AUDITOR LIABILITY AND THE DEVELOPMENT OF A STRATEGIC EVALUATION OF GOING CONCERN

This paper addresses various aspects of the auditor liability problem in Australia. It identifies, as the fundamental cause of the auditor liability problem, the moral and ethical degradation of the accountancy profession and, as a derivative thereof, its intellectual impoverishment. It indicates a significant imbalance between self-interest and public-interest in the profession. This imbalance is supported with an examination of the resolute efforts which were actioned by powerful members of the profession to control the initiatives which were taken to protect a small minority of members, including themselves, from damage awards. It examines the success which those parties had in bringing about the introduction of an act of parliament to cap damages awarded by a judge and it explores the obnoxious scheme that was enacted under that act to protect wrongdoers from the payment of just, fair, and equitable damages to their victims. The paper indicates that the profession did not do its job properly and that, accordingly, it is not so much the victim as it is the culprit. The paper identifies the evaluation of the going concern basis as being fundamentally flawed and, thereby, as being a basic cause of auditor liability. It suggests the introduction of a multi-disciplinary approach to such evaluations utilizing, amongst other things, strategic management dimensions. It also proposes an order of magnitude expansion of the role of going concern basis evaluations. The paper indicates that the profession is a victim of itself. It concludes with the observation that the accountancy bodies are myopic and that they are not learning organizations. This situation, it states, must change.     

AUDITOR PREFERENCES FOR LIABILITY LIMITATION

Debate over statutorily limiting auditor civil liability has implicitly assumed auditors are homogeneous in their preferences for capping liability. This study examines the preferences of auditors for limiting auditor liability and investigates reasons for the preferences. The study uses an Australian setting in which there has been a persistent debate for a decade or more over regulatory intervention in this area. The study provides a background to the debate over this issue and addresses the effects of two factors suggested by the extant literature, namely auditor size and the business risk of an auditor's client portfolio. These factors are argued to affect the expected costs of litigation facing auditors and therefore their preferences on capping liability. Using the submissions by audit firms on an Australian Companies and Securities Law Review Committee Discussion Paper on limiting auditor liability, the study finds larger audit firms that have greater capacities to lobby and greater expected costs of litigation from unlimited liability than smaller firms, dominate the respondents on the Paper and tend to be more supportive of liability limitation than smaller audit firms. Within the array of possible methods of capping liability canvassed by the Discussion Paper, the study documents evidence of diversity in preferences among audit firms. Larger audit firm size is associated with a preference for a group of methods that provides such firms with opportunities to benefit from the capping at the expense of the smaller audit firms. The method most preferred by the larger audit firms is the multiple of fee with a prescribed minimum. Perhaps not surprisingly, this is also the preferred method of the professional accounting bodies in Australia. As to the effect of the riskiness of the client portfolio on preferences for methods of limiting liability, the study finds that higher business risk in an auditor's portfolio is associated with a preference for methods that give greater control over their liability exposure. The study has implications for the impact of regulation of capping liability on competition in the audit services market.     

EXTERNAL AUDITOR EVALUATION OF THE INTERNAL AUDIT FUNCTION

This study examines the relative importance of the factors used by external auditors when valuating an internal audit function. The study also examines the consistency of external auditors in making evaluations of an internal audit function. The factors used are based on Statement of Auditing Practice AUP 2 “Using the Work of an Internal Auditor” and a similar study conducted in the U.S.A. The two factors which this study finds to be the most significant are ‘technical competence’ and ‘due professional care’. The study finds a high degree of consensus across the respondents with respect to the evaluation of the internal audit function, and a high degree of insight and stability in their judgements.     

THE ROLE OF AUDITOR CULPABILITY IN NAMING AUDITOR DEFENDANTS IN UNITED STATES SECURITIES CLASS ACTIONS

Arguments for passage by the United States Congress of the Private Securities Litigation Reform Act, 1995 (Reform Act), as well as the Securities Litigation Uniform Standards Act, 1998, center on two allegations. First, that there was a general lack of merits (i.e. management culpability did not matter) in pre-Reform Act private securities class actions. Second, that nonculpable auditors were routinely named defendants in these lawsuits. A theoretical framework consisting of the constructs auditor culpability, management culpability, and nonculpability is used to investigate whether nonculpable auditors were routinely named defendants in these lawsuits. Empirical evidence based on 446 securities lawsuits filed from April 1992 to April 1995 in federal and state courts against United States companies suggests that nonculpable auditors were not routinely named defendants in these lawsuits.     

AUDITOR OBJECTIVITY: THE EFFECT OF PRIOR INVOLVEMENT IN AUDIT PROGRAMME DESIGN

This study tests whether the involvement of independent auditors in the design of an audit programme affects their subsequent audit work relating to that audit area. Two groups of subjects played roles in designing partial audit programmes for a particular account. They also evaluated partial audit programmes for another account designed by someone else. A third group merely evaluated partial audit programmes for both accounts. All subjects were informed that both audit programmes were implemented and of potential problems that could be attributed to either of the two accounts. Subjects were asked to allocate 15 hours to investigate either or both of the accounts in question. Our hypothesis was that auditors who had a role in designing a partial audit programme would allocate less audit effort to that account than auditors who had no role in the programme design. Comparisons of the hours allocated provided some support for this hypothesis.     

THE EFFECT OF AUDITOR INVOLVEMENT ON THE PREDICTIVE CAPACITY OF INTERIM FINANCIAL INFORMATION

Considerable controversy has arisen over auditor involvement with interim financial statements. The Securities and Exchange Commission (SEC) has taken an aggressive stance towards the advocacy of auditor involvement. The Commission cited anticipated improvements in the predictive capacity of interim data as justification for such advocacy. This study found evidence contrary to the expectations of the SEC. Earnings per share forecast errors generated through naive predictor models did not differ significantly when auditor involvement was introduced as in input segregation criterih. Accordingly, the data suggest that auditor involvement does not affect the predictive content of interim statements. In view of the finding of the study the author recommends a reassessment of the cost/benefit structure associated with auditor involvement in interim financial statements.     

SOME OBSERVATIONS ON THE FOUNDATIONS OF THE CURRENT VALUE DEBATE

Proponents of alternative accounting information production systems have, in supporting their alternative, usually demonstrated the superiority of their system conditional upon assumptions about the producers and consumers of accounting information, and in light of the lack of evidence on the issue, assumptions about the relative costs and benefits of their system. This paper addresses the premises that are implicit in the usual arguments for one or the other form of current value accounting and reaches the general conclusion that the arguments for change are not as compelling as they may, at first glance, appear to be.     

AUDITOR INDEPENDENCE,AUDIT QUALIFICATIONS AND THE PROVISION OF NON-AUDIT SERVICES: A NOTE

This paper presents the results of a study designed to investigate the question of whether there is the potential for an appearance of auditor independence impairment when higher levels of non-audit services are provided to audit clients. This question was investigated by analysing the audit reports for a sample of publicly listed companies over the period 1980 to 1989. The results of the analysis indicate that the auditors of companies not receiving an audit qualification of any type over the period derived a significantly higher proportion of their remuneration from non-audit services fees than the auditors of companies receiving at least one audit qualification. This result is driven by the non-Top 100 companies in the research sample. These findings could suggest that auditors are less likely to qualify a given company's financial statements when higher levels of non-audit services fees are derived. This could convey the view that the independence of the auditors of these companies may have been compromised.     

PROPORTIONATE LIABILITY: THE EMERGING GLOBAL STANDARD

Recent progress in the United States toward a new standard of allocating the payment of damages in lawsuits against professionals according to their degree of proportionate fault should encourage similar reforms in other nations. This paper documents that a system based upon joint and several liability coerces settlements from so-called deep-pocket defendants with little regard to the merits of the underlying claim. Besides threatening the viability of accounting firms, joint and several liability ultimately harms investors by restricting existing and potential audit services and by deterring qualified individuals from serving on corporate boards. Early reviews of the U.S. reforms and the recent defeat of an initiative that would have undermined the federal law indicate that proportionate liability is effective in discouraging abusive litigation and protecting the largest number of investors.     

THE PERFORMANCE OF THE 1980S CALIFORNIA INSURANCE AND LIABILITY REFORMS

Abstract: The authors examine the impact of Proposition 103. They contend that Proposition 103 reforms did not come at the expense of insurer profitability. Rather than exhibiting a decline in profitability following the adoption of Proposition 103, there was a substantial improvement in profitability which remains quite high relative to the rest of the country.     

THE ELIMINATION OF DIRECTOR LIABILITY AND STOCKHOLDER RETURNS: AN EMPIRICAL INVESTIGATION

In this paper, the performance of the common stock of Delaware and non-Delaware firms is examined during the Delaware legislature's debate and approval of an amendment to the Delaware General Corporation Law permitting the elimination of director liability. In addition, stockholder returns surrounding the proxy and meeting dates for certain Delaware firms are examined. Results indicate that Delaware firms performed worse than non-Delaware firms during the legislative period; however, strong differences between the two groups are not documented.     

A MICROECONOMIC ANALYSIS OF THE AMEY/SOLOMONS DEBATE

This paper analyses the Solomons/Amey debate in terms of the traditional theory of the firm. The scope of the paper includes a clarification of the working capital issue, and in particular, the appropriate charge which should be recorded in the periodic income statement submitted by management. The analysis then examines Amey's proposition that Solomons is confusing the investment decision with the operating decision and concludes that Amey's position is correct. The reporting framework which would induce divisional management to act both in the short- and long-run interests of a group is examined and there is adiscussion of the market strategies which may be dictated by the divisional periodic accounting reports.     

注册会计师的法律责任

1.The major legal concepts that relateto CPAs’ liability(1)NegligenceNegligence, also referred to as ordinaryor simple negligence, is violation of a legalduty to exercise a degree of care that anordinary prudent person would exerciseunder similar circumstances. For the CPA,negligence is failure to perform a duty inaccordance with applicable standards. Forpractical purposes, negligence may beviewed as “failure to exercise dueprofessional care”.1.涉及注册会计师责任的主要法律概念(1)过失过失…