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Client risk and recent changes in the market for audit services

Article Abstract:

Rising litigation costs have made large accounting companies hesitant to deliver audit services to companies seen as having high litigation risks. Larger auditing firms in 1987, such as the Big Eight companies, had more high-risk clients than other independent firms. These high-litigation risk companies include firms in financial difficulty and those in the high technology industry. In contrast, there was a lower chance that Big Eight firms were willing to provide auditing services for these high-risk clients in 1994.

Practice

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Audit litigation research: do the merits matter? An assessment and directions for future research

Article Abstract:

The merit-based audit litigation still requires knowledge of how judges and juries deal with merits, and where merits do not matter, nonmerit-based factors should be used in resolving lawsuits against independent auditors. Available data such as economic incentives, company size and existence of insurance may be used to settle the case instead of bringing into a trial, which might be more costly. Also, lawsuits are only one of the venues for settling audit disputes.

Analysis, Management, Trials

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Incidence of accounting irregularities: an experiment to compare audit, review, and compilation services

Article Abstract:

The impact of three different types of CPA firm services, namely, audits, reviews and compilations, on the extent two accounting irregularities was analyzed. The randomized response technique was used to experiment on MBA and executive MBA students who had to decide on improper ways of inflating income. The response of the subjects from the audit, review and compilation groups showed differences in expected direction.

Research, Services

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