Home > Audit, Legal Issues, Market and Industry News > Auditor Liability and Client Acceptance Decisions

Auditor Liability and Client Acceptance Decisions

Quiet Contemplation
Image by judepics via Flickr

Excellent article from Harvard Law School on the possible impacts on the market if the current auditor liability schemes where changed. It will likely have significant impacts on the way external auditors and the Big Four do business. Below is an excerpt:

“The audit profession has long argued that excessively burdensome legal liability imposed on auditors hinders capital formation by increasing the likelihood that audit firms will reject potential clients, particularly high risk firms, leaving such firms with limited access to capital markets. However, in equilibrium, a change in the legal environment will also have an impact on the audit fee, as the entrepreneur can compensate the auditor for the increased risk since it allows him to raise capital from investors at lower cost. Thus, the equilibrium implications of increased auditor liability on client rejection rates are not as obvious as implied by the audit professions arguments.”

Continue reading by clicking the link below:

Shared via AddThis

Enhanced by Zemanta
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: