evidence to support audits of FVMs (hereafter, “FVM gap”). Moreover, results highlight several areas in audits of FVMs where differences of opinion exist between auditor and inspector experts regarding what constitutes a reported deficiency. Within the contexts we examine, our results identify additional factors, beyond deficient auditor performance, that may contribute to the FVM gap. We also report audit partners' recommendations for ways to reduce the FVM gap and suggest avenues for future research. Gaining a more complete understanding of sources contributing to reported deficiencies will help regulators, standard setters, audit firms, and academics to identify ways to reduce the FVM gap and reported deficiencies in audits of FVMs.

Transaction costs have a first-order effect on the performance of currency portfolios. Proportional costs based on quoted bid–ask spread are relatively small, but when a fund is large, costs due to the trading volume price impact are sizable and quickly erode returns, leaving many popular strategies unprofitable. A mean–variance-transaction-cost optimized approach (MVTC) that accounts for costs in the optimization efficiently tackles the problem with only relatively minor negative implications on before-cost profitability. MVTC is robust even when the price impact of trading is severe. Finally, we introduce an accurate extrapolation approach to expand the sample of the realized Amihud measure of Ranaldo and Santucci de Magistris (2022) from 12 to 26 currencies and from 2012 back in time to 1986.

We examine whether tone at the top emphasizing firm-level commercial, audit quality, or both goals (balanced) can nonconsciously affect auditors' engagement-level tendency to accept management's estimates, and whether the effects differ if management engages a specialist. This study is motivated by academics' and regulators' increasing attention on firm-level tone at the top and concerns about management bias in audited estimates, especially when the evidence is prepared by management's specialist. We find firm-level goals can be pursued nonconsciously by auditors when performing a complex task. When management's specialist is absent, a balanced approach reduces auditors' tendency to agree with management's estimate compared to a commercial approach; however, it is less effective when management's specialist is present. We find an audit quality approach reduces auditors' tendency to accept management's estimate compared to a commercial approach, regardless of the absence/presence of a specialist. Our results have important implications for regulators and audit firms. Data Availability: Data are available from the authors upon request.