This study investigates the impact on auditors' and clients' activities of Public Company Accounting Oversight Board (PCAOB) inspections of individual engagements. I find that both auditors and clients react to a Part I Finding, which identifies audit deficiencies on their inspected engagements. Audit firm effort increases on inspected engagements and non-inspected engagements of offices or partners that receive a Part I Finding, suggesting direct, as well as spillover, effects of the PCAOB inspections. The client is also more likely to switch auditors. However, auditor effort and financial reporting quality subsequently decline for inspected engagements that did not receive a Part I Finding. In these cases, clients are less likely to switch auditors. Additional analyses show that the auditor reaction depends on whether the auditor is an industry specialist, the client reaction depends on the size of the auditor, and effects on financial reporting quality depend on whether the deficiency is a firm-wide issue. Overall, these results suggest that both audit firms and clients care about the PCAOB individual engagement inspection process and, in several instances, gravitate toward the level set by the Part I Finding bar.

We examine the disclosure policies of non-unionized firms operating in unionized industries. We test the hypothesis that non-unionized firms have an incentive to disclose more information when their unionized rivals are engaged in labor renegotiations; that is, to weaken them. We find that non-unionized firms disclose more information and more good news when renegotiations are ongoing. This behavior is stronger for larger firms, firms with fewer peers in the industry, and firms more similar to their renegotiating rivals. We also find some evidence that unionized firms are harmed by this behavior and that non-unionized firms benefit from their increased disclosures.