Capping auditor liability: The German experience

Gietzmann, Miles B.; Quick, Reiner

doi:10.1016/s0361-3682(96)00047-5

Cited by 63 publications

(34 citation statements)

References 16 publications

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“…The first three incentive variables were also used by Louwers (1998). It has been shown that litigation rates in Continental Europe are rather low in comparison with the US and the UK (Kinney, 1994;Mueller et al, 1994;Gietzmann and Quick, 1998). This study will be carried out in Belgium: a typi-' Belgium consists of two major parts: Flanders and Wallonia.…”

Section: Introductionmentioning

confidence: 99%

Auditor economic incentives and going-concern opinions in a limited litigious Continental European business environment: empirical evidence from Belgium

Vanstraelen¹

2002

Accounting and Business Research

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Abstract-Theory predicts that auditor reporting behaviour may be influenced by the perceived consequences of disclosing going-concern uncertainty in the audit report (DeAngelo 1981, Watts andZimmerman 1986). Krishnan and Krishnan (1996) and Louwers (1998) have addressed this issue empirically in a US context. The results of Krishnan and Krishnan (1996) suggested that one of the important factors in the auditor's opinion decision is the risk of litigation. The purpose of this study is to examine the relationship between auditor economic incentives and the propensity to issue going-concern opinions in a limited litigious business environment, Belgium. In spite of the low risk of litigation and the fact that most Belgian companies are privately held, various regulations have been put into effect to safeguard audit quality in Belgium. However, the results suggest that the auditor's going-concern opinion decision in Belgium is associated with factors relating to the perceived consequences of disclosing a goingconcern opinion. Specifically, the results suggest that auditors in Belgium are significantly less likely to issue going-concern opinions to clients that pay higher audit fees, and when the audit firm has lost a relatively high proportion of its clients in the preceding year. The auditor's going-concern opinion does not appear to be significantly influenced by the length of the auditor-client relationship, year of the auditor engagement period, and auditor type.

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Section: Introductionmentioning

confidence: 99%

Auditor economic incentives and going-concern opinions in a limited litigious Continental European business environment: empirical evidence from Belgium

Vanstraelen¹

2002

Accounting and Business Research

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“…The evidence comprised official documents such as statutes and legal cases and documents concerning interpretations of the auditors' responsibilities produced by the Danish Institute of State Authorised Public Accountants (DISAPAs). The paper contributes to country-specific studies on the development of the auditor's responsibilities, such as their liability for negligence in the UK context (Napier 1998), the role of the courts in establishing the boundaries of privileges of licenced vs. non-licenced auditors in the US context (Mills and Young 1999), and the change in the role of the auditor in the German corporate governance system and liability-restricting mechanisms (Gietzmann and Quick 1998).…”

Section: Prior Research and Methodologymentioning

confidence: 99%

“…The role of auditors has likewise evolved in response to different models of corporate governance (Gietzmann and Quick 1998;Napier 1998) as well as changes in professional jurisdictions (Robson et al 1994;Maltby 1999;Walker 2008). Various forms of audit, including corporate audits, were performed in most countries long before they were required by law (Watts and Zimmerman 1983;Swanson and Gardner 1988;Walton 1993).…”

Section: Prior Research and Methodologymentioning

confidence: 99%

Civil and common law influences on the Danish auditor's responsibilities in relation to fraud

Holm

2014

Accounting History Review

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We use a legal perspective to examine how the role of auditors in Denmark has been defined and the auditor's responsibilities in relation to fraud have been determined. The study draws on laws, legal cases and documents produced by professional organisations. We show that developments during the twentieth century were conditioned by the central legislative role of the Danish state combined with a hands-off approach to enforcing new law provisions. While the organising role of the state was consistent with the Roman civil law tradition, the implications of legislative absences, and later provisions in the form of 'general principles legislature', ensured that the role of the auditor was defined as a result of market forces and the judicial processes of the courts. We observe that in the Danish legal system important interpretative powers are granted to the courts in line with case law traditions in common law systems. An examination of fraud cases handled by the courts and disciplinary tribunals suggests that an important role was played by the professional organisation in Denmark.

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“…The courts have interpreted 'intent' as an auditor being sufficiently aware of the possibility that a third party would suffer a damage because of his or her conduct. Auditors are responsible for the tortious acts of their assistants but may absolve themselves from liability if they prove that they thoroughly selected, trained and supervised them, or prove that the damage would have occurred even if they had exercised this care (Gietzmann & Quick, 1998;Quick, 1996).…”

Section: Common Lawmentioning

confidence: 99%

“…Australia ($20 M) has a fixed component, whereas Canada has a fixed ($1 M) and variable (varies with fees) component. Germany also has a liability cap, but it was imposed before SOX (Gietzmann & Quick, 1998;Nowak, 2001). The U.S. has increased its civil and criminal penalties for SOX violations, which affects auditor liability to third parties if auditors are negligent in their duties.…”

Section: Analysis and Comparisonmentioning

confidence: 99%

Auditor liability to third parties after Sarbanes-Oxley: An international comparison of regulatory and legal reforms

Chung

Farrar

Puri

et al. 2010

Journal of International Accounting, Auditing and Taxation

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Capping auditor liability: The German experience

Cited by 63 publications

References 16 publications

Auditor economic incentives and going-concern opinions in a limited litigious Continental European business environment: empirical evidence from Belgium

Auditor economic incentives and going-concern opinions in a limited litigious Continental European business environment: empirical evidence from Belgium

Civil and common law influences on the Danish auditor's responsibilities in relation to fraud

Auditor liability to third parties after Sarbanes-Oxley: An international comparison of regulatory and legal reforms

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