Auditors' Liability, Vague Due Care, and Auditing Standards

This paper expands the set of previously considered liability rules to include a negligence liability rule with a vague specification of due care. Auditors who are negligent in conducting their audit are liable for losses that result from reliance on misstated financial statements. However, what constitutes negligence for auditors is not clearly specified in the law. Consequently, courts often resort to Generally Accepted Auditing Standards (GAAS) and Statements on Auditing Standards (SAS) as benchmarks for determining due care. A liability regime that consists of a vague negligence rule supports and amplifies the credibility of auditing standards. While auditing standards alleviate some of the vagueness that is inherent in the legal standard, they also form a lower bound on due care, since an audit of a quality that is lower than the quality that auditing standards require would be considered negligent. Thus, the vague specification of due care enables auditors to commit to audit quality as pronounced in auditing standards. This paper explores this link between professional standards and auditors' legal liability. It establishes that the commitment to auditing standards could not have been as credible as it is, if auditors' liability was determined based on the strict liability rule, or based on a negligence rule with a clearly specified due care, since under these two liability rules courts would not need to refer to auditing standards to establish fault. The paper also demonstrates that a legal regime where audit standards are used as a benchmark to evaluate negligence is not the same as a legal regime where due care is defined clearly. Therefore, previous studies that assumed a negligence regime with clear due care may have overstated the effort level that is induced by legal liability.     

Increasing correlations or just fat tails?

Increasing correlation during turbulent market conditions implies a reduction in portfolio diversification benefits. We investigate the robustness of recent empirical results that indicate a breakdown in the correlation structure by deriving theoretical truncated and exceedance correlations using alternative distributional assumptions. Analytical results show that the increase in conditional correlation could be a result of assuming conditional normality for the return distribution. When assuming a popular alternative distribution – the bivariate Student-t_r – we find significantly less support for an increase in conditional correlation and conclude that this is due to the presence of fat tails when assuming normality in the return distribution.     

Opportunities for Air Pollutant and Greenhouse Gas Emission Reduction through Local Transport Planning

This paper has three main objectives: firstly, to provide quantitative information on the potential greenhouse gas and air pollutant emissions reductions resulting from a number of future road transport scenarios; secondly, to illustrate the emission reduction measures available to local transport planners; and thirdly, to highlight the potential for these measures to be integrated into strategies that deliver other transport priorities. The results are drawn from a case study of Norfolk in the UK. We conclude that while technology can play a large part in reducing emissions of air pollutants, demand management is crucial to the delivery of long term greenhouse gas emission reduction and ultimately of air pollutant emissions too.     

Exploring local projects for sustainable energy in system transition: local perceptions of success

In the sustainability transitions literature, ‘success’ is conceived as the transition from an unsustainable system to a sustainable one. However, this view hides a more profound complexity in individual projects which can contribute to system transition. This paper focuses instead on local projects as key sites for change. In two case studies of UK sustainable energy projects, success is shown to be characterised by different causative beliefs held by different people about the problems being addressed, which predetermines solutions to those problems; and hence the nature of success. By acknowledging this multiplicity of success, as perceived by ordinary residents and project organisers as well as transition scholars, ‘narratives of success’ can be recognised, enabling future projects to build on success, and continue along the path to transition. This reconceptualisation provides transition scholars with new ways of understanding and effecting transitions; by focusing on the project level, which is useful in contexts with varying commitment to sustainability.     

IN TANDEM OR OUT OF SYNC? ACADEMIC ECONOMICS RESEARCH AND PUBLIC POLICY MEASURES

This paper investigates whether academic research attention to certain policy‐related measures (including gross domestic product, unemployment, and inflation) is correlated with empirical measurements of the measures themselves. In other words, when unemployment rises, does research attention to the matter increase? Or do economists pursue research (in the short run) relatively uninfluenced by policy shocks on the ground? Text analysis implies that economic attention to key policy terms does correlate with empirical movements of the terms in most instances; however, the stronger and more consistent correlation is between use of policy terms in the literature and discussion of them by the broader public. (JEL A11, H00)     

The Meaning of ``Agreement' under the Sherman Act: Thoughts from the ``Facilitating Practices' Experience

Review of Industrial Organization -     

Small business and entrepreneurship in the knowledge economy: A comparison of Australia and Sweden

Dominant explanations within the existing development literature for the differences in poverty levels around the world have tended to ignore the influence of international inequality on poverty, instead focusing solely on domestic factors. In this paper, I conduct a regression analysis of the effect of inequality between countries on world poverty between 1980 and 2007, employing a new structural measure of international inequality which is created using social network analysis to calculate countries' positions in international trade networks. Countries' infant mortality rates are used to measure poverty. The results of the empirical analysis provide cross-country evidence to demonstrate that structural inequalities in the international system have a significant impact on poverty around the world. As such, the analysis demonstrates the need to move beyond focusing exclusively on domestic attributes of developing countries towards considering the broader international political economy in analysing contemporary poverty.     

Testing servers' roles as experts and managers of tipping behaviour

This article studies the ability of servers to predict their own tips. A distinction is made between the two roles of servers with regard to tipping behaviour: the role of expert and the role of manager. As experts, servers understand the relations between several predictors and tip size, and are able to predict the tip they are about to receive. As managers, servers designate certain tip amounts, and then manage the service encounter so that their predictions are realised. This study maps the necessary conditions for an expert position and outlines the process for managing a service encounter. Empirical testing suggests that servers have an impressive predictive ability. The findings also offer some support to the view of the role of the server as manager.     

Price and quality of durable goods: Are they more closely related in the seventies than in the sixties?

The objectives of this paper were to investigate price-quality relations for durable goods over an extended period of time and to determine if there had been any improvements in price-quality relations in recent years. Durable goods were selected since they are expensive, infrequently purchased items, and are hence more likely to stimulate the development of an expert buyer's market. The relation between price and product quality was measured using data fromConsumer Reports from 1970–1977. The results were compared to an earlier study by Morris and Bronson which usedConsumer Reports data from 1960–1967. A comparison of data for the two time periods showed an increase in the percentage of significant correlations but a decline in the median correlation coeffizient. On the whole, it was concluded that price-quality relations in the two time periods did not differ to any great extent. In addition, there was no significant improvment in price-quality relations from 1970–1977.