Carol Callaway Dee

Prominent Audit Clients and the Relation between Discretionary Accruals and Non-Audit Service Fees

Abstract Using a matched-pair design, we find that for SP however, this result is not robust to alternative fee measures. For a group of matching small firms, higher fees paid to auditors are associated with higher levels of income-decreasing discretionary accruals (i.e., lead to more negative discretionary accruals). We conclude that (1) the relation between discretionary accruals and fees paid to auditors differs for prominent and less-prominent audit clients, and (2) auditors appear to be more conservative with their less-prominent audit clients from whom they receive large fees.

Environmental Disclosures in the Oil and Gas Industry

We investigate the state of environmental financial reporting since the increased regulation imposed by the Securities and Exchange Commission and other regulatory bodies during the 1990s by examining mandatory environmental disclosures for a sample of petroleum firms. Our results indicate that while the majority of firms stated that they accrued remediation liabilities and environmental exit costs, only about half or less of these firms disclosed the amount of the accrual, even though disclosure is required if the amount is material. Consistent with prior research, we find that cross-sectional variation in disclosure is positively related to firm size and financial leverage. Our results show that environmental disclosures increased during the 1990s, concurrent with increased regulatory pressure and corresponding threats to oil companies’ legitimacy. Firms’ disclosure levels in 1998 were strongly related to their disclosure levels in 1989 –i.e., those companies that reported more (less) information in 1989 did the same in 1998. Thus, individual firms appear to have distinctive environmental disclosure policies.