Litigation Against Auditors

Routledge Companion to Auditing, edited by David Hay, W. Robert Knechel and Marleen Willeken, 2013

Posted: 12 Apr 2014

See all articles by Dain C. Donelson

Dain C. Donelson

University of Iowa

Kathryn Kadous

Emory University - Goizueta Business School

John M. McInnis

University of Texas at Austin - Department of Accounting

Date Written: 2013

Abstract

Auditors are subject to litigation exposure under federal securities laws and under state law. Research into auditors’ liability under federal securities laws tends to make use of publicly available data from class action suits to examine factors associated with the incidence of litigation against auditors, the extent to which the legal merits of the case influence incidence and outcomes of those cases, and the impact of legal reform on litigation against auditors. State law does not generally allow class actions suits, so public data are not available. Research in this area focuses on understanding the process by which jurors and judges assess auditor blame for client misstatements. It considers similar issues, including the extent to which the merits of the case versus legally irrelevant factors impact the resolution of the case. Market-based experiments examine the effects of various legal regimes on auditor and social welfare. We summarize research results in these areas and identify important areas for future research, including examining the effects of potential decreases in auditor liability on social welfare, deepening our understanding of the conditions under which the merits of the case are appropriately reflected in case outcomes, and improving our understanding of how parties determine whether to settle and how juries set damage awards.

Suggested Citation

Donelson, Dain C. and Kadous, Kathryn and McInnis, John M., Litigation Against Auditors (2013). Routledge Companion to Auditing, edited by David Hay, W. Robert Knechel and Marleen Willeken, 2013, Available at SSRN: https://ssrn.com/abstract=2423355

Dain C. Donelson

University of Iowa ( email )

108 Pappajohn Business Building
Iowa City, 52242-1000
United States

Kathryn Kadous (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
404-727-4967 (Phone)

John M. McInnis

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States
512-232-6791 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,469
PlumX Metrics