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Author: Colleen Honigsberg
Publisher:
ISBN:
Category :
Languages : en
Pages : 61
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Book Description
We provide a comprehensive overview of shareholder litigation against auditors since the passage of the Private Securities Litigation Reform Act (PSLRA). The number of lawsuits per year has declined, dismissals have increased, and settlements in recent years have declined. Our study asks why. Because we find that the likelihood an auditor is sued following a severe restatement has significantly declined in recent years, it does not appear that the decline can be attributed solely to increases in audit quality. Instead, we consider whether the recent wave of Supreme Court cases limiting the scope of Rule 10b-5 against private actors may have led to the decline. To study this possibility, we focus on the Supreme Court’s 2007 and 2011 rulings in Tellabs v. Makor and Janus v. First Derivative, respectively. These decisions affected Rule 10b-5 litigation in different ways; Tellabs related to pleading standards, while Janus related to liability rules. Our analysis provides strong evidence that the higher liability standards imposed by Janus significantly reduced auditors’ liability exposure, but we find only limited evidence that the pleading standard imposed by Tellabs had a significant effect.
Author: Colleen Honigsberg
Publisher:
ISBN:
Category :
Languages : en
Pages : 61
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Book Description
We provide a comprehensive overview of shareholder litigation against auditors since the passage of the Private Securities Litigation Reform Act (PSLRA). The number of lawsuits per year has declined, dismissals have increased, and settlements in recent years have declined. Our study asks why. Because we find that the likelihood an auditor is sued following a severe restatement has significantly declined in recent years, it does not appear that the decline can be attributed solely to increases in audit quality. Instead, we consider whether the recent wave of Supreme Court cases limiting the scope of Rule 10b-5 against private actors may have led to the decline. To study this possibility, we focus on the Supreme Court’s 2007 and 2011 rulings in Tellabs v. Makor and Janus v. First Derivative, respectively. These decisions affected Rule 10b-5 litigation in different ways; Tellabs related to pleading standards, while Janus related to liability rules. Our analysis provides strong evidence that the higher liability standards imposed by Janus significantly reduced auditors’ liability exposure, but we find only limited evidence that the pleading standard imposed by Tellabs had a significant effect.
Author: Casey Joseph McNellis
Publisher:
ISBN:
Category : Auditing
Languages : en
Pages : 146
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Book Description
Author: Suil Pae
Publisher: National Library of Canada = Bibliothèque nationale du Canada
ISBN:
Category : Auditing
Languages : en
Pages : 154
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Book Description
Author: Deokheon Lee
Publisher:
ISBN:
Category : Auditors
Languages : en
Pages : 148
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Book Description
Author: Jeffrey Scott Pickerd
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Auditor liability is an important topic of accounting research as auditors respond to a constantly changing financial reporting and regulatory environment. Through three independent essays, I intend to explore how estimate uncertainty, financial statement aggregation, audit quality indicators, a company's investor base, and the size of the alleged misstatement can impact auditor liability both in the courtroom, as determined by jurors, and in out of court settlement, as determined by attorneys. I find that jurors do hold the auditor more likely to be negligent when audit quality indicators suggest the auditors did a poor quality audit. I also find that jurors hold auditors to be more negligent when both estimate uncertainty is low and the income statement is disaggregated. This juror finding is in contrast to lawyers where I find that high estimate uncertainty causes auditors' lawyers to believe that the auditors are more vulnerable for failing to detect a material misstatement and make more concessions in out-of-court settlement negotiation. Together, these studies have a number of important implications. First, the impact of high estimate uncertainty on auditor liability can go in opposite directions depending on whether the case disposition is determined by jurors or by lawyers negotiating settlement. Second, auditors' legal counsel may erroneously concede during settlement negotiations based on incorrect beliefs about their vulnerability to jurors. Third, while accounting research has focused on juror judgments to proxy for auditor litigation risk, auditors may face very different litigation risk in out-of-court settlement, where the vast majority of auditor liability is determined.
Author: George Kwadwo Baah
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 0
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Book Description
The rich store of audit quality research and steady improvements to auditing standards over the decades have not yielded the desired impact on audit quality. While most litigations following corporate failure naming auditors as defendants tend to accuse auditors of lack of independence, objectivity and willful participation in fraud, the impact of these character dimensions on audit quality has not been fully explored. Professional accounting bodies impress upon their members to be independent in fact and in appearance, be objective and exhibit integrity in their decisions about their clients' financials statement, yet, not much is known about how independence, objectivity, and integrity impact audit quality. Secondly, not much is known about how auditors enact independence, objectivity, and integrity on an audit engagement. Also, inputs from auditors have been quite underutilized in audit quality research in recent years, yet auditors are the people who implement changes in auditing standards and regulations. This dissertation focuses on the very character dimensions that auditors tend to be accused of lacking to examine the impact of independence, objectivity, integrity, and environmental constraints on audit quality. Guided by institutional theory and the theory of negotiated order, a multi-staged, three-part sequential mixed methods study consisting of one quantitative and two qualitative studies were conducted using responses from audit managers. Survey responses from auditors in the United Kingdom and the United States were used to perform an exploratory theoretical study of the impact of Independence, Objectivity, Integrity, and Constraints on Audit Quality. The second study was conducted to identify a highly constrained business environment where the impact of Independence, Objectivity, and Integrity on Audit Quality could be validated. Following the second study, a third study was conducted to understand the effects of the institutional environment on audit quality and how auditors respond to the effects of the institutional factors. The research finds that auditors' integrity is a consistent determinant of audit quality. The positive significant impact of integrity on audit quality does not change when integrity interacts with environmental constraints. Contrary to the general notions about the importance of independence to audit quality, the research finds that independence and objectivity do not have a significant direct effect on audit quality. However, moderating independence on objectivity leads to a significant effect on audit quality. Independence strengthens the positive effect of objectivity on audit quality. But the positive impact of interacting independence and objectivity on audit quality reduces substantially when the interaction variable interacts with environmental constraints. Auditors tend not rely on their independence when the impact of environmental constraints are weak, and they tend to ignore or bend their interpretation and enactment of independence and objectivity and rather rely on their integrity when the environmental constraints are high. These findings show that agents resort to their inner core beliefs when making decisions under high-risk conditions. This dissertation makes theoretical and practical contributions to the literature. The quantitative research for the dissertation is the first known empirical analyses or validation of impact of external constraints, independence, objectivity, and integrity on audit quality using data from auditors. The research challenges the continued emphasis on independence as the core determinant of audit quality instead of the integrity of auditors. Also, study two of the dissertation is the first known study to find that aid project failure was mainly due to managerial failure though literature has blamed poor institutions, weak economies, and corruption as the culprits. Though prior audit quality studies have used responses from auditors, most recent researches in that domain have used data from sources other than auditors, yet auditors are the people who actually perform the work. The finding that auditors' perceptions about the core determinant of audit quality is integrity and not independence suggests that perhaps custodians of the profession have not focused on the fundamental character determinant of audit quality. This finding makes a contribution to theory and practice.
Author: Carl J. Pacini
Publisher:
ISBN:
Category : Accounting firms
Languages : en
Pages : 270
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Book Description
Author: Adam C. Pritchard
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
This essay argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession with the adoption of the Sarbanes-Oxley Act. Given these fundamental changes in the regulatory backdrop, I argue that the marginal benefit of litigation has been substantially diminished and in many cases that it is likely to be ineffective in promoting greater audit quality. I propose a knowledge standard for auditor liability in securities fraud cases.
Author: United States Government Accountability Office
Publisher: Lulu.com
ISBN: 0359536395
Category : Reference
Languages : en
Pages : 234
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Book Description
Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process. This revision contains major changes from, and supersedes, the 2011 revision.
Author: Wally Smieliauskas
Publisher: Routledge
ISBN: 0429854129
Category : Business & Economics
Languages : en
Pages : 269
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Book Description
Auditing has become an essential component in market societies and the need for auditing skills has risen in line with globalization. This textbook provides a comprehensive overview of the role of financial statement auditing in contemporary society, including the auditor’s role in evaluating the financial reporting of an auditee—a topic of central concern in the recent comprehensive review of the auditing profession in the Brydon Report (2019). The experienced authors provide insight into auditing research to help readers understand its function, regulation, and role in theory and practice. With focus on private sector financial statement auditing and its regulation, the book includes perspectives on social theory, history, and the importance of professional standards. The thought-provoking final chapter challenges students to consider the effectiveness of auditing in evaluating increasingly risky and complex accounting estimates involving assumptions about future events. A fundamental approach to auditing theory, this textbook will be useful reading for advanced undergraduate and postgraduate students across business and accounting fields.
