This study focuses on nonprofit clients of Arthur Andersen and investigates the impact of Andersen's loss of reputation on five charity income sources. We find that Arthur Andersen's loss of reputation does not impact nonprofit income. Our results are robust to alternative definitions of nonprofit income including multiple donation and revenue types, as well as organizational characteristics such as year, size, state, industry, organizational age, replacement auditor, and reliance on revenue source. These findings are in contrast to the results reported in for-profit studies that document the loss of market value suffered by shareholders of Andersen's clients. We believe this contribution has interesting implications for both nonprofit organizations and nonprofit researchers who aim to explore the effect accounting firm reputation plays in the nonprofit sector.

Documented behavioral differences between women and men suggest that the gender of the audit engagement partner may have implications for the price setting of the audit. Thus, this paper examines the effect of the auditor's gender on audit fees in an environment where the responsible audit partners can be identified. Using a sample of public firms from the NASDAQ OMX exchanges in three Nordic countries, we find evidence indicating that firms with female audit engagement partners have significantly higher audit fees. Although this is an interesting finding, it should be interpreted with caution since there is no clear theoretical explanation to support it. Potential reasons are introduced, such as the gender differences in risk tolerance, which may affect the pricing decisions by increasing the audit investment and/or increasing the audit fee risk premium. Alternatively, female auditors' diligence, lower overconfidence, and higher level of preparation could also lead to an increase in audit investment, and thereby result in higher audit fees.

We investigate in an experiment the effects of including statements contrasting the amount of assurance evidence collected and the relative level of assurance provided (‘contrasting statements’) on users' assurance assessment. We manipulated between subjects the type of assurance reports (limited versus reasonable assurance) and the presence of contrasting statements in the assurance report (with versus without). We also measured the participants' assurance knowledge (less versus more informed). We find that, under the current reporting regime which requires the inclusion of contrasting statements only in limited assurance reports, only more informed users can differentiate the extent of assurance conveyed in limited versus reasonable assurance reports. Extending the requirement of contrasting statements to reasonable assurance reports enables both less and more informed users to make stronger discerning assurance assessments between limited and reasonable assurance reports. We also find that users cannot distinguish between limited and reasonable assurance reports without contrasting statements. Overall results suggest that contrasting statements improve users' understanding of the different assurance levels conveyed in limited and reasonable assurance reports.

Since the initial disclosure of accounting irregularities at Enron in late 2001, the landscape of audits for both domestic and foreign companies listed in the United States has undergone substantial change. These changes include the demise of Arthur Andersen and the enactment of the Sarbanes-Oxley Act of 2002 (SOX). Together these changes have significantly increased the amount of work required to issue an audit report for US registrants and resulted in an unprecedented increase in the number of auditor resignations. I extend the audit literature by investigating how Big 4 audit firms make client continuance decisions in the post-SOX era. My findings indicate that Big 4 audit firms have become more critical of the client continuance decision and this heightened concern and/or the additional audit requirements of SOX has resulted in the threshold for client continuance increasing post-SOX. Interestingly, almost 70 percent of the Big 4 resignation clients move down in auditor class, and in the years immediately following the resignation, they continue to perform poorly.

The joint provision of audit and non-audit services by incumbent auditors has been intensively debated in the literature. The basic issue is that, while non-audit services can impair auditor independence, knowledge spillovers from these services can reduce the audit cost. This is an important trade-off for small and medium-sized enterprises (SMEs) that depend on their auditors for non-audit services. Using data from 322 Swedish SMEs, this study investigates the choice of purchasing non-audit services from the incumbent auditor and other audit firms. We hypothesize, and find, that the length of the auditor-client relationship is positively related to the purchase of non-audit services from incumbent auditors. Also, we find a positive association between perceived quality of audit services and the likelihood of a client purchasing non-audit services from the auditor. However, unlike studies of publicly traded companies, agency variables do not drive the purchase of non-audit services by SMEs.

Over the years, there has been considerable discussion about the extent and exact nature of the responsibilities of the auditor to detect fraud. The purpose of our study is to examine how the courts and professional bodies in a principle-based legal system respond to the change in the audit promulgations introducing proactive responsibilities in relation to fraud. We observe the outcome of actual fraud cases in which the court system and professional bodies in Denmark establish the responsibilities of auditors. The data set includes all publicized cases in the period 1996–2006. We find that the Danish audit profession has adopted the new proactive responsibilities identified by the standard setters, whilst the courts and the professional bodies seem to see ‘the changes’ as mere clarifications of existing responsibilities. The proactive responsibilities are not further accelerated by prescriptive court rulings.