ABSTRACT: This study examines the causes and consequences of internal control deficiencies in the nonprofit sector using a sample of 27,495 public charities from 1999 to 2007. We first document that the likelihood of reporting an internal control problem increases for nonprofit organizations that are in poor financial health, growing, more complex, and/or smaller. We then present evidence that the disclosure of weak internal controls over financial reporting is negatively associated with subsequent donor support received after controlling for the current level of donor support and other factors influencing donations. We likewise report a negative association between internal control problems and subsequent government grants. Our results suggest that donors and government agencies, important sources of capital for nonprofit organizations, react either directly or indirectly to internal control information.

ABSTRACT We conduct three experiments to test if investors' views about fair value are contingent on whether the financial instrument in question is an asset or liability, whether fair values produce gains or losses, and whether the item will or will not be sold/settled soon. We draw on counterfactual reasoning theory from psychology, which suggests that these factors are likely to influence whether investors consider fair value as providing information about forgone opportunities. The latter, in turn, is predicted to influence investors' fair value relevance judgments. Results are generally supportive of the notion that judgments about the relevance of fair value are contingent. Attempts to influence investors' fair value relevance judgments by providing them with information about forgone opportunities are met with mixed success. In particular, our results are sensitive to the type of information provided and indicate the difficulty of overcoming investors' (apparent) strong beliefs about fair value. Data Availability: Contact the authors.