Litigation Risk and Abnormal Accruals Litigation Risk and Abnormal Accruals

Abstract

In this paper, we examine the relation between auditor litigation risk and abnormal accruals over the 1989-2007 time period. We address potential endogeneity in prior studies by jointly modeling abnormal accruals and litigation risk in a simultaneous equation system. Our findings suggest that client-specific litigation risk affects auditor incentives to… (More)

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