The Determinants and Consequences of Copying the Auditor on SEC Comment Letter Correspondence

SUMMARY We investigate when companies copy auditors on SEC comment letter correspondence and whether copying the auditor affects comment letter resolution. We find that companies are more likely to copy the auditor when there is a need for the auditor's expertise (i.e., the SEC's comment letter references an accounting topic). Copying the auditor is associated with quicker company responses to the SEC, and copying a more experienced auditor is associated with quicker SEC responses. Copying more experienced auditors is also associated with a greater (lower) likelihood that the comment letter is resolved through a revision (restatement). Finally, with respect to potential mechanisms, copying the auditor is associated with clearer company responses, more references to accounting authoritative guidance, more references to previous phone calls with the SEC, fewer requests for extensions, and higher audit fees. Overall, our results suggest that companies benefit from copying the auditor in comment letter responses. Data Availability: All data used in the study are publicly available from sources cited in the text. JEL Classifications: M42; M48.