Practitioner Summary of Can Auditors Reduce Negligence Verdicts? An Examination of Remedial Tactics

Abstract

SUMMARY:This article summarizes our recent study, ''The Use of Remedial Tactics in Negligence Litigation '' (Cornell et al. 2009). Auditors face significant litigation risk when adverse economic events occur with clients, even when the auditors followed Generally Accepted Auditing Standards (GAAS) when they conducted the audit. Civil litigation rules in many U.S. jurisdictions allow plaintiffs to compel testimony from defendants during trial proceedings. We investigated whether auditors could use verbal remediation tactics to reduce the likelihood of guilty verdicts when accused of professional negligence. In a mock trial setting, we examined whether an apology and/or a first-person justification offered by an auditor-defendant results in fewer negligence verdicts against audit firms. Our results indicate that, when an auditor testifies and expresses an apology and/or a first-person justification, jurors find the auditor guilty of negligence about half as often as when no remedial tactic is used. These findings provide evidence that auditors accused of negligence may effectively utilize such tactics to defend their audit decisions and actions.