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In a quasi-experiment with external (EA), in-house internal (IIA), and outsourced internal auditors (OIA) as participants in their natural roles, we compare auditors’ internal control evaluations in the presence of differing management reporting motives. Grounded in Organizational Identity (OID) Theory, we find EAs’ evaluations are more (less) lenient when management’s motive is less (more) self-serving. We provide evidence that management’s motives affect EAs’ evaluations because management is a conduit for EAs’ OID and because EAs adopt an affiliative protective orientation. In contrast, we find no evidence management’s motives affect IIAs’ evaluations or that management is an OID conduit for IIAs. Finally, we find that although OIAs and IIAs exhibit similar OID levels, on average, OIAs’ evaluations are more lenient than IIAs’. Our results clarify how auditors form OID, how it manifests into protective behaviors, and suggest EAs’ preference to rely on OIAs’ work over IIAs’ may inadvertently diminish audit quality.

Background: Patients with established coronary artery disease or peripheral artery disease often have diabetes mellitus. These patients are at high risk of future vascular events. Methods: In a prespecified analysis of the COMPASS trial (Cardiovascular Outcomes for People Using Anticoagulation Strategies), we compared the effects of rivaroxaban (2.5 mg twice daily) plus aspirin (100 mg daily) versus placebo plus aspirin in patients with diabetes mellitus versus without diabetes mellitus in preventing major vascular events. The primary efficacy end point was the composite of cardiovascular death, myocardial infarction, or stroke. Secondary end points included all-cause mortality and all major vascular events (cardiovascular death, myocardial infarction, stroke, or major adverse limb events, including amputation). The primary safety end point was a modification of the International Society on Thrombosis and Haemostasis criteria for major bleeding. Results: There were 10 341 patients with diabetes mellitus and 17 054 without diabetes mellitus in the overall trial. A consistent and similar relative risk reduction was seen for benefit of rivaroxaban plus aspirin (n=9152) versus placebo plus aspirin (n=9126) in patients both with (n=6922) and without (n=11 356) diabetes mellitus for the primary efficacy end point (hazard ratio, 0.74, P =0.002; and hazard ratio, 0.77, P =0.005, respectively, P interaction =0.77) and all-cause mortality (hazard ratio, 0.81, P =0.05; and hazard ratio, 0.84, P =0.09, respectively; P interaction =0.82). However, although the absolute risk reductions appeared numerically larger in patients with versus without diabetes mellitus, both subgroups derived similar benefit (2.3% versus 1.4% for the primary efficacy end point at 3 years, Gail-Simon qualitative P interaction P interaction =0.02; 2.7% versus 1.7% for major vascular events, P interaction P interaction =0.001). Conclusions: In stable atherosclerosis, the combination of aspirin plus rivaroxaban 2.5 mg twice daily provided a similar relative degree of benefit on coronary, cerebrovascular, and peripheral end points in patients with and without diabetes mellitus. Given their higher baseline risk, the absolute benefits appeared larger in those with diabetes mellitus, including a 3-fold greater reduction in all-cause mortality. Registration: URL: https://www.clinicaltrials.gov ; Unique identifier: NCT01776424.

Audit firms are investing billions of dollars to develop artificial intelligence (AI) systems that will help auditors execute challenging tasks (e.g., evaluating complex estimates). Although firms assume AI will enhance audit quality, a growing body of research documents that individuals often exhibit “algorithm aversion” – the tendency to discount computer-based advice more heavily than human advice, although the advice is identical otherwise. Therefore, we conduct an experiment to examine how algorithm aversion manifests in auditor judgments. Consistent with theory, we find that auditors receiving contradictory evidence from their firm’s AI system (instead of a human specialist) propose smaller adjustments to management’s complex estimates, particularly when management develops their estimates using relatively objective (versus subjective) inputs. Our findings suggest auditor susceptibility to algorithm aversion could prove costly for the profession and financial statements users.

Recent research reveals that accruals-based earnings management (AEM) is decreasing while real earnings management (REM) is increasing, suggesting the correlation is due to regulatory scrutiny. However, based on Correspondent Inference Theory, we predict and find that when management uses REM, auditors are more restrictive of management's subjective estimates, making it more difficult for management to use income-increasing AEM. Our experiment manipulates the presence versus absence of REM, and whether the audit difference potentially impacts the client's ability to meet an earnings target. Using a serial mediation model, we find that when auditors observe REM, they perceive these operating decisions as aggressive, leading them to perceive management as aggressive, ultimately causing greater proposed adjustments on an unrelated audit difference. We contribute to the literature by demonstrating that when auditors observe REM, their altered perceptions about management can cascade, affecting how they respond to management estimates in unrelated financial statement accounts.

Informed by Perceptual Deterrence Theory, we conduct multiple experiments to investigate when and how auditor actions can help deter manager opportunism. In Study 1, we conduct two experiments in which managers can use real earnings management (REM) to report more favorable earnings. Study 1A results indicate that REM can be deterred when managers expect auditors to increase scrutiny and communicate their observations with the board. However, this effect occurs only when managers’ operational decisions are inconsistent (as opposed to consistent) with peer behavior. Study 1B results suggest that without communication to the board, auditor scrutiny is not likely to deter REM, irrespective of consistency with peers. In Study 2, we conduct an experiment in which managers can choose to use either accruals-based earnings management (AEM) or REM that is inconsistent with peer behavior to report more favorable earnings. We find that increased auditor scrutiny with communication to the board effectively deters both AEM and REM, reducing the total level of manager opportunism. However, auditor scrutiny alone (i.e., without communication to the board) deters AEM, but also induces more REM, leaving the total level of manager opportunism unchanged. Our findings highlight the importance of auditor-board communication and demonstrate when and how auditor actions can contribute to the deterrence of both AEM and REM.

In this study, we examine how information foraging by auditors affects audit evidence collection in two distinct contexts, and show how a small change to audit methodology mitigates the potentially harmful effects of foraging. Information Foraging Theory explains how, while navigating an information environment, individuals learn to acquire information through personally experiencing the costs incurred and the values obtained from information. Consistent with the theory, we find that auditors react to the immediately felt costs of information collection (e.g., time and effort) at the expense of a more global consideration of information value (i.e., auditors collect lower-quality audit evidence). However, foraging behavior is moderated by removing the personal cost to the individual auditor (identifying audit evidence for another member of the audit team to collect), further demonstrating that these personally felt costs influence auditor choices in a way that reduces the quality of information collected. We contribute to the literature by demonstrating how information foraging can influence evidence quality and, thus, audit quality, and how a slight alteration of audit methodology can mitigate this behavior.

SUMMARY Real earnings management (REM) is an increasingly common method of manipulating financial results, yet little research examines auditors' perceptions of and responses to REM. Using the auditor comfort framework (Pentland 1993; Carrington and Catasús 2007), we examine the extent to which REM impacts auditor comfort and how, in the presence of REM, auditors rely on comfort-building strategies in trying to move from a state of discomfort (i.e., fear of failing to identify misstatements) to comfort. Based on in-depth interviews of 20 experienced auditors, we find that auditors are aware of REM and often identify REM through formalized protocols that include analytical procedures, discussions with management, or their knowledge of the business. Formal audit procedures play a role when trying to address, “rationally,” the risk of REM, but we also find that auditors use emotive phrases and references to body senses related to discomfort, indicating that there also is an emotional component to dealing with REM (Guénin-Paracini, Malsch, and Marché-Paillé 2014). Most of the interviewees have concerns about REM (i.e., it threatens comfort), largely because they believe that it is indicative of management's desire to meet short-term targets (i.e., poor management tone), and that it may signal the use of other, less acceptable earnings management methods (i.e., accruals-based earnings management) to meet those targets. Interviewees respond to the discomfort caused by REM in many ways, including engaging in discussions with the client, increasing skepticism, and altering audit procedures and risk assessments. Auditors may even go as far as resigning from an engagement because of REM. Our analysis reveals that REM is a significant source of auditor discomfort and that auditors use both their rationality and their emotions/body senses to identify and try to alleviate that discomfort.

Real earnings management (REM) is an increasingly common method of manipulating financial results, yet little research examines auditors’ perceptions of and responses to REM. Using the auditor comfort framework (Pentland 1993; Carrington and Catasus 2007), we examine the extent to which REM impacts auditor comfort and how, in the presence of REM, auditors rely on comfort-building strategies in trying to move from a state of discomfort (i.e., fear of failing to identify misstatements) to comfort. Based on in-depth interviews of 20 experienced auditors, we find that auditors are aware of REM and often identify REM through formalized protocols that include analytical procedures, discussions with management, or their knowledge of the business. Formal audit procedures play a role when trying to address, “rationally,” the risk of REM, but we also find that auditors use emotive phrases and references to body senses related to discomfort, indicating that there also is an emotional component to dealing with REM (Guenin-Paracini, Malsch, and Paille 2014). Most of the interviewees have concerns about REM (i.e., it threatens comfort), largely because they believe that it is indicative of management’s desire to meet short-term targets (i.e., poor management tone), and that it may signal the use of other, less acceptable earnings management methods (i.e., accruals-based earnings management) to meet those targets. Interviewees respond to the discomfort caused by REM in many ways, including engaging in discussions with the client, increasing skepticism, and altering audit procedures and risk assessments. Auditors may even go as far as resigning from an engagement because of REM. Our analysis reveals that REM is a significant source of auditor discomfort and that auditors use both their rationality and their emotions/body senses to identify and try to alleviate that discomfort.

Although real earnings management (REM) is increasingly common, limited research examines how auditors react when they know or suspect that their clients are using REM. In addition, prior research on whether auditors react to REM is not conclusive, nor does it provide strong insights into why auditors would react to REM, given that REM does not violate GAAP. We conduct a 2x3 between-subjects experiment (client Beat or Missed the analysts’ consensus forecast, with three levels of REM: Explicit REM, Potential REM, and No REM) with highly experienced auditors as participants to examine the conditions in which auditors are sensitive to REM. Informed by Correspondent Inference Theory, we predict and find evidence that, when a client beats an EPS target, auditors observing Explicit REM perceive the weakest management tone and assess the highest levels of risk, followed by those observing Potential REM, and then those observing no REM. However, we predict that, when a client misses an EPS target, auditors are less likely to view Potential REM as actual REM. Thus, we find that, when a client misses an EPS target, auditors observing Explicit REM perceive weaker management tone and assess higher levels of risk relative to when they observe Potential REM or when REM is absent. Further, when clients miss the EPS target, we find that auditor responses to Potential REM do not differ from when REM is absent. Finally, we find that auditors’ perceptions of management tone mediate the relation between REM and risk assessments. Overall, the results are consistent with Correspondent Inference Theory and demonstrate how and why auditors respond to REM.

OBJECTIVESWe sought to evaluate whether oral anticoagulant (AC) therapy given for five months was superior to standard (control) therapy in patients with unstable angina receiving aspirin.BACKGROUNDThe long-term risk of myocardial infarction (MI) or death remains high in patients with unstable angina, despite the use of aspirin. Therefore, additional treatments are necessary.METHODSOf the 10,141 patients entering the main trial, 3,712 were randomized 12 to 48 h later to receive oral AC therapy (n = 1,848) or standard therapy (n = 1,864).RESULTSOne-hundred forty patients (7.6%) suffered from cardiovascular death, MI or stroke while receiving oral AC, compared with 155 patients (8.3%) on standard therapy (relative risk [RR] 0.90, 95% confidence interval [CI] 0.72 to 1.14; p = 0.40). The rates of the primary outcomes plus refractory angina were 16.7% (n = 308) versus 17.5% (n = 327) (RR 0.95, 95% CI 0.81 to 1.11; p = 0.53). Countries were divided into good or poor compliers (based on the use of oral AC above or below 70% at 35 days), without knowledge of results by country. In good-complier countries, oral AC was discontinued in only 10.4% of patients at seven days and in 23.6% by five months, compared with 27.6% and 44.9%, respectively, in poor complier countries. There were significant reductions in the risks of both the primary (6.1% vs. 8.9%; RR 0.68, 95% CI 0.48 to 0.95; p = 0.02) and secondary outcomes (11.9% vs. 16.5%; RR 0.70, 95% CI 0.55 to 0.90; p = 0.005) with oral AC in the good-complier countries. There was little difference in the poor-complier countries (9.0% vs. 7.8% for the primary and 21.3% vs. 18.5% for the secondary outcomes, tests for interactions comparing the RRs for the primary and secondary outcomes were p < 0.02 and p = 0.002, respectively, between the two sets of countries). In the overall study, there was an excess of major bleeding (2.7% vs. 1.3%; p = 0.004), which was larger in the good-complier countries (RR 2.71) compared with the poor-complier countries (RR 1.58). There were also reductions in cardiac catheterization (RR 0.80; p = 0.004) and coronary revascularization procedures (RR 0.82; p = 0.06) in the good-complier countries, but not in the poor-complier countries (RR 0.98 and 1.06, respectively, p for interaction of 0.06 and 0.04, respectively).CONCLUSIONSOverall, oral AC led to a small, nonsignificant reduction in the risk of the primary and secondary outcomes. Stratifying the countries or centers by their rates of compliance to oral AC suggested that good compliance to oral AC could potentially lead to clinically important reductions in major ischemic cardiovascular events.

Background Other than aspirin, there are few oral antithrombotic treatments with proven efficacy in patients with acute coronary syndrome. In this report, we present the rationale, design and baseline characteristics of the Clopidogrel in Unstable angina to prevent Recurrent ischaemic Events (CURE) trial, which includes a meta-analysis of the effects of thienopyridines in patients with vascular disease. Methods and Results Combined data from randomized trials of thienopyrindines in patients with atherosclerotic disease demonstrated a 29% reduction in vascular events when compared with placebo/control (n=2392) (OR 0.71, 95% CI 0.58-0.86, P=0.0006) and a 10% reduction in vascular events when compared with aspirin (n=22 254) (OR 0.91, 95% Cl 0.84-0.99, P=0.039). Similarly, randomized trials of aspirin plus thienopyridines in patients undergoing intracoronary stenting, demonstrated marked benefit of aspirin plus ticlopidine in reducing death or myocardial infarction compared with aspirin alone (OR 0.23, 95% CI 0.11-0.49, P=0.0001) or aspirin plus warfarin (OR 0.51, 95% CI 0.33-0.78, P=0.002). Whether these benefits extend to the much larger population of patients with acute coronary syndrome is unknown. CURE is an international, randomized, double-blind trial, in which patients with acute coronary syndrome will be randomized to receive either a bolus dose of clopidogrel (300 mg) followed by 75 mg per day for 3-12 months, or matching placebo. Both groups will receive aspirin. The co-primary efficacy end-points of CURE are: (1) the composite of cardiovascular death, myocardial infarction or stroke; and (2) the composite of cardiovascular death, myocardial infarction, stroke or refractory ischaemia. CURE will recruit approximately 12 500 patients with acute coronary syndrome (from 28 countries) and its power to detect moderate treatment benefits will be in the region of 80-90%, while maintaining an overall type I error (a) of 0.05. The baseline characteristics of the study population are consistent with at least a moderate risk group of patients with acute coronary syndrome. Conclusions Randomized trials of thienopyridines in patients with vascular disease demonstrate that thienopyridines are effective in reducing vascular events when compared with placebo/control or aspirin, as well as when used in combination with aspirin in patients undergoing intracoronary stent implantation. The CURE trial is a large international study to determine if acute and longterm treatment with the combination of clopidogrel and aspirin is superior to aspirin alone in patients with acute coronary syndrome. (C) 2000 The European Society of Cardiology.

A 55-year-old White male with agnogenic myeloid metaplasia, proved on bone marrow trephine biopsy, underwent splenectomy for abdominal discomfort. Six months later he developed paraparesis and on myelography multiple extradural obstructions were seen. In the absence of other obvious diagnostic possibilities, these were attributed to areas of extramedullary haematopoiesis, and he was treated with local radiotherapy. However, the neurological deficit progressed and emergency laminectomy and decompression were undertaken. Tissue obtained at this time confirmed the diagnosis of agnogenic myeloid metaplasia. A repeat myelogram showed complete relief of the obstruction, but the patient developed fulminating septicaemia and died. These findings are reported in view of the great rarity of spinal cord compression due to multiple areas of extramedullary haematopoiesis.