TY - JOUR
T1 - Drivers of juror's malpractice assessments in auditor litigation involving offshoring and overtime
T2 - Generation and a management Mindset
AU - Chambers, Valerie A.
AU - Reckers, Philip M.J.
AU - Reinstein, Alan
N1 - Publisher Copyright:
© 2020 Elsevier Ltd
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2020/9
Y1 - 2020/9
N2 - The Center for Audit Quality (CAQ) estimated audit firms' lawsuit costs roughly equaled 15% of their 2008 annual revenues, and auditors still remain frequent targets of shareholder litigation today. However, settlements have declined following two critical Supreme Court rulings. Higher standards of liability in Janus v. First Derivatives have changed the landscape; audit firms are much more willing to litigate, sensing a greater likelihood to prevail. In this environment, the importance of juror perceptions of audit quality is critical. Simultaneously, juror perceptions of audit firm motives are equally important, as standards related to scienter remain ambiguous (Tellabs v. Makor). Our research manipulates variables directly germane to both perceptions of audit quality and scienter. Our research is also important because the accounting profession still provides no clear standards of audit quality. Without standardized measures, we expect jurors to seek easily understood information when tasked to assess audit quality and inferring scienter. We examine how jurors use their prior experiences to assess overtime and offshoring practices in rendering verdicts in instances of alleged “audit failures”. Specifically, we hypothesize (and find) more youthful jurors (who face more pressure to work more hours than did prior generations) interpret excessive overtime practices more negatively; and jurors with more managerial experience (who reflect a more high-level construal mindset focused on goals) interpret offshoring practices more favorably.
AB - The Center for Audit Quality (CAQ) estimated audit firms' lawsuit costs roughly equaled 15% of their 2008 annual revenues, and auditors still remain frequent targets of shareholder litigation today. However, settlements have declined following two critical Supreme Court rulings. Higher standards of liability in Janus v. First Derivatives have changed the landscape; audit firms are much more willing to litigate, sensing a greater likelihood to prevail. In this environment, the importance of juror perceptions of audit quality is critical. Simultaneously, juror perceptions of audit firm motives are equally important, as standards related to scienter remain ambiguous (Tellabs v. Makor). Our research manipulates variables directly germane to both perceptions of audit quality and scienter. Our research is also important because the accounting profession still provides no clear standards of audit quality. Without standardized measures, we expect jurors to seek easily understood information when tasked to assess audit quality and inferring scienter. We examine how jurors use their prior experiences to assess overtime and offshoring practices in rendering verdicts in instances of alleged “audit failures”. Specifically, we hypothesize (and find) more youthful jurors (who face more pressure to work more hours than did prior generations) interpret excessive overtime practices more negatively; and jurors with more managerial experience (who reflect a more high-level construal mindset focused on goals) interpret offshoring practices more favorably.
KW - Auditor negligence
KW - Auditor overtime
KW - Offshoring
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U2 - 10.1016/j.adiac.2020.100488
DO - 10.1016/j.adiac.2020.100488
M3 - Article
AN - SCOPUS:85089219912
SN - 0882-6110
VL - 50
JO - Advances in Accounting
JF - Advances in Accounting
M1 - 100488
ER -