Liquidity Constraints and Auditor Responses to Repo Transactions
研究发现审计师对银行回购交易的应对取决于其流动性约束，而非交易规模；流动性紧张的银行若季度末回购负债异常下降，审计费用会显著上升。
ABSTRACT Repurchase agreements (repos) are often used by banks to manipulate their reported quarter‐end risk levels. Prior research has documented adverse capital market consequences associated with active window dressing of repo liabilities. In this study, we investigate whether a client bank's repos also affect its auditor's risk assessment. We find that auditor responses to repos are contingent on the bank's liquidity constraints rather than on the extent of repo transactions. Specifically, downward quarter‐end deviations in repo liabilities are not perceived by auditors as risky for banks with greater liquidity. For banks with high liquidity constraints, however, we document a strong positive association between repo deviations and audit fees. Our findings suggest that auditors utilize the contextual cue of liquidity constraints to help resolve ambiguity surrounding repo transactions and accordingly charge higher fees for clients with higher liquidity risk. This main finding persists when a change in auditor or the issuance of a going‐concern opinion is used instead of audit fee as a measure of auditor response