Accounting misstatements following lawsuits against auditors

• 成果类型: Article
• 署名作者: Lennox, Clive; Li, Bing
• 署名单位: Nanyang Technological University; City University of Hong Kong
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2013.10.002
• 发表日期: 2014
• 关键词: rational-expectations; nonaudit services; LITIGATION RISK; office size; RESTATEMENTS; QUALITY; INDEPENDENCE; determinants; accruals

摘要

This study investigates whether an auditor's experience of litigation in the recent past affects subsequent financial reporting quality. At the audit firm level, we find accounting misstatements occur significantly less (more) often after audit firms are sued (not sued). At the audit office level, the negative association between past litigation and future misstatements is stronger for offices who were directly implicated in the litigation than for the non-accused offices of sued audit firms. Therefore, the litigation experiences of both audit firms and audit offices are incrementally significant predictors of future financial reporting quality. (C) 2013 Elsevier B.V. All rights reserved.