The Impact of Legal Liability Regimes and Differential Client Risk on Client Acceptance, Audit Pricing, and Audit Effort Decisions

Journal of Accounting, Auditing & Finance

Volumn 13, Issue 4, 1998, Pages 437-460

  Gramling, Audrey A ^a   Bailey, Andrew D ^a   Schatzberg, Jeffrey W ^b   Zhang, Hao ^c  

^a UNIVERSITY OF ILLINOIS AT URBANA CHAMPAIGN   (United States)

^b UNIVERSITY OF ARIZONA   (United States)

^c ABERYSTWYTH UNIVERSITY   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84990358740     PISSN: 0148558X     EISSN: None     Source Type: Journal    
DOI: 10.1177/0148558X9801300404     Document Type: Article

References (41)

1. AICPA. 1993. Audit Risk Alert—1993. New York: American Institute of Certified Public Accountants.
2. Anderson B. Maletta M. Wright A. 1997. “Perceptions of Auditor Responsibility: Views of the Judiciary and the Profession.” Working Paper, Northeastern University.
3. Andrews A. R. Simonetti G. Jr. 1996. “Tort Reform Revolution.” Journal of Accountancy (September): 53–55.
4. Asare S. K. Hackenbrack K. Knechel W. R. 1994. “Client Acceptance and Continuation Decisions.” Deloitte and Touche/University of Kansas Symposium on Auditing Problems Proceedings XII: 163–178.
5. Asare S. K. Knechel W. R. 1995. “Termination of Information Evaluation in Auditing.” Journal of Behavioral Decision Making 8 (1): 21–31.
6. Balachandran B. V. Nagarajan N. J. 1987. “Imperfect Information, Insurance and Auditors’ Legal Liability.” Contemporary Accounting Research 3 (2): 281–301.
7. Big Six White Paper. 1992. “The Liability Crisis in the United States: Impact on the Accounting Profession.” Position Statement of the “Big Six” Accounting Firms (August 6).
8. Boritz J. E. Zhang P. 1997. “The Implications of Alternative Litigation Cost Allocation Systems for the Value of Audits.” Journal of Accounting, Auditing & Finance 12 (Fall): 353–372.
9. Boyle E. J. Knopf F. N. 1996. “The Private Securities Litigation Reform Act of 1995.” The CPA Journal (April): 44–47.
10. Chan D. K. Pae S. 1995. “The Economic Consequences of Alternative Auditor Liability and Legal Cost Allocation Rules: An Equilibrium Analysis.” Working Paper, Hong Kong University of Science and Technology.
11. Colbert J. L. Luehlfing M. S. Alderman C. W. 1996. “Engagement Risk.” The CPA Journal (March): 54–56.
12. Cox J. Isaac M. 1984. “In Search of the Winner's Curse.” Economic Inquiry 22 (October): 579–592.
13. Dopuch N. Ingberman D. E. King R. R. 1997. “An Experimental Investigation of Multi-Defendant Bargaining in Joint & Several and Proportionate Liability Regimes.” Journal of Accounting and Economics 23 (June): 189–221.
14. Dopuch N. King R. R. 1992. “Negligence vs. Strict Liability Regimes in Auditing: An Experimental Investigation.” The Accounting Review 67 (January): 97–120.
15. Dopuch N. King R. R. Schatzberg J. W. 1994. “An Experimental Investigation of Alternative Damage-Sharing Liability Regimes with an Auditing Perspective.” Journal of Accounting Research 32 (Supplement): 103–130.
16. Erickson M. Mayhew B. W. Felix W. L. Jr. 1997. “Why Do Audits Fail? Evidence from Lincoln Savings and Loan.” Working Paper, University of Chicago.
17. Gigler F. 1994. “Discussion of an Analysis of Auditor Liability Rules.” Journal of Accounting Research 32 (Supplement): 61–64.
18. Hock S. 1993. “Local Firms Score More SEC Work.” Accounting Today (May 3): 1, 66.
19. Holland K. Light L. 1993. “Big Six Firms are Firing Clients.” Business Week (March 1): 76–77.
20. Huss H. F. Jacobs F. A. 1991. “Risk Containment: Exploring Auditor Decisions in the Engagement Process.” Auditing: A Journal of Practice and Theory 10 (Fall): 16–32.
21. Jenkins D. 1986. “The Winner's Curse, Information and Emergent Market Rationality.” In Laboratory Market Research, Moriarity S. Norman, Okla.: University of Oklahoma Center for Economic and Management Research, 15–29.
22. King R. R. 1991. “Using Experimental Economics in Auditing Research.” In Auditing: Advances in Behavioral Research, Ponemon L. A. Gabhart D. R. L. New York: Springer-Verlag, 93–112.
23. King R. R. Schwartz R. 1997. “The Private Securities Litigation Reform Act of 1995: A Discussion of Three Provisions.” Accounting Horizons 11 (March): 92–106.
24. Melumad N. Thoman L. 1990. “On Audits and the Courts in an Adverse Selection Setting.” Journal of Accounting Research 28 (Spring): 77–120.
25. Mock T. J. Wright A. 1993. “An Exploratory Study of Auditors’ Evidential Planning Judgments.” Auditing: A Journal of Practice and Theory 12 (Fall): 39–61.
26. Narayanan V. G. 1994. “An Analysis of Auditor Liability Rules.” Journal of Accounting Research 32 (Supplement): 39–59.
27. Nelson J. Ronen J. White L. 1988. “Legal Liabilities and the Market for Auditing Services.” Journal of Accounting, Auditing & Finance 3 (Summer): 255–295.
28. Palmrose Z. 1994. “The Joint & Several vs. Proportionate Liability Debate: An Empirical Investigation of Audit-Related Litigation.” Stanford Journal of Law, Business & Finance (Fall): 53–72.
29. Pincus A. J. 1996. “The Reform Act: What CPAs Should Know.” Journal of Accountancy (September): 55–58.
30. Schatzberg J. W. 1990. “A Laboratory Market Investigation of Low Balling in Audit Pricing.” The Accounting Review 65 (April): 337–362.
31. Schatzberg J. W. Sevcik G. 1994. “A Multi-period Model and Experimental Evidence of Independence and ‘Low Balling.’” Contemporary Accounting Research 11 (Summer): 137–174.
32. SEC. 1977. Securities Act of 1933, Release Number 5869. Washington, D.C.: Securities and Exchange Commission.
33. Simunic D. A. Stein M. T., 1990. “Audit Risk in a Client Portfolio Context.” Contemporary Accounting Research 6 (Spring): 329–343.
34. Simunic D. A. Stein M. T. 1996. “The Impact of Litigation Risk on Audit Pricing: A Review of the Economics and the Evidence.” Auditing: A Journal of Practice and Theory 15 (Supplement): 119–134.
35. Smith V. L. Schatzberg J. Waller W. S. 1987. “Experimental Economics and Auditing.” Auditing: A Journal of Practice and Theory 1 (Fall): 71–93.
36. Starkman D. 1996. “Securities Class-Action Suits Seem Immune to New Law.” Wall Street Journal (November 12): B7.
37. Starkman D. 1997. “Securities Class-Action Suits Are Making a Comeback.” Wall Street Journal (July 9): B11.
38. Turpen R. 1995. “Audit Fees—What Research Tells Us.” The CPA Journal (January): 54–56.
39. Walo J. C. 1995. “The Effects of Client Characteristics on Audit Scope.” Auditing: A Journal of Practice and Theory 14 (Spring): 115–124.
40. Weinbach L. A. 1992. “Legal Crisis Paralyzes U.S. Innovation.” Accounting Today (May 11): 4–5.
41. Weiss M. I. 1994. “Auditors, Public Both Need Tough Liability Rules.” Accounting Today (January 24): 9.