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Author : Kevin M. Raedy
Publisher :
ISBN 13 :
Total Pages : 129 pages
Book Rating : 4.:/5 (17 download)
Download or read book Auditors' Litigation Risk written by Kevin M. Raedy and published by . This book was released on 1998 with total page 129 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Cory A. Cassell
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Auditor Litigation Risk and the Number of Institutional Investors written by Cory A. Cassell and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether auditors are sensitive to litigation risk related specifically to having greater numbers of institutional investors that hold the common stock of a given client. Our findings suggest that audit fees are higher when the number of institutional investors holding stock in the company is greater. Additional tests corroborate our inference that the association between audit fees and the number of institutional investors is related to litigation risk. The importance of improving our understanding of auditors' sensitivity to factors that increase litigation exposure is highlighted by the number and magnitude of lawsuits filed against auditors relating to the audits of public clients.
Author : Sue Woolley Scholz
Publisher :
ISBN 13 :
Total Pages : 169 pages
Book Rating : 4.:/5 (83 download)
Download or read book Auditor Litigation Risk and Auditor Resignations written by Sue Woolley Scholz and published by . This book was released on 1996 with total page 169 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jayanthi Krishnan
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book Litigation Risk and Auditor Resignations written by Jayanthi Krishnan and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Litigation against auditors has increased dramatically in recent years. Auditors can offset litigation risk in a number of ways, including improved audit quality and planning, increases in audit fees and increases in the issuance of modified opinions. Auditors can also adjust their client portfolios by becoming more selective in their choice of new clients and by withdrawing from high-risk engagements. We test the hypothesis that litigation risk motivates auditor resignations by comparing resignation companies with two groups of client companies that dismissed their auditors: one matched with the resignation companies on industry and year, and the other matched on year alone. We find resignation companies differ from dismissal companies along dimensions that capture the probability of litigation: financial distress, variance of abnormal returns, auditor independence, tenure and a modified (particularly going-concern) opinion. We also construct a litigation proxy based on a prior litigation-prediction model and find that the proxy is positively associated with the probability that the auditor will resign rather than be dismissed from the engagement. Our analysis is consistent with concerns expressed by the accounting profession that litigation pressures lead to the withdrawal of audit services for a segment of the market.
Author : Lynn Barkess
Publisher :
ISBN 13 :
Total Pages : 32 pages
Book Rating : 4.:/5 (383 download)
Download or read book The Impact of Litigation Risk on Auditor Remuneration written by Lynn Barkess and published by . This book was released on 1995 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mahfuz Chy
Publisher :
ISBN 13 :
Total Pages : 63 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Effect of Auditor Litigation Risk on Client Access to Bank Debt written by Mahfuz Chy and published by . This book was released on 2020 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: We exploit staggered state-level shocks to third-party auditor legal liability in the U.S. to test whether auditor litigation risk affects client companies' access to private debt markets. We find that an exogenous increase in auditor litigation risk leads to an increase in both clients' likelihood of receiving bank loans and the average amount of the bank loans that clients receive. In support of our proposed mechanism that auditor litigation risk leads to improvements in clients' audit and financial reporting quality, we find that these same shocks lead to a reduction in accruals, an increase in going-concern opinions, a decrease in restatements, and an improvement in accruals' ability to predict future cash flows. We also find that increased auditor litigation risk leads to an increase in the contractibility of clients' accounting numbers, as proxied by the use of debt covenants, and a decrease in the cost of borrowing.
Author : Jagan Krishnan
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (129 download)
Download or read book Auditor Litigation Risk and Corporate Disclosure of Quarterly Review Report written by Jagan Krishnan and published by . This book was released on 2014 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Securities and Exchange Commission (SEC) recently made timely reviews of quarterly financial statements mandatory for all registrants. The objective is to improve corporate quarterly reporting. However, formal review reports are not required to be included in 10-Q filings, and may not even be issued by auditors. A priori, one would expect these reports to be useful to investors if they imply added auditor diligence or if they contain modifications to the standard report. We find that only 5.7% of the companies in our sample attached the auditor's review report in their 10-Q filings. Also the majority of these reports are clean, suggesting that clients may not be disclosing the reports when they are modified. After controlling for factors such as auditor type, agency costs, capital market transactions, and company size, we find a significant negative association between auditor's litigation risk and disclosure of a review report. In addition, we find that the disclosure of a review report is associated with auditor type and company size.
Author : Miguel Minutti-Meza
Publisher :
ISBN 13 :
Total Pages : 22 pages
Book Rating : 4.:/5 (13 download)
Download or read book Issues in Examining the Effect of Auditor Litigation on Audit Fees written by Miguel Minutti-Meza and published by . This book was released on 2014 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: A large body of research has studied audit fees aiming to determine whether they reflect auditors' response to clients' risks, auditors' expertise, competitive pressures in the audit market, and independence issues between auditors and clients. Badertscher, Jorgensen, Katz, and Kinney [2014] study the effect of auditor litigation risk on audit fees. Litigation risk is expected to be a strong incentive for auditors to deliver high quality audits and an important determinant of audit fees. Nevertheless, determining the impact of litigation risk is complicated because although there is considerable variation in audit fees, there are scarce opportunities to examine variation in litigation risk. This paper provides a brief summary of extant studies examining the effect of auditor litigation on audit fees, and discusses research design issues and future research opportunities in this area.
Author : Szu-fan Chen
Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (13 download)
Download or read book Disclosure of Internal Control Weaknesses and Auditors' Litigation Risk written by Szu-fan Chen and published by . This book was released on 2019 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: In contrast to research showing that private litigation discourages audit clients from disclosing internal control weaknesses, we find that auditors' litigation concerns have a countervailing effect. Our empirical results show that adverse internal control opinions reduces the likelihood of auditors being implicated in lawsuits against their clients, which suggests that disclosing internal control weaknesses can protect auditors from litigation. Consistent with the notion that such litigation protection in turn encourages auditors to issue adverse internal control opinions, we find that both new and incumbent auditors are more likely to issue adverse internal control opinions for clients with higher ex ante litigation risk. Moreover, for restating firms that eventually acknowledge the existence of internal control weaknesses, ex ante litigation risk is positively associated with earlier adverse internal control opinions. Overall, our evidence suggests that litigation threat provides an incentive rather than a disincentive for auditors to issue adverse internal control opinions in a timely fashion. As both new and incumbent auditors have such incentives, auditors' litigation concerns suppress clients' opportunistic internal control opinion shopping.
Author : Mohamed I. Gomaa
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book The Effects of Audit Risk and Litigation Risk on Decision Aid Reliance written by Mohamed I. Gomaa and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of the current study is to examine the extent to which audit risk and litigation risk cause auditors to increase reliance on decision aids. These are particularly relevant issues in the era of Sarbanes-Oxley and abundant audit litigation, as decision aids hold the potential to improve audit quality; yet, immense legal and regulatory pressures on audit firms to improve audit quality could lead to a 'check list' mentality where auditors subordinate their audit judgments for the sake of compliance. Based on an experiment involving 118 audit practitioners, we find that auditors rely more on decision aid recommendations when either litigation risk (exogenous to the audit risk model) or internal control risk (endogenous to the audit risk model) is high relative to low. When litigation risk and internal control risk are simultaneously high, there is an interactive effect on decision aid reliance. Further analyses suggest that litigation risk amplifies the auditors' awareness of legal defensibility, which in turn increases decision aid reliance. Disturbingly, when both litigation risk and control risk are high, the auditors appear to deferentially follow the aid's advice to increase the legal defensibility of their decisions, even as their confidence in the quality of their decisions deteriorates.
Author : Dong Young Lee
Publisher :
ISBN 13 :
Total Pages : 110 pages
Book Rating : 4.:/5 (573 download)
Download or read book Firm's Growth Potential and Auditor Litigation Risk written by Dong Young Lee and published by . This book was released on 2004 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Liuchuang Li
Publisher :
ISBN 13 :
Total Pages : 63 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Impacts of Judge Ideology on Auditors' Litigation Risk written by Liuchuang Li and published by . This book was released on 2019 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates whether and how judge ideology affects auditors' litigation risk. Using the appointing president's political affiliation to measure federal judge ideology, we document that audit fees charged to auditees locating in jurisdictions of circuit courts with more Democratic judges are higher. We also document that the auditees locating in jurisdictions of circuit courts with more Democratic judges are more likely to receive going concern opinions. We do not find meaningful impact of judge ideology on audit quality. We interpret our results as that judge ideology is an important factor in the legal environment that affects auditors' behavior and auditors believe that the impact of judge ideology is resulted from political consideration rather than from interpretation of auditors' professionalism.
Author : Sebahattin Demirkan
Publisher :
ISBN 13 :
Total Pages : 33 pages
Book Rating : 4.:/5 (13 download)
Download or read book Auditor Litigation written by Sebahattin Demirkan and published by . This book was released on 2018 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study extends the Palmrose and Scholz (2004) general litigation and general restatements study by focusing on auditor litigation and revenue restatements. We investigate all potential accounting issues, individually, instead of by their group method, with regard to auditor litigation. The impact of the individual accounting issues implicated in restatements is of concern to auditors and audit standard setters in gauging auditor litigation risk and audit risk. It also is important for financial analysis and securities valuation because investors' losses are greater, and recovery of losses on a percentage basis lower, when the auditor is a defendant, and especially when the auditor has a more severe, negative litigation experience (Commolli et al. 2012). We examine financial reporting lawsuits filed from 2001 through 2008 and find that revenue restatements - far more than any other kind of restatements - are associated with auditors being named defendants and also auditors experiencing a more severe, negative outcome in the litigation.
Author : Jillian Alderman
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Can Audit Committee Expertise Increase External Auditors' Litigation Risk? The Moderating Effect of Audit Committee Independence written by Jillian Alderman and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether the perceived independence and financial expertise of audit committee members affect external auditors' exposure to legal liability. We use an experiment in which potential jurors make judgments about auditor independence and legal liability for a case involving an audit failure. We find that perceptions of audit committee independence from management are positively associated with judgments of auditor independence and negatively associated with auditor liability. However, financial expertise of audit committee members can be a double-edged sword. Our experiment finds that judgments of auditor liability are higher when the audit committee is perceived to have higher financial expertise but lower independence from management. In assessing litigation risk of current and prospective clients, auditors may want to carefully consider the independence of audit committee members from management, particularly when audit committee members have financial expertise. In the event of an audit failure, the financial expertise of non-independent audit committee members can negatively affect jurors' perceptions of auditor independence and liability.
Author : Paul J. Beck
Publisher :
ISBN 13 :
Total Pages : 61 pages
Book Rating : 4.:/5 (13 download)
Download or read book Litigation Risk and Audit Fees written by Paul J. Beck and published by . This book was released on 2013 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using D&O insurance premia from the 2001-2004 Tillinghast D&O insurance surveys as a proxy for litigation risk, we show that audit fees are positively associated with litigation risk even after controlling for several quantitative risk factors known to influence both the insurance premium and audit fee. We attribute this positive association to the parallel development of risk assessment expertise by both D&O insurers and auditors and to their overlapping sources of qualitative risk information. The significant association between D&O premia and audit fees also provides external validation for the auditor's risk assessment process. Finally, we partition accounting firms based on their audit methodologies and find that the audit fees charged by risk-based auditors are more strongly associated with litigation risk than those charged by firms using more traditional audit approaches.
Author : Jillian Alderman
Publisher :
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.:/5 (13 download)
Download or read book Can Audit Committee Financial Expertise Increase External Auditors' Litigation Risk? The Moderating Effect of Audit Committee Independence written by Jillian Alderman and published by . This book was released on 2019 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This study examines whether the perceived independence and financial expertise of audit committee members affect external auditors' exposure to legal liability. We use an experiment in which potential jurors make judgments about auditor independence and legal liability for a case involving an audit failure. We find that perceptions of audit committee independence from management are positively associated with judgments of auditor independence and negatively associated with auditor liability. However, financial expertise of audit committee members can be a double-edged sword. Our experiment finds that judgments of auditor liability are higher when the audit committee is perceived to have higher financial expertise but lower independence from management. In assessing litigation risk of current and prospective clients, auditors may want to carefully consider the independence of audit committee members from management, particularly when audit committee members have financial expertise. In the event of an audit failure, the financial expertise of non-independent audit committee members can negatively affect jurors' perceptions of auditor independence and liability.
Author : Dan S. Dhaliwal
Publisher :
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (13 download)
Download or read book Negative Press Coverage, Litigation Risk, and Audit Opinions in China written by Dan S. Dhaliwal and published by . This book was released on 2017 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Exploiting a legal regime change in China in 2005 that significantly increased auditors' legal liability, we reexamine why auditors are more likely to issue modified audit opinions (MAOs) to clients who receive negative press coverage before audit report dates. We find that the probability for auditors to issue MAOs is significantly positively associated with negative press coverage during 2001-2009, consistent with findings using the U.S. data. More importantly, we find that such a positive relation does not exist in the low litigation risk period (2001-2004) and is present only in the high litigation risk period (2006-2009). Moreover, we separate negative press coverage into (1) accounting-related and (2) non-accounting negative news reports or (3) first-reported and (4) repeated negative news reports. We find that the probability for auditors to issue MAOs is unrelated to any of these four measures of negative press coverage in the low litigation risk period, and is positively related to accounting-related, non-accounting, and first-reported negative press coverage in the high litigation risk period. Finally, additional analyses on regulatory sanctions in the year after negative press coverage rule out the possibility that the observed no relation between issuing MAOs and negative press coverage in the low litigation risk period is due to slack regulatory sanctions in that period. Taken together, our findings suggest that auditors increase the probability of issuing MAOs to firms receiving negative press coverage to mitigate a perceived increase in litigation risk stemming from negative press coverage in the high litigation risk period.
