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I reexamine the conflicting results in Frank, Lynch, and Rego (2009) and Lennox, Lisowsky, and Pittman (2013). Frank et al. (2009) conclude that firms can manage book income upward and taxable income downward in the same period, implying a positive relation between aggressive book and tax reporting. Lennox et al. (2013) conclude the relation is negative and aggressive book reporting informs users that aggressive tax reporting is less likely. I identify four key differences in the research designs across the two studies, including measures of aggressive book reporting, measures of aggressive tax reporting, sample time periods, and empirical models. I systematically examine whether each of these differences is responsible for the conflicting results by altering the key difference while holding other factors as constant as possible. I find the relation between aggressive book and tax reporting is driven by the measure of aggressive book reporting, as the relation is positive for some subsets of firms and negative for others. Firms accused of financial statement fraud have a negative relation while nonfraud firms exhibit a positive relation. Using discretionary accruals, I also look for, but do not find a “pivot point” in the relation between aggressive book and tax reporting. I provide a better understanding of the relation between aggressive book and tax reporting by identifying research design choices that are responsible for prior results. I show that measures of both discretionary accruals and financial statement fraud are necessary to gain a more complete picture of the relation between aggressive book and tax reporting.

This study aims to examine how auditors respond to the revelation of clients’ corporate fraud.

This study uses an ordinary least squares estimation to examine how audit fees and audit turnover change after the revelation of corporate fraud.

After a client discloses fraudulent activities, average audit fees significantly increase due to an increase in audit hours, rather than in audit premiums. Both new and continuing auditors increase audit hours for fraud firms, but only new auditors charge higher audit fees for the increased effort. In addition, when auditors are designated by regulators following the revelation of fraud, audit fees and premiums increase, but audit hours do not. Finally, auditor turnover becomes more frequent after the revelation of fraud. Overall, the findings suggest that auditors update their assessment of audit risks after fraud revelation and, thus, adjust their audit pricing and client acceptance decisions.

The study provides regulators and audit practitioners with insights into how to audit contract characteristics and regulatory intervention (auditor designations) affect auditors’ response to increased audit risks.

The study contributes to the auditing literature and practice by providing evidence on how auditors respond to the revelation of fraudulent activities and how their response depends on their ability to determine audit fees. Moreover, we provide novel evidence that audit contracting characteristics and regulatory requirements result in different responses of auditors toward changes in audit risks.

The purpose of this paper is to examine whether comments made by Big‐Six auditors about their post‐audit perceptions of the client's integrity were influenced by their firm's rating of the client's integrity prior to the start of the current audit.

The paper uses an established fraud detection case study with a manipulation of client integrity. The participants include 152 managers and 342 seniors from five of the then Big‐Six firms.

The findings indicates that auditors were insensitive to client integrity ratings in the audit planning/risk assessment stage of the audit.

The very foundation of corporate governance and the value of the audit are weakened when client integrity is questionable and may not result in implementing more rigorous audit procedures suggested by Mautz and Sharaf.

The existent literature cannot be used to determine whether or not Auditing Standards enacted since 1991 have had any effect on the practice of auditing in this area. Consequently, this paper contributes to the literature by establishing a 1991 (i.e. before Statement of Auditing Standards 82) baseline for evaluation purposes. (A baseline being a point of reference to compare the results of future research.)

Investigates the relative importance of potential factors associated with the likelihood of detecting fraud during the audit of financial statements. Based on a survey of 357 auditors, reveals auditing experience of the auditor and prior success of auditing organization in detecting fraud are constantly significant variables in detecting fraud for each audit cycle and combined cycle estimates. Certified public accountant certification, peer review, and organizational size have impact only on certain specific audit cycles. This study surveyed two types of auditor: first, certified public accountants specialized in auditing publicly held corporations (external); and second, government entities, and internal auditors specialized in auditing publicly held corporations (internal). The respondent auditors evaluated the degree of effectiveness of 218 auditing techniques in detecting fraud. These techniques were associated with four different audit cycles: acquisition and payment, inventory and warehousing, payroll and personnel and sales and collection.

This paper aims to study the explanatory power of demographics, financial behaviors and financial literacy on instances of consumer financial fraud (CFF) among Emirati households.

This study is based on a survey applied to the United Arab Emirates’ (UAE’s) largest federal higher education institution. The authors analyzed the data using generalized linear models, specifically generalized regressions based on both the logit and the probit models. Independent sample tests were also applied to compare the different subgroups considered in this study.

The authors found that the CFF victims seem to be older with more years of post-secondary education and high monthly credit card balances. When analyzing the probability of Emirati students becoming CFF victims, the authors found that only age, instances of lack of monthly income to cover living costs, and average monthly credit card balance, all have significant and positive explanatory power on the probability of becoming a CFF victim. However, when analyzing the aggregate subsample of all Emirati respondents, only the credit card balance has a positive and significant relationship with such a probability.

The authors used a non-probability sampling method that produced some biases, including a gender bias and an age-related bias. These biases preclude us from making valid inferences and generalizations about the Emirati population.

To the best of authors’ knowledge, no previous research article has studied CFF in the UAE, which constitutes this study’s original contribution.

This study aims to investigate whether low self‐control and routine activity theories explain fraud outcomes among the elderly. Specifically, the effects of low self‐control and remote purchasing behaviors on shopping fraud targeting and victimization are empirically assessed.

Cross‐sectional survey data from telephone interviews conducted in Arizona and Florida are used. A total of 2,000 adults aged 60 and over were surveyed. Because selection bias was observed, a two‐stage probit regression model was estimated to assess theoretical hypotheses in a multivariate context.

The results demonstrate that two forms of remote purchasing – telemarketing purchase and mail‐order purchase – increase the probability of shopping fraud targeting. Infomercial purchase and mail‐order purchase are significant correlates of shopping fraud victimization. The probability of becoming a target and victim is affected positively by reduced levels of self‐control. The effects of demographic characteristics on fraud outcomes are null.

This research lends support to the argument that low self‐control and routine activity theories shed light on fraud victimization among elderly consumers. Future research should examine the influence of low self‐control, individual routines and lifestyles on other forms of victimization that the elderly experience.

The findings underscore the need for fraud prevention and increasing public awareness among elderly consumers.

This is the first study to examine shopping fraud targeting and victimization of the elderly in a broad theoretical context.

In the early days of the COVID-19 pandemic, an area could only report its first positive cases if the infection had spread into the area and if the infection was subsequently detected. A standard probit model does not correctly account for these two distinct latent processes but assumes there is a single underlying process for an observed outcome. A similar issue confounds research on other binary outcomes such as corporate wrongdoing, acquisitions, hiring, and new venture establishments. The bivariate probit model enables empirical analysis of two distinct latent binary processes that jointly produce a single observed binary outcome. One common challenge of applying the bivariate probit model is that it may not converge, especially with smaller sample sizes. We use Monte Carlo simulations to give guidance on the sample characteristics needed to accurately estimate a bivariate probit model. We then demonstrate the use of the bivariate probit to model infection and detection as two distinct processes behind county-level COVID-19 reports in the United States. Finally, we discuss several organizational outcomes that strategy scholars might analyze using the bivariate probit model in future research.

This paper aims to examine the research questions: Do executive and non‐executive directors face similar labor market penalties upon revelation of accounting fraud? Are all executive directors treated by markets as a homogenous group? Or, do executive directors who are top managers face stiffer penalties than other executive directors?

Board membership of incumbent directors in US firms accused of accounting fraud are tracked for three years after the revelation. Two labor market consequences/penalties are considered. Probability of losing internal, own firm board seat is the likelihood that incumbent directors leave the accused firm's board upon accounting fraud revelation. The likelihood of losing at least one external board seat (outside directorship) is also examined. Both univariate tests and multivariate LOGIT regressions are used to conduct the analysis.

Compared to non‐executive directors, executive directors are more than twice as likely to lose own firm board seat and at least five times as likely to lose at least one outside directorship. Moreover, all executives, top or otherwise, appear to face similar tough penalties.

Accounting fraud is a rare event; this may limit the generality of the findings. Results obtained from a US sample may be applicable to countries with well‐developed capital and labor markets. Results imply that the labor market for directors serves a vital function in the US‐style corporate governance environment; labor market discipline provides at least some incentives for board members, including non‐employee directors and other executive directors, to perform their fiduciary duties.

This is the first study that utilizes a single corporate event to analyze the operation of the labor market across different categories of directors. Also, while studies have examined penalties on top executives there is no evidence that other executives who also serve on the board of the accused firms suffer labor market penalties.