The banking sector is subject to a number of regulations designed to promote the safety and soundness of the industry. Loan loss accounting standards began to change following the 2008 global financial crisis. In her latest research, “The Effects of Auditors and Bank Regulators on Loan Loss Provisions,” Wharton accounting professor Allison Nicoletti analyzes how external auditors and bank regulations affect the discretion that banks have in loan loss provision estimates. She recently spoke with Knowledge at Wharton about her work. An edited transcript of the conversation follows. Knowledge at Wharton: You’re going to talk today about your dissertation. Could you give us a broad overview? Allison Nicoletti: My dissertation examines how external auditors and bank regulators affect loan loss provision decisions. The loan loss provision is analogous to bad debt expense for a non-financial firm, and for banks, it’s one of the most important accruals.…