Malleable Standards of Care Required by Jurors When Assessing Auditor Negligence

Posted: 28 Feb 2014 Last revised: 30 Oct 2018

See all articles by Eldar Maksymov

Eldar Maksymov

Arizona State University (ASU) - School of Accountancy

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: February 16, 2016

Abstract

We report the results of four experiments investigating the relationship between (a) the quality of an audit, (b) jurors’ assessments of the standard of prudent care (“SOC”) against which audit quality is compared, and (c) jurors’ negligence verdicts. Experiment 1 operationalizes audit quality by varying the sample size used in audit testing, and provides evidence that jurors anchor their assessment of SOC on audit quality, producing a “competitive mediation” in which audit quality reduces the potential for a negligence verdict directly but increases that potential indirectly by increasing SOC. Experiment 2 generalizes this finding to a setting that operationalizes audit quality by varying the size of adjustment the auditor required. Experiments 3 and 4 extend these results to a setting in which SOC is elicited after jurors make negligence verdicts. Overall, these experiments provide insight into the role of SOC in constraining and justifying negligence verdicts.

Keywords: Auditor liability; jury; audit quality; mediation; anchoring; sample size; audit adjustment

Suggested Citation

Maksymov, Eldar M. and Nelson, Mark W., Malleable Standards of Care Required by Jurors When Assessing Auditor Negligence (February 16, 2016). The Accounting Review, Vol. 92, No. 1, 2017, Available at SSRN: https://ssrn.com/abstract=2402032 or http://dx.doi.org/10.2139/ssrn.2402032

Eldar M. Maksymov

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Mark W. Nelson (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

448 Sage Hall
Ithaca, NY 14853
United States
607-255-6323 (Phone)
607-254-4590 (Fax)

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