Author: Lynn BarkessPublisher:
ISBN:
Category : Auditors
Languages : en
Pages : 32
Book Description
The Impact of Litigation Risk on Auditor Remuneration
Author: Lynn BarkessPublisher:
ISBN:
Category : Auditors
Languages : en
Pages : 32
Book Description
Issues in Examining the Effect of Auditor Litigation on Audit Fees
Author: Miguel Minutti-MezaPublisher:
ISBN:
Category :
Languages : en
Pages : 22
Book Description
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.
Litigation Risk and Audit Fees
Author: Paul J. BeckPublisher:
ISBN:
Category :
Languages : en
Pages : 61
Book Description
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.
Litigation Risk and Audit Fees
Author: Ananth SeetharamanPublisher:
ISBN:
Category :
Languages : en
Pages : 25
Book Description
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.
The Impacts of Judge Ideology on Auditors' Litigation Risk
Author: Liuchuang LiPublisher:
ISBN:
Category :
Languages : en
Pages : 63
Book Description
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.
The Association Between Firm Litigation Risk and Audit Fees
Author: Joginderpal Singh KundiPublisher:
ISBN:
Category : Auditing
Languages : en
Pages : 278
Book Description
The Impact of Litigation Risk on Audit Pricing
Author: Dan A. SimunicAuditors' Litigation Risk
Author: Kevin M. RaedyAuditor Litigation Risk and the Number of Institutional Investors
Author: Cory A. CassellPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
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.
Auditor Litigation
Author: Sean CaoPublisher:
ISBN:
Category :
Languages : en
Pages : 39
Book Description
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.