The Effects Of State Tort Provisions And Perceptions Of Litigation Risk On Malpractice Insurance

Linville, Mark

doi:10.19030/jabr.v17i3.2085

Cited by 6 publications

(6 citation statements)

References 4 publications

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“…The index is developed from state-level summaries of joint-and-several liability reform by the American Tort Reform Association (2014). Prior work documents that third-party liability standards affect overall auditor litigation risk (e.g., Linville (2011) finds that auditors in states with more stringent third-party liability pay higher malpractice insurance premiums). The index assigns a value of 0 to state-years that follow a proportionate liability standard (least stringent form of thirdparty liability), 0.5 to state-years that follow a modified joint-and-several liability standard (moderately stringent form of third-party liability), and 1 to state-years that follow a full joint-and-several liability standard (most stringent form of third-party liability).…”

Section: Inventory Intensitymentioning

confidence: 99%

Auditor Information Spillovers and Company Operating Performance: Evidence from Targeted Auditor Switches

Kleppe

2020

SSRN Journal

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In this study, I examine whether companies realize operational benefits from making "targeted auditor switches" (i.e., engaging a new auditor recently dismissed by a competitor company). While prior work provides evidence consistent with companies perceiving that auditor information spillovers are costly, there is sparse extant evidence as to whether auditors actually do transfer operational information across companies. I find that companies that switch to a competitor's former auditor realize significant subsequent improvements in operating performance and that the association between targeted auditor switches and improvements in operating performance varies predictably with several across-and within-market factors. In addition, I document systematic movement in local audit markets consistent with a recognition of the value of auditors' operational knowledge. Finally, I find that companies that make targeted switches pay a significant audit fee premium to the incoming auditor and that this premium does not appear to be attributable to these companies hiring higher-quality auditors. Collectively, my findings suggest that operational information can be transferred across companies via external auditors and that companies' concerns over sharing an auditor with a competitor are based on real information spillover costs.

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Section: Inventory Intensitymentioning

confidence: 99%

Auditor Information Spillovers and Company Operating Performance: Evidence from Targeted Auditor Switches

Kleppe

2020

SSRN Journal

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“…Understanding various legal rules allows auditors to better assess liability exposure (i.e., auditor litigation risk). Examining statewide malpractice insurance premiums, Linville (2001) shows increased auditor litigation risk in nonprivity states than in privity ones. Assessing liability exposure to nonclients for negligent misrepresentation is important given the many instances of auditor lawsuits involving only or mainly state law claims (Pacini, Hillison, & Sinason, 2000).…”

Section: State Liability To Clients and Third Partiesmentioning

confidence: 99%

Examining the Current Legal Environment Facing the Public Accounting Profession: Recommendations for a Consistent U.S. Policy

Reinstein

Pacini

Green

2017

Journal of Accounting, Auditing & Finance

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We examine the recent history and trends of U.S. auditor liability to third parties to help regulators and legislators develop policies to protect and maintain audit quality while limiting auditor liability exposure. Although the United States has yet developed a formal policy to address auditor liability, some European Union member countries and Australia, in varying degrees, support such limitation. Thus, we also explore current EU and Australian policies as examples of potential recommendations to U.S. policy makers. In light of a litigious environment, U.S. Certified Public Accounting firms generally accept potential clients only after analyzing potential risks, dismiss many risky clients, raise their total or hourly fees, spend more time examining attestation evidence, and perform other procedures to reduce their litigation risk. This risk arises largely from the federal and state legal systems, assuming that auditors can better absorb and control losses from misleading financial statements than can financial statement users. While culpable, this litigious environment led to the demise of two large international Certified Public Accounting firms—Arthur Andersen and Laventhol & Horwath. Is the global economy better off having fewer accounting firms with the capacity to perform international audits? A Public Company Accounting Oversight Board’s recent Exposure Draft would require auditors of issuers to expand significantly their audit reports beyond current Pass/Fail standards, which could increase audit firms’ disclosures and resultant liabilities. After examining U.S. federal and state statutes plus court decisions regarding auditor liability, we suggest methods to protect the public while allowing audit firms to thrive in these environments.

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“…It was proposed that when the number of customers increases, so does the attention required for each customer; therefore, service quality decreases and it is more difficult to track and assess each customer. Linville (2001) claimed that when the number of customers increases, so does the litigation risk (Linville, 2001: 65). In the insurance application forms analyzed in our study, while one internationally operating insurance company asked for the number of customers, the insurance companies that are operating in Turkey did not.…”

Section: Customer-specific Litigation Risk Factors For Professional Lmentioning

confidence: 99%

Risk Assessment for Accounting Professional Liability Insurance

2016

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In this study, litigation risk factors were determined for accounting professional liability insurance and an artificial neural network was developed to determine the litigation risks. A training data set comprised of data from 201 policies was used to train an artificial neural network. The performance of the artificial neural network model was then assessed using a test data set comprised of data from 100 policies. In the research, a litigation risk estimation model was formed for liability insurance via an artificial neural network model. By comparing the litigation risks occurring in accounting professional liability insurance to those foreseen by the artificial neural network system, it was determined that the results were quite consistent. It was also determined that the realized results and the risks foreseen in the artificial neural network model provided data close to the real values and that the artificial neural network model could foresee the litigation risks in accounting professional liability insurance with a 99% success rate. Keywords: Insurance Industry, Litigation Risk, Accounting Professional Liability Insurance, Risk Assessment, Artificial Neural Network. JEL Classification Codes 94 ÖzÇalışmada muhasebe mesleği sorumluluk sigortalarının hukuki risk faktörleri belirlenerek, hukuki risklerini değerlendiren yapay sinir ağı modeli geliştirilmiştir. Çalışmada yapay sinir ağı yöntemi uygulanmıştır. Muhasebe mesleği sorumluluk sigortalarında gerçekleşen hukuki riskle, yapay sinir ağı yönteminin öngördüğü hukuki risk mukayese edildiğinde sonuçların oldukça uyumlu olduğu tespit edilmiştir. Gerçekleşen sonuçlar ile yapay sinir ağı modelinden elde edilen sonuçların gerçek değerlere çok yakın çıktılar verdiği ve yapay sinir ağı modelinin %99 başarı oranında muhasebe mesleği sorumluluk sigortalarının hukuki risklerinde doğru öngörüde bulunduğu tespit edilmiştir.

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The Effects Of State Tort Provisions And Perceptions Of Litigation Risk On Malpractice Insurance

Cited by 6 publications

References 4 publications

Auditor Information Spillovers and Company Operating Performance: Evidence from Targeted Auditor Switches

Auditor Information Spillovers and Company Operating Performance: Evidence from Targeted Auditor Switches

Examining the Current Legal Environment Facing the Public Accounting Profession: Recommendations for a Consistent U.S. Policy

Risk Assessment for Accounting Professional Liability Insurance

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