This paper draws from the service science and professional service literatures to conceptualize financial auditing as an economic service. A central characteristic of economic services is the participation of the customer/client in the production process. The necessity of having the customer/client be a co-producer introduces greater heterogeneity to the provision of services relative to the manufacturing of goods which, in turn, creates a tension between service quality and service efficiency. One implication of this tension is that standardization of the audit process may not increase audit quality. We further argue that audit research should give more attention to the idiosyncratic nature of audit engagements and the importance of successful cooperation between the service provider (the audit firm) and the client for improving audit quality. Utilizing research on service networks, we draw attention to a broader perspective than the dyadic relations of service provider and client to show that the possible frictions between the value of co-creation of the service and the independence of the service professional are endemic to the service process, implying that efforts to maximize auditor independence may have unexpected costs that impair audit quality.

We examine whether financial analysts are subject to limited attention. We find that when analysts have another firm in their coverage portfolio announcing earnings on the same day as the sample firm (a “concurrent announcement”), they are less likely to issue timely earnings forecasts for the sample firm's subsequent quarter than analysts without a concurrent announcement. Among the analysts who issue timely earnings forecasts, the thoroughness of their work decreases as their number of concurrent announcements increases. In addition, analysts are more sluggish in providing stock recommendations and less likely to ask questions in earnings conference calls as their number of concurrent announcements increases. Moreover, when analysts face concurrent announcements, they tend to allocate their limited attention to firms that already have rich information environments, leaving behind firms in need of attention. Overall, our evidence suggests that even financial analysts, who serve as information specialists, are subject to limited attention. JEL Classifications: G10; G11; G17; G14. Data Availability: Data are publicly available from the sources identified in the paper.