What does this research mean for the field?

Negative news media coverage of peer audit firms improves audit quality by mitigating the contagion effect of low-quality audits, acting as an informal oversight mechanism. Novelty: ClaimNovelty.INCREMENTAL. Consensus alignment: ConsensusAlignment.NEUTRAL.

What question did this study set out to answer?

To examine whether negative news media coverage of peer accounting firms improves audit quality by attenuating the contagion effect of financial restatements.

August 22, 2026Review of Accounting StudiesOpen Access

Does news media affect audit quality? Evidence from variation in the “contagion effect”

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Authors

ECElizabeth N. Cowle CRCaleb Rawson SRStephen P. Rowe

Discussion

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Overview

Empirical analysis reveals negative peer news coverage mitigates restatement contagion among local audit offices, highlighting the role of external media as an informal oversight mechanism.

Key Points

To examine whether negative news media coverage of peer accounting firms improves audit quality by attenuating the contagion effect of financial restatements.
Tracked the geographic and office-level contagion of financial restatements across corporate clients sharing an audit office or city.
Evaluated how negative peer news coverage, litigation reporting, client firm size, and local media intensity moderate audit restatement risks.
Financial restatements exhibit significant local contagion, increasing restatement risks for other companies served within the same audit office or metropolitan area.
Negative news coverage of peer audit firms significantly attenuates this contagion effect, especially among smaller client firms and in markets with higher local news intensity.
The mitigation effect is driven specifically by negative and litigation-related reporting rather than non-negative news, reflecting increased auditor attention to reputational threats.

Cite This Study

Cowle et al. (2026) studied this question.

synapsesocial.com/papers/6a895f87ca7ade938187e2f7 https://doi.org/10.1007/s11142-026-09986-9

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August 22, 2026Review of Accounting StudiesOpen Access

Does news media affect audit quality? Evidence from variation in the “contagion effect”

View Full Paper

Ask AI

Bookmark

Authors

ECElizabeth N. Cowle CRCaleb Rawson SRStephen P. Rowe

Discussion

Member takes

Overview

Empirical analysis reveals negative peer news coverage mitigates restatement contagion among local audit offices, highlighting the role of external media as an informal oversight mechanism.

Key Points

To examine whether negative news media coverage of peer accounting firms improves audit quality by attenuating the contagion effect of financial restatements.
Tracked the geographic and office-level contagion of financial restatements across corporate clients sharing an audit office or city.
Evaluated how negative peer news coverage, litigation reporting, client firm size, and local media intensity moderate audit restatement risks.
Financial restatements exhibit significant local contagion, increasing restatement risks for other companies served within the same audit office or metropolitan area.
Negative news coverage of peer audit firms significantly attenuates this contagion effect, especially among smaller client firms and in markets with higher local news intensity.
The mitigation effect is driven specifically by negative and litigation-related reporting rather than non-negative news, reflecting increased auditor attention to reputational threats.

Cite This Study

Cowle et al. (2026) studied this question.

synapsesocial.com/papers/6a895f87ca7ade938187e2f7 https://doi.org/10.1007/s11142-026-09986-9

View Full Paper

Ask AI

Bookmark