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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 : 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 : 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 : 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 : 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 : 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 : 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 : 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 : Jeffrey R. Casterella
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)
Download or read book Litigation Risk and Audit Firm Characteristics written by Jeffrey R. Casterella and published by . This book was released on 2007 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the association between audit-firm characteristics and audit-related litigation risk. Previous litigation risk studies have been limited to examining audit-client characteristics, as audit-firm data has generally been unavailable, or available only for a very small set of homogeneous firms (e.g., the Big 4). Using data from an insurance company specializing in providing professional liability insurance to a wide range of accounting firms, we develop and test a model of litigation risk that includes audit-firm characteristics likely to be related to audit failure and/or litigation: firm expertise, audit-process quality/consistency, compliance with professional standards, and general attitudes regarding independence and risk. We find evidence that four of these five characteristics are associated with litigation risk. We also find that firm size, litigation history, and jurisdiction are strongly associated with audit-related litigation risk.
Author : Jagan Krishnan
Publisher :
ISBN 13 :
Total Pages : 32 pages
Book Rating : 4.:/5 (129 download)
Download or read book Audit Committee Financial Expertise, Litigation Risk and Corporate Governance written by Jagan Krishnan and published by . This book was released on 2014 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent debates on audit committee financial expertise have focused on quot;accountingquot; and quot;non-accountingquot; financial experts. A significant proportion of firms do not appoint accounting financial experts (i.e., persons with specialized accounting/auditing experience) to their audit committees. We examine the determinants of firms' choice of the quot;audit committee financial expertsquot;, for a sample of Fortune 1000 firms. We test the relation between the demand for accounting financial experts (AFEs), potential litigation risk, and corporate governance. We find that firms with higher litigation risk are more likely to have AFEs on their audit committee. However, the association between litigation risk and the likelihood of appointing accounting financial experts occurs for firms with relatively strong governance but not for those with weak governance. Thus, our findings indicate that (1) companies with demand for accounting financial experts - measured by potential litigation risk - seem to be able to secure accounting financial experts but (2) such benefits only accrue in the presence of otherwise strong corporate governance.
Author : Jayanthi Krishnan
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book The Role of Economic Trade-Offs in the Audit Opinion Decision written by Jayanthi Krishnan and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We extend existing audit opinion models by incorporating economic trade-offs that arise in the auditor's qualification (modification) decision. Prior qualification studies (e.g., Dopuch, Holthausen, and Leftwich [1987]; Bell and Tabor [1991]) do not investigate whether the opinion issued is influenced by particular trade-offs facing an auditor. On the one hand, the audit firm faces the risk of losing the client if it issues a qualification, and on the other, failing to qualify exposes the auditor to lawsuits and reputation loss. We model the auditor's qualification decision as a two-stage model. We estimate a bivariate model that breaks down the probability of qualifying into two components: (1) the probability that the client deserves a qualified opinion based on the audit and (2) the probability that the auditor reports a qualified opinion, given it considers that the client deserves such an opinion. We hypothesize that the second stage decision to qualify or not is influenced by factors such as the auditor's risk of litigation, the type (Big Six or not) of auditor, the extent of outsider ownership, the share of public debt in total debt, the relative importance of the client in the auditor's portfolio, and the future growth rate of the client. Our results indicate that the auditor's litigation risk, the extent of outsider ownership, the relative importance of the client in the auditor's portfolio, and future growth are important factors in the audit opinion decision. Estimated mean and median probabilities indicate significantly higher values of reporting probabilities for qualified as compared to unqualified firms, suggesting that the second stage is an important component of the qualification decision.
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 : 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 : 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 : 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 : 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.
