Mitigating the auditor’s legal risk

Marianne Jennings, Dan C. Kneer, Philip Reckers

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

“The definition of auditing calls for the communication of the degree of correspondence between assertions and established criteria” [ASOBAC, 1973]. As the profession has rejected adoption of universal quantitative definitions of materiality as infeasible [FASB, 1979], Don Leslie [1984] recommended adoption of a standard requiring disclosure of specific engagement materiality thresholds in the auditor’s report. This study examines how such disclosures might affect perceptions of an auditor’s culpability and liability in instances where post publication errors are discovered which alternately aggregate to more or less than reported materiality thresholds. A behavioral experiment was conducted in which eighty-seven U.S. general jurisdiction judges participated. Findings support the potential for meaningful modifications to the standard auditor’s report to reduce perceived auditor liability but also note the importance of jurists’ pre-experimental attitudes and beliefs respecting the public accounting profession.

Original languageEnglish (US)
Pages (from-to)61-85
Number of pages25
JournalManagerial Finance
Volume22
Issue number9
DOIs
StatePublished - 1996
Externally publishedYes

Fingerprint

Materiality
Auditors
Disclosure
Auditing
Liability
Public accounting
Accounting profession
Communication
Experiment
Auditor liability
Jurisdiction

ASJC Scopus subject areas

  • Finance
  • Strategy and Management

Cite this

Mitigating the auditor’s legal risk. / Jennings, Marianne; Kneer, Dan C.; Reckers, Philip.

In: Managerial Finance, Vol. 22, No. 9, 1996, p. 61-85.

Research output: Contribution to journalArticle

Jennings, Marianne ; Kneer, Dan C. ; Reckers, Philip. / Mitigating the auditor’s legal risk. In: Managerial Finance. 1996 ; Vol. 22, No. 9. pp. 61-85.
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