Audit Committee Members and Restatement-Related Litigation Risk PDF Download
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Author: Chris E. Hogan
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This study investigates factors associated with restatement-related litigation against U.S. audit committee members. Using a sample of restatement-related litigation in the U.S. over the period 1999-2012, we find that the likelihood of audit committee litigation is higher in the post-SOX time period when financial reporting and auditor oversight responsibilities were significantly increased. This finding suggests that increased legal liability post-SOX could reduce the pool of qualified candidates willing to serve on the audit committee. We find that directors serving on the audit committee for a longer portion of the class action period and those with net insider selling activity during the class action period are more likely to be named as defendants. However, audit committee chairs, financial experts, and audit committee members serving on the compensation committee are no more likely to be named as defendants than other audit committee members, contrary to the perceptions of many officers and directors. Overall, our study provides insights into when audit committee members face higher litigation risk and useful information for the recruitment and retention of audit committee members.
Author: Chris E. Hogan
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This study investigates factors associated with restatement-related litigation against U.S. audit committee members. Using a sample of restatement-related litigation in the U.S. over the period 1999-2012, we find that the likelihood of audit committee litigation is higher in the post-SOX time period when financial reporting and auditor oversight responsibilities were significantly increased. This finding suggests that increased legal liability post-SOX could reduce the pool of qualified candidates willing to serve on the audit committee. We find that directors serving on the audit committee for a longer portion of the class action period and those with net insider selling activity during the class action period are more likely to be named as defendants. However, audit committee chairs, financial experts, and audit committee members serving on the compensation committee are no more likely to be named as defendants than other audit committee members, contrary to the perceptions of many officers and directors. Overall, our study provides insights into when audit committee members face higher litigation risk and useful information for the recruitment and retention of audit committee members.
Author: Jagan Krishnan
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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Book Description
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: Jillian Alderman
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
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:
Category :
Languages : en
Pages : 42
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Book Description
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: Sebahattin Demirkan
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
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: U S Government Accountability Office (G
Publisher: BiblioGov
ISBN: 9781289167622
Category :
Languages : en
Pages : 220
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Book Description
The U.S. Government Accountability Office (GAO) is an independent agency that works for Congress. The GAO watches over Congress, and investigates how the federal government spends taxpayers dollars. The Comptroller General of the United States is the leader of the GAO, and is appointed to a 15-year term by the U.S. President. The GAO wants to support Congress, while at the same time doing right by the citizens of the United States. They audit, investigate, perform analyses, issue legal decisions and report anything that the government is doing. This is one of their reports.
Author:
Publisher: DIANE Publishing
ISBN: 1428944737
Category :
Languages : en
Pages : 272
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Book Description
Author: United States. General Accounting Office
Publisher: Nova Publishers
ISBN: 9781604565034
Category : Business & Economics
Languages : en
Pages : 154
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Book Description
This book examines (1) concentration in the market for public company audits, (2) the potential for smaller accounting firms' growth to ease market concentration, and (3) proposals that have been offered by others for easing concentration and the barriers facing smaller firms in expanding their market shares.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
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Book Description
Author: Laura F. Spira
Publisher: Springer Science & Business Media
ISBN: 030647655X
Category : Business & Economics
Languages : en
Pages : 191
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Book Description
Why do we need to understand audit committees? The Cadbury Committee recommended that UK companies should adopt them in response to financial scandals that have stemmed from dubious financial reporting practices. In other countries, similar commissions have made similar recommendations and audit committees are now a common institution. However, many practitioners doubt whether an audit committee really does much to ensure the integrity of a firm's financial statements because, as outsiders, members don't know enough to dig deeply beneath the numbers. The Audit Committee: Performing Corporate Governance argues that such criticism overlooks the ceremonial function of these committees. The audit committee is an arena where members can form and strengthen shifting and fragmentary networks with each other and with the external auditors. Within these networks, both consensus and independence are demonstrated, generating comfort, which legitimises the company and maintains its access to external sources of capital. The audit committee is a key part of the corporate governance structure within an organisation. Many in the UK have been patched together to meet regulatory requirements and their operation is poorly understood because few people other than their members have access to their deliberations. In this account of the world of audit committees the practitioner will find the ethnographical perspectives on ceremonial performance, consensus, independence, and comfort both familiar and different. It's like looking at a photograph of something commonplace from an unusual angle or through a strange-shaped lens.
