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An examination of selected factors associated with audit litigation
Abstract
This research was prompted by the rise in litigation against public accountants in recent years. The purpose of the research was to examine whether (1) changes in financial structure, (2) frequency of switching auditors, and (3) frequency of qualifications to the audit report or disclaimers of opinion could be used to discriminate between engagements which do or do not result in litigation. It was hypothesized that litigate and nonlitigate companies would report significantly different changes in their financial structure during the four years preceding litigation. It was also hypothesized that litigate and nonlitigate companies could be distinguished on the basis of the frequency of switching auditors and frequency of qualifications to the audit report or disclaimers of opinion. The results indicate that litigate companies, as a group, grew at a faster rate in both asset base and cost of sales than their nonlitigate counterparts. There appeared to be no significant difference in the frequencies with which litigate and nonlitigate companies switched auditors. The results showed that litigate companies tended to have a higher frequency of qualifications to the audit report or disclaimers of opinion than nonlitigate companies. The results of the research indicated that it may be possible to operationally define a benchmark which public accountants could use to assess the risk of litigation associated with specific engagements.
Subject Area
Accounting
Recommended Citation
Spurrell, A. C. Lloyd, "An examination of selected factors associated with audit litigation" (1988). ETD collection for University of Nebraska-Lincoln. AAI8914088.
https://digitalcommons.unl.edu/dissertations/AAI8914088