<p>We examine whether firms alter their financial reporting decisions during periods of increased regulatory scrutiny. A determinants analysis reveals that the likelihood of an enforcement action for firms investigated by the SEC increases (decreases) with pre-investigation levels of accounting manipulation and irregularities (accounting conservatism). Further, while executive turnover is positively associated with enforcement actions, firms that bring more accounting expertise into their executive ranks have a lower likelihood of being sanctioned. Next, we provide evidence suggesting that managers attempt to reduce the probability of enforcement by increasing conservatism and reducing manipulation and irregularities during the investigation. Finally, investigation firms are associated with adverse outcomes, including a reduction in investment and increases in executive turnover, lawsuits, restatements, and comment letters. Our study improves the understanding of how heightened regulatory scrutiny over financial reporting influences managerial behavior in terms of firms’ operating and financial reporting decisions, regardless of enforcement outcomes.</p>