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Author : Dan A. Simunic
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (313 download)
Download or read book The Impact of Litigation Risk on Audit Pricing written by Dan A. Simunic and published by . This book was released on 1995 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 : 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 : 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 : Ananth Seetharaman
Publisher :
ISBN 13 :
Total Pages : 25 pages
Book Rating : 4.:/5 (129 download)
Download or read book Litigation Risk and Audit Fees written by Ananth Seetharaman and published by . This book was released on 2001 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study re-examines the relationship between litigation risk and audit pricing. Two necessary ingredients to empirically examine this relationship are (a) a litigious legal environment, and (b) publicly disclosed auditor remuneration. Prior studies have not been able to comprehensively examine this relationship because the most litigious country in the world, the U.S., does not require auditor remuneration to be publicly disclosed. Conversely, countries that require companies to disclose auditor remuneration in their financial statements (e.g., Hong Kong, Australia, and the UK) typically have a relatively benign litigation environment. In this study, we straddle publicly disclosed auditor remuneration and a highly litigious environment by focusing on UK firms cross-listed on U.S. stock exchanges. We find that, after controlling for other factors, UK firms tend to charge higher fees for their services when their clients are cross-listed on major U.S. stock exchanges. We, however, find no evidence of higher audit fees when UK firms cross-list on non-U.S. foreign exchanges. These findings are consistent with the prediction that audit fees will reflect risk differences across liability regimes.
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 : 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 : Sean Cao
Publisher :
ISBN 13 :
Total Pages : 39 pages
Book Rating : 4.:/5 (13 download)
Download or read book Auditor Litigation written by Sean Cao and published by . This book was released on 2018 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Litigation poses a significant business risk for auditors. We argue that auditors learn from other auditors' litigation events and examine the consequences of such events for future accounting misstatements. Using a hand-collected sample of auditor litigation events, we find a significant subsequent decrease in misstatement frequency in within-industry audits conducted by auditors who did not face litigation. This industry-based across-auditor effect is further supported (a) by an increase in audit fees; (b) an increase in auditor going concern opinions; and (c) is robust to a battery of controls including the use of a difference-in-difference approach. By showing that auditor litigation leads to lower, rather than higher, misstatements across an industry, the findings expand our understanding of misstatement contagion evidenced in other studies. We find no evidence of region-based across-auditor learning. Overall, this study, by demonstrating a deterrence effect of litigation for non-sued entities significantly enhances the impact of litigation beyond just the sued entity.
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 : 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 : Joginderpal Singh Kundi
Publisher :
ISBN 13 :
Total Pages : 278 pages
Book Rating : 4.:/5 (631 download)
Download or read book The Association Between Firm Litigation Risk and Audit Fees written by Joginderpal Singh Kundi and published by . This book was released on 2005 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Brad A. Badertscher
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Public Equity and Audit Pricing in the United States written by Brad A. Badertscher and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: To what degree are audit fees for U.S. firms with publicly traded equity higher than fees for otherwise similar firms with private equity? The answer is potentially important for evaluating regulatory regime design efficiency and for understanding audit demand and production economics. For U.S. firms with publicly traded debt, we hold constant the regulatory regime, including mandated issuer reporting and auditor responsibilities. We vary equity ownership and thus public securities market contextual factors, including any related public firm audit fees from increased audit effort to reduce audit litigation risk and/or pure litigation risk premium (litigation channel effects). In cross-section, we find that audit fees for public equity firms are 20-22% higher than fees for otherwise similar private equity firms. Time-series comparisons for firms that change ownership status yield larger percentage fee increases (decreases) for those going public (private). Results are consistent with litigation channel effects giving rise to substantial incremental audit fees for U.S. firms with public equity ownership.
Author : Jun Zhan
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Audit Pricing, Accruals and Firm Value written by Jun Zhan and published by . This book was released on 2012 with total page 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 : Suil Pae
Publisher : National Library of Canada = Bibliothèque nationale du Canada
ISBN 13 :
Total Pages : 154 pages
Book Rating : 4.F/5 ( download)
Download or read book Firm Value, Audit Quality, and Social Welfare in the Presence of Costly Litigation Against Auditors written by Suil Pae and published by National Library of Canada = Bibliothèque nationale du Canada. This book was released on 1996 with total page 154 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 : 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.
