Title

Organized labor, audit quality, and internal control

Document Type

Article

Publication Date

3-1-2017

Subject Area

ARRAY(0x5575b06b60f8)

Abstract

This study investigates whether labor union strength is associated with the quality of audits and internal control. Labor unions have reason to demand high quality audits and strong systems of internal control because they rely on financial information in collective bargaining negotiations. However, organized labor creates incentives for managers to procure lower quality audits and provide weaker internal control in order to hold greater influence over the content of the financial information that unions receive. I provide evidence that union strength is associated with higher audit quality and better internal control. Specifically, I find that union strength is associated with higher audit fees, fewer audit failures, and fewer material weaknesses.

Publication Title

Advances in Accounting

Volume

36

First Page

11

Last Page

26

Digital Object Identifier (DOI)

10.1016/j.adiac.2016.09.005

ISSN

08826110

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