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Audit Firm Attributes and Auditor Litigation Risk

Title
Audit Firm Attributes and Auditor Litigation Risk
Authors
Kang, MinjungLee, Ho-YoungMande, VivekWoo, Yong-Sang
Ewha Authors
우용상
SCOPUS Author ID
우용상scopus
Issue Date
2019
Journal Title
ABACUS-A JOURNAL OF ACCOUNTING FINANCE AND BUSINESS STUDIES
ISSN
0001-3072JCR Link

1467-6281JCR Link
Citation
ABACUS-A JOURNAL OF ACCOUNTING FINANCE AND BUSINESS STUDIES vol. 55, no. 4, pp. 639 - 675
Keywords
Auditor expertiseAuditor independenceAuditor's litigation riskProfessional liability insurance premiums
Publisher
WILEY
Indexed
SSCI; SCOPUS WOS
Document Type
Article
Abstract
This study examines the association between auditors' litigation risk and audit firm attributes. Using professional liability insurance premiums as a proxy for auditors' litigation risk, we present evidence that the risk is lower in audit firms having: (1) separate non-audit and audit divisions; (2) a higher proportion of partners; and (3) a higher annual growth in number of CPAs employed. Additionally, we find that the risk is higher in audit firms having: (1) operating losses; and (2) high revenue growth. Our results are consistent with the idea that audit firms' financial condition and organizational structure affect their independence/ expertise, and, in turn, their litigation risk. Our results are broadly supportive of the PCAOB's (2015) and US Department of Treasury's (2008) views that investors, audit committees, management, and other regulators could benefit from having access to financial and organizational information about audit firms.
DOI
10.1111/abac.12171
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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