Does litigation risk increase audit effort?

IF 1.4 4区经济学 Q3 BUSINESS, FINANCE

Asia-Pacific Journal of Accounting & Economics Pub Date : 2022-01-12 DOI:10.1080/16081625.2022.2026232

Xuejiao Zhang, Limei Cao, Wanfu Li, Qing Zhao, Lingwei Li

引用次数: 0

Abstract

ABSTRACT We examine audit firms’ responses to increased legal liability. Using audit-effort data in China, we find audit firms increase audit effort when they are forced to switch from limited liability corporations (LLCs) to limited liability partnerships (LLPs). Audit fees also increase after the switch from LLCs to LLPs. Furthermore, we show the increase in audit effort is greater for clients that are in financial distress and for clients that report higher discretionary accruals. Overall, our study suggests audit firms respond to increased legal liability by increasing their audit effort, and the increase in audit effort is more pronounced for risky clients.

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诉讼风险会增加审计工作吗?

我们研究了审计公司对增加的法律责任的反应。利用中国的审计工作数据，我们发现当审计事务所被迫从有限责任公司(llc)转变为有限责任合伙(llp)时，审计工作增加了。从有限责任公司转换为有限责任公司后，审计费用也会增加。此外，我们还显示，对于处于财务困境的客户和报告较高可自由支配应计项目的客户，审计工作量的增加更大。总体而言，我们的研究表明，审计公司通过增加审计工作来应对增加的法律责任，并且对风险客户的审计工作增加更为明显。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Asia-Pacific Journal of Accounting & Economics Multiple-

CiteScore

2.40

自引率

9.10%

发文量

期刊介绍： The Asia-Pacific Journal of Accounting & Economics (APJAE) is an international forum intended for theoretical and empirical research in all areas of economics and accounting in general. In particular, the journal encourages submissions in the following areas: Auditing, financial reporting, earnings management, financial analysts, the role of accounting information, international trade and finance, industrial organization, strategic behavior, market structure, financial contracts, corporate governance, capital markets, and financial institutions. The journal welcomes contributions related to the Asia Pacific region, and targets top quality research from scholars with diverse regional interests. The editors encourage submission of high quality manuscripts with innovative ideas. The editorial team is committed to an expedient review process.