The consequences of protecting audit partners' personal assets from the threat of liability

• 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.2012.06.002
• 发表日期: 2012
• 关键词: firm client portfolios; LITIGATION RISK; earnings management; LEGAL LIABILITY; fees; reputation; QUALITY; REGIMES; riskiness; accruals

摘要

This study investigates the audit firm's decision to protect its partners' personal assets by becoming a limited liability partnership (LLP). We find that the likelihood of an audit firm switching from unlimited to limited liability is increasing in its size and exposure to litigation risk. We find no evidence that audit firms supply lower audit quality, lose market share, or charge lower audit fees after they become LLPs. However, the mix of public and private clients in audit firms' portfolios exhibits a significant shift toward riskier publicly traded companies after the switch to limited liability. (C) 2012 Elsevier B.V. All rights reserved.