The consequences of protecting audit partners' personal assets from the threat of liability

Journal of Accounting and Economics

Volumn 54, Issue 2-3, 2012, Pages 154-173

  Lennox, Clive ^a   Li, Bing ^b  

^a NANYANG TECHNOLOGICAL UNIVERSITY   (Singapore)

^b CITY UNIVERSITY OF HONG KONG   (Hong Kong)

Author keywords

Audit liability; Audit quality; LLP

Indexed keywords

EID: 84872496088     PISSN: 01654101     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jacceco.2012.06.002     Document Type: Article

References (59)

1. Accountancy Magazine, 2005. Get your teeth into LLPs. May, pp. 73-74.
2. Badertscher, B., Jorgensen, B., Katz, S., Kinney, W.R., 2011. The effect of ownership structure on audit fees. Working paper.
3. Baltagi B.H. Econometric Analysis of Panel Data 1995, Wiley, Chichester.
4. Beattie V., Fearnley S. The changing structure of the market for audit services in the UK-a descriptive study. The British Accounting Review 1994, 26:301-322.
5. Beattie V., Fearnley S. Audit market competition: auditor changes and the impact of tendering. The British Accounting Review 1998, 30:261-289.
6. Beatty R. The economic determinants of auditor compensation in the initial public offerings market. Journal of Accounting Research 1993, 31:294-302.
7. Becker C.L., DeFond M.L., Jiambalvo J., Subramanyam K.R. The effect of audit quality on earnings management. Contemporary Accounting Research 1998, 15:1-24.
8. Bell T.B., Landsman W.R., Shackelford D. Auditors' perceived business risk and audit fees: analysis and evidence. Journal of Accounting Research 2001, 39:35-43.
9. Bertrand M., Duflo E., Mullainathan S. How much should we trust differences-in-differences estimates?. The Quarterly Journal of Economics 2004, 119:249-275.
10. Chan D., Pae S. An analysis of the economic consequences of the proportionate liability rule. Contemporary Accounting Research 1998, 15:457-480.
11. Chaney P., Philipich K. Shredded reputation: the cost of audit failure. Journal of Accounting Research 2002, 40:1221-1245.
12. Chen C.Y., Lin C.J., Lin Y.C. Audit partner tenure, audit firm tenure, and discretionary accruals: Does long auditor tenure impair earnings quality. Contemporary Accounting Research 2008, 25:415-445.
13. Choi J.H., Doogar R.K., Ganguly A.R. The riskiness of large audit firm client portfolios and changes in audit liability regimes: evidence from the US audit market. Contemporary Accounting Research 2004, 21:747-785.
14. Choi J.H., Kim J-B., Liu X., Simunic D.A. Audit pricing, legal liability regimes, and Big 4 premiums: theory and cross-country evidence. Contemporary Accounting Research 2008, 25:55-100.
15. Choi J.H., Kim J-B., Liu X., Simunic D.A. Cross-listing audit fee premiums: theory and evidence. The Accounting Review 2009, 84:1429-1463.
16. Cousins J., Mitchell A., Sikka P. Auditor liability: the other side of the debate. Critical Perspectives on Accounting 1999, 10:283-312.
17. Darrough M. Disclosure policy and competition: Cournot vs. Bertrand. The Accounting Review 1993, 68:534-562.
18. Dechow P., Dichev I. The quality of accruals and earnings: the role of accrual estimation errors. The Accounting Review 2002, 77:35-59.
19. DeFond M.L. Discussion of "The riskiness of large audit firm client portfolios and changes in audit liability regimes: evidence from the US audit market". Contemporary Accounting Research 2004, 21:787-794.
20. DeFond M.L., Jiambalvo J. Factors related to auditor-client disagreements over income-increasing accounting methods. Contemporary Accounting Research 1993, 9:415-431.
21. DeFond M., Raghunandan K., Subramanyarn K.R. Do non-audit service fees impair auditor independence? Evidence from going-concern audit opinions. Journal of Accounting Research 2002, 40:1247-1274.
22. Dye R. Auditing standards, legal liability, and auditor wealth. Journal of Political Economy 1993, 101:887-914.
23. Dye R. Incorporation and the audit market. Journal of Accounting and Economics 1995, 19:75-114.
24. Feltham G., Xie J. Voluntary financial disclosure in an entry game with continua of type. Contemporary Accounting Research 1992, 9:46-80.
25. Firth M., Mo P., Wong R. Auditors' organizational form, legal liability, and reporting conservatism: evidence from China. Contemporary Accounting Research 2012, 29(1):57-93.
26. Francis J.R., Maydew E.L., Sparks H.C. The role of Big 6 auditors in the credible reporting of accruals. Auditing-a Journal of Practice & Theory 1999, 18:17-34.
27. Francis J.R., Krishnan J. Evidence on auditor risk-management strategies before and after the Private Securities Litigation Reform Act of 1995. Asia-Pacific Journal of Accounting and Economics 2003, 9:135-157.
28. Francis J.R., Reichelt K., Wang D. The pricing of national and city-specific reputations for industry expertise in the US audit market. The Accounting Review 2005, 80:113-136.
29. Geiger M.A., Raghunandan K., Rama D.V. Auditor decision-making in different litigation environments: the Private Securities Litigation Reform Act, audit reports and audit firm size. Journal of Accounting and Public Policy 2006, 25:332-353.
30. Gigler F. Self-enforcing voluntary disclosures. Journal of Accounting Research 1994, 32:224-241.
31. Hay D.C., Knechel W.R., Wong N. Audit fees: a meta-analysis of the effect of supply and demand attributes. Contemporary Accounting Research 2006, 23:141-191.
32. Hay D.C., Knechel W.R. The effects of advertising and solicitation on audit fees. Journal of Accounting and Public Policy 2010, 29:60-81.
33. Hribar P., Nichols D.C. The use of unsigned earnings quality measures in tests of earnings management. Journal of Accounting Research 2007, 45:1017-1053.
34. ICAEW Auditor liability 1994, Technical Release for the Institute of Chartered Accountants of England and Wales, London.
35. Jones J. Earnings management during import relief investigations. Journal of Accounting Research 1991, 29:193-228.
36. Kinney W.R., Martin R.D. Does auditing reduce bias in financial reporting? A review of audit-related adjustment studies. Auditing: A Journal of Practice and Theory 1994, 13:151-156.
37. Larcker D., Rusticus T. On the use of instrumental variables in accounting research. Journal of Accounting and Economics 2010, 49:186-205.
38. Lee H.Y., Mande V. The effect of the Private Securities Reform Act of 1995 on accounting discretion of client managers of Big-6 and non-Big 6 auditors. Auditing: A Journal of Practice and Theory 2003, 22:93-108.
39. Lennox C., Pittman J. Big Five audits and accounting fraud. Contemporary Accounting Research 2010, 27:209-247.
40. London Economics, 2006. Study on the economic impact of auditors' liability regimes. Final Report to EC-DG Internal Market and Services, Brussels.
41. Mayhew B.W. Auditor reputation building. Journal of Accounting Research 2001, 39(3):599-617.
42. Moizer P., Hansford-Smith L. UK auditor liability: an insurable risk?. International Journal of Auditing 1998, 2:197-213.
43. Morgan J., Stocken P. The effects of business risk on audit pricing. Review of Accounting Studies 1998, 3:365-385.
44. Muzatko S.R., Johnstone K.M., Mayhew B.W., Rittenberg L.E. An empirical investigation of IPO underpricing and the change to the LLP organization of audit firms. Auditing:. A Journal of Practice and Theory 2004, 23(1):53-67.
45. Napier C. Intersections of law and accountancy: unlimited auditor liability in the United Kingdom. Accounting, Organizations and Society 1998, 23:105-128.
46. Nelson M., Elliott J., Tarpley R. Evidence from auditors about managers' and auditors' earnings management decisions. The Accounting Review 2002, 77:175-202.
47. Oxera, 2006. Competition and choice in the UK audit market. Report prepared for Department of Trade and Industry and the Financial Reporting Council, Oxera Consulting, April 2006.
48. Palmrose Z-V. An analysis of auditor litigation and audit service quality. The Accounting Review 1988, 63:55-73.
49. Pratt J., Stice J.D. The effects of client characteristics on auditor litigation risk judgments, required audit evidence, and recommended fees. The Accounting Review 1994, 69:639-656.
50. Seetharaman A., Gul F.A., Lynn S.G. Litigation risk and audit fees: Evidence from UK firms cross-listed on US markets. Journal of Accounting and Economics 2002, 33:91-115.
51. Select Committee on Trade and Industry, 1998. Draft Limited Liability Partnership Bill (Fourth Report). House of Commons, 1 December 1998.
52. Select Committee on Economic Affairs, 2011. Auditors: Market Concentration and Their Role. House of Lords, 30 March 2011.
53. Skinner, Douglas J., Srinivasan, Suraj., 2012. Audit quality and auditor reputation: evidence from Japan. Accounting Review, in press. http://dx.doi.org.ezlibproxy1.ntu.edu.sg/10.2308/accr-50198.
54. St.Pierre K., Anderson J.A. An analysis of the factors associated with lawsuits against accountants. The Accounting Review 1984, 59:242-263.
55. Venkataraman R., Weber J.P., Willenborg M. Litigation risk, audit quality, and audit fees: evidence from initial public offerings. The Accounting Review 2008, 83:1315-1345.
56. Verrecchia R.E. Discretionary disclosure. Journal of Accounting and Economics 1983, 5:179-194.
57. Weber J., Willenborg M., Zhang J. Does auditor reputation matter? The case of KPMG Germany and ComROAD AG. Journal of Accounting Research 2008, 46:941-972.
58. Willenborg M. Empirical analysis of the economic demand for auditing in the initial public offerings market. Journal of Accounting Research 1999, 37:225-238.
59. Wingate M. An examination of cultural influence on audit environments. Research in Accounting Regulation 1997, 129-148.