...Kevin C. W. Chen; Szu-fan Chen SUMMARY We investigate whether the concern of shareholder litigation motivates auditors to disclose internal control weaknesses. We document that issuing adverse internal control opinions reduces the likelihood of auditors being named with their clients as defendants...

...Amanuel F. Tadesse; Uday S. Murthy SUMMARY We investigate whether the format of internal control weakness (ICW) disclosures required by the Sarbanes-Oxley Act of 2002 influences perceptions of nonprofessional investors. Using a 2 × 2 between-participants experiment, we examine two facets of ICW...

...Sudipta Basu; Jagan Krishnan; Jong Eun Lee; Yinqi Zhang SUMMARY This study investigates (1) why some IPO firms proactively disclose internal control weaknesses (ICWs) and remediation progress in their prospectuses before going public, despite being exempt from the requirements of Sections 302...

..., not process-level controls, are associated with a higher risk of reporting fraud. JEL Classifications: M41. Third, we investigate whether internal control weaknesses represent a more systemic cultural characteristic of the firm or its management. For example, tolerance of internal control weaknesses may...