The Sarbanes-Oxley Act (2002) required that firms disclose whether their audit committee has at least one independent financial expert. This study examines whether the independence and expertise of audit committee members lower the exposure of external auditors to legal liability. We use an...

Proposals for increased transparency and disclosure within audit reports are consistently met with conflict. Some suggest that auditor disclosures increase liability exposure for auditors, and should be the responsibility of management. Others suggest that such disclosures are beneficial to the...

An important application for financial accounting theory is in accounting standards, for which clarity of conceptual foundation can be viewed as essential in addressing the practical complexities of determining financial position and financial performance. Viewed from this perspective, the...

Directors' and Officers' (D&O) legal liability insurance is a common component of CEO compensation packages. We expect managers are more willing to engage in opportunistic behaviors when their personal assets are protected from litigation risk. Therefore, information about D&O policy details is...

The primary conclusion from prior literature is that firm size, as a measure of firm resources and capacity to pay, is a key predictor of class action securities settlement amount, and the merits of the case are less important in settlement negotiations. The purpose of this study is to shed...

The study examines the relationship between auditor legal liability cap and audit quality. Using a matched sample of 298 firm-year observations over the period 2001-2007, I provide evidence that limiting or reducing auditor’s legal liability caps against clients as disclosed in the engagement...

Restoring the credibility of the auditor's report by disclosing an audit partner's signature has been the subject of recent auditing standard setting. This study presents an experimental examination of the effect of voluntary audit partner signature disclosure on nonprofessional investor...

In this paper, we rely on an exogenous shock to examine the impact of litigation risk on real earnings management (REM). We conduct differences-in-differences tests centered on an unanticipated court ruling that reduced litigation risk for firms headquartered in the Ninth Circuit. REM increases...

This study examines how disclosures impact lawyers' perceptions of independent auditors being sued for failure to detect fraud; specifically whether the auditor's opinion and disclosures required by the Sarbanes-Oxley Act of 2002 may be deemed to be red flags and deter litigation. A 3x1...

Purpose – The purpose of this paper is to: discuss how reporting under a human resource liability paradigm fits into the traditional accounting framework of contingent liabilities; examine the financial effects of such reporting on market valuation and internal planning; and explore...