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Section 404 of the Sarbanes–Oxley Act (SOX) altered the relationship between auditors and their clients by requiring an external audit of companies’ internal controls. Regulatory guidance is interpreted and applied by external auditors to comply with SOX. The purpose of this paper is to apply service operations management theories and techniques to the internal control audit process to better understand the role regulatory guidance plays in audit services. We discuss service operations management theories that apply to the production of audit services and employ the operations management technique of simulation to examine the effects of a historical relationship between the client and the auditor, information sharing between the client and the auditor, and the auditor’s perceived risk of the client on the internal control audit process. The application of service operations management theories and the simulation results illustrate that risk and information sharing are key factors for the audit process. The results suggest the updated Public Company Accounting Oversight Board guidance from Auditing Standard 2 to Auditing Standard 5 appropriately increased audit effectiveness by encouraging risk-based judgments and information sharing. This paper merges accounting and service operations management research to examine the effects of regulatory guidance on the internal control audit process. The paper uses simulation to illustrate the importance of interpreting regulatory guidance and the specific effects of risk and information sharing on the internal control audit process.

This paper aims to describe the storage constrained, inbound inventory routeing problem and presents bounds and heuristics for solutions to this problem. It also seeks to analyze various characteristics of this problem by comparing the solutions generated by the two proposed heuristics with each other and with the lower bound solutions.

The proposed heuristics use a sequential decomposition strategy for generating solutions for this problem. These heuristics are evaluated on a set of problem instances which are based on an actual application in the automotive manufacturing industry.

The storage space clearly has a significant effect on both the routeing and inventory decisions, and there are complex and interesting interactions between the problem factors and performance measures.

Facility design decisions for the storage of inbound materials should carefully consider the impact of storage space on transportation and logistics costs.

This problem occurs in a number of different industrial applications while most of the existing literature addresses outbound distribution. Other papers that address similar problems do not consider all of the practical constraints in the problem or do not adequately benchmark and analyze their proposed solutions.

This study investigates the consequences of the key audit matter (KAM) disclosure requirement by considering two salient audit proxies: audit fees and audit report lag. This investigation is relevant because most auditors worldwide are required to expand their audit report including discussion on key matters faced in the audit engagement. However, the emerging literature on the implications of KAM is inconclusive.

Using a distinctive dataset of 601 year-observations for firms listed on the Omani capital market over 2012–2019, this study employs pooled panel data regression with robust standard error.

Results indicate that auditors increased their fees considerably during the period of KAM but substantially shortened audit report lag. Conversely, using the KAM period as a sample, the authors find marginal or insignificant evidence for the effect of the number of KAM on both proxies. In additional analyses, this study shows that entity-level risk KAM is associated with higher fees and shorter audit report lag, while KAM related to account-level risk does not have the same effect. Interestingly, it is observed that KAM disclosure is strongly associated with higher fees and high-quality audit even when the auditors issue their report in a shorter time.

This study contributes to the limited research examining the consequences of KAM in emerging markets. It is also the first to show that KAM is associated with shorter audit report lag.

The purpose of this paper is to develop efficient heuristics for determining the route design and inventory management of inbound parts which are delivered for manufacturing, assembly, or distribution operations and for which there is limited storage space. The shipment frequencies and quantities are coordinated with the available storage space and the vehicle capacities.

Two heuristics that generate near optimal solutions are proposed. The first heuristic has an iterative routing phase that maximizes the savings realized by grouping suppliers together into routes without considering the storage constraint and then calculates the pickup frequencies in the second phase to accommodate the storage constraint. The second heuristic iteratively executes a routing and a pickup frequency phase that both account for the storage constraint. A lower bound is also developed as a benchmark for the heuristic solutions.

Near optimal solutions can be obtained in a reasonable amount of time by utilizing information about the amount of storage space in the route design process.

The traditional emphasis on high vehicle utilization in transportation management can lead to inefficient logistics operations by carrying excess inventory or by using longer, less efficient routes. Route formation and pickup quantities at the suppliers are simultaneously considered, as both are important from a logistics standpoint and are interrelated decisions.

The two proposed heuristics dynamically define seed sets such that the solutions to the capacitated concentrator location problem (CCLP) are accurately estimated. This increased accuracy helps in generating near‐optimal solutions in a practical amount of computing time.

The purpose of this paper is to investigate the association between auditor industry specialization and audit fees surrounding Section 404 implementation.

With a sample of 1,006 industrial firms over the 2003-2005 reporting periods, an ordinary least square regression model was used to regress change in audit fees on auditor specialization measure and other control variables.

It was found that auditor industry specialization is negatively related to the change in audit fees during the first year of Sarbanes–Oxley Act (SOX) compliance (2003-2004). It was also found that there were no significant cost savings associated with auditor industry specialization in the second year of SOX compliance (2004-2005).

These results suggest that industry-specific expertise may enable auditors to adapt more efficiently to new significant audit standards and regulations, but that such efficiencies are likely to be most pronounced during the initial implementation year.

Auditor competition and auditor specialization are at the forefront of today’s ever-changing accounting industry. Analysis of a contemporary auditing issue (auditor specialization) in the context of major legislation (SOX) provides a research setting that gives both academics and practitioners valuable insight toward how future legislation can impact current accounting industry issues such as the increasing need to have more expertise.

This case was developed through interviews with Brooke Cooper, Dr. Charles Steinberg and others at the WooSox, as well as a thorough analysis of the Worcester Red Sox’s social media and company websites.

The purpose of this marketing case study is to This case focuses on understanding the process involved in conceptualizing and developing a marketing plan and strategy, and the ability to define and articulate the importance of BRAND in a marketing context.

The Pawtucket Red Sox relocated to Worcester, Massachusetts in Spring of 2019. The citizens of Worcester embraced their new team – the WooSox – as did many of the surrounding towns in Worcester County. The marketing arm of the WooSox worked tirelessly to develop a plan that included immersion in the cultures of the cities and towns within Worcester County; becoming a presence in their schools, businesses and community-based organizations; learning the priorities of the individual communities and supporting those needs; building a consistent, interactive and strong presence on social media; highlighting various interactions with their fan base; providing an outstanding experience at Polar Park; creating a loyal fan base ultimately driving ticket and merchandise sales and cultivating new fans to experience Polar Park; and understanding that word of mouth is the best form of marketing. The WooSox leadership team understood the need to expand its reach into new markets. In this case, the marketing team has been charged with exploring the Western Massachusetts region as a potential growth opportunity. The WooSox have a strong brand in the greater Worcester County area – but can they travel 60–90 min west and establish the same presence?

This case was written for undergraduate-level Marketing Principles or Sport Marketing courses.

CEO duality occurs when the same individual holds both the CEO and board Chair positions. In some countries (such as Britain) CEO duality is considered to impair good corporate governance. In the United States, however, CEO duality is still a common practice. The Sarbanes–Oxley Act (SOX) included many corporate governance reforms, but the Act did not address the issue of CEO duality. However, we suggest that the corporate governance environment surrounding the passage of SOX may have influenced corporate board decisions regarding CEO duality when appointing new CEOs. In this study, we seek to determine whether CEO duality changed in the post-Sox environment by investigating the likelihood of CEO duality when CEO changes took place before and after SOX. Using a sample of 182 CEO succession events before and after the passage of SOX, we find that the likelihood of combining the CEO and Chair positions for newly appointed CEOs significantly decreased in the post-SOX period relative to the pre-SOX period. Our results suggest the SOX environment fostered a greater focus on governance issues even beyond the specific provisions of SOX.

This study examines whether auditors’ pricing decisions on managerial ability are affected by auditor litigation risk (financial distress or financial crisis), auditor’s familiarity with their client or regulatory changes in the post-Sarbanes–Oxley Act of 2002 (SOX) era.

Building on the extant audit fee literature, this study constructs an audit fee determinants model to examine how context affects auditors’ pricing of managerial ability.

Auditors offer a larger fee discount to more able client management teams when auditors face lower litigation risks or are more familiar with the client. Furthermore, managerial ability has a more pronounced effect on audit fees in the post-SOX era when managers are mandated to play more active roles in financial reporting (i.e. certification of financial statements required by SOX 302).

Based on the audit risk model (Simunic, 1980), Krishnan and Wang (2015) show that the managerial ability of an audit client is relevant and important to auditors’ pricing decisions. This study demonstrates that managerial ability exhibits a non-linear relationship with audit fees and contextual factors, such as litigation risk, and that auditors’ familiarity with managers can alter the negative association between audit fees and managerial ability. This study extends Krishnan and Wang’s study by offering additional insights into auditors’ use of soft information such as managerial ability. Furthermore, the findings add to the literature on the impact of SOX on audit fees by suggesting that SOX has not only increased overall audit fees (Ghosh and Pawlewicz, 2009; Huang et al., 2009), it has also increased auditors’ price sensitivity to soft information (e.g. managerial ability).

This study provides insights for audit firms and client companies who are interested in understanding audit fee-pricing decisions. The findings also suggest that auditors need to be sensitive and responsive to various contextual factors when making pricing decisions.

Previous studies have not addressed the non-linear relationship between audit fees and soft information about managerial ability.

The purpose of this paper is to investigate the impact of the Sarbanes‐Oxley Act (SOX) on market‐based measures of earnings quality and cost of capital.

The paper uses empirical data to determine measures for the market's perception of earnings quality and the ex‐ante cost of capital. The measures for 2001 (pre‐SOX) are compared to the measures for 2003 (post‐SOX).

The results indicate that in the post‐SOX period, the market's perception of earnings quality has improved, while the firms' cost of equity capital has decreased.

At a time when debate is raging as to the overall impact of SOX on the US economy, this study provides some evidence as to its beneficial nature. A limitation is that the method of computing restricts the sample, potentially creating biases.

This is the first study to investigate the impact of SOX on the market's perception of earnings quality and the firms' cost of equity capital.