The Impact of Proposed Changes to the Content of the Audit Report on Jurorss Assessments of Auditor Negligence

Backof, Ann G.; Bowlin, Kendall; Goodson, Brian M.

doi:10.2139/ssrn.2446057

Cited by 38 publications

(43 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Aldamen et al, 2016;Ittonen et al, 2010;Xiang & Chengdu, 2015). A second-order effect on users' decisions, primarily through the effect on users' liability assessments, has also been analyzed (Backof, Bowlin, & Goodson, 2017;Brasel, Doxey, Grenier, & Reffett, 2016;Brown, Majors, & Peecher, 2016;Gimbar, Hansen, & Ozlanski, 2016;Kachelmeier et al, 2017). Instead, former studies have concentrated on the consequences of KAM disclosures with experimental and archival designs.…”

Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 99%

“…A second-order effect on users' decisions, primarily through the effect on users' liability assessments, has also been analyzed (Backof, Bowlin, & Goodson, 2017;Brasel, Doxey, Grenier, & Reffett, 2016;Brown, Majors, & Peecher, 2016;Gimbar, Hansen, & Ozlanski, 2016;Kachelmeier et al, 2017). However, Backof et al (2017) and Gimbar et al (2016) found greater perceived liability with KAM disclosures. However, the effect was not what regulators might have expected.…”

Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 99%

See 1 more Smart Citation

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Velte

2018

Corp Soc Responsibility Env

113

View full text Add to dashboard Cite

This paper investigates the relationship between the percentage of women on audit committees (WOAC) in UK firms and auditors' disclosures on key audit matters (KAM) from 2014 to 2015.The results show that firms with a higher percentage of WOAC have higher readability of KAM disclosures as measured by the Flesch reading ease index. By modifying our dependent and independent variables, sensitivity tests (Blau index and Fog readability index) also corroborate the expectation that WOAC will lead to greater readability of KAM disclosures, with stricter monitoring activities and greater risk avoidance in the audit committee. We provide a useful contribution to recent empirical sustainable corporate governance literature for practices, researchers, and regulators.

show abstract

Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 99%

Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 99%

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Velte

2018

Corp Soc Responsibility Env

113

View full text Add to dashboard Cite

show abstract

“…However, an experimental study by Gold, Gronewold and Pott () revealed that the revised ISA 700 auditor's report is not effective in reducing this expectation gap. Backof, Bowlin and Goodson () performed an experiment and tested how a clarification of the meaning of reasonable assurance affects jurors’ assessments of auditor liability. Participants were undergraduate students of a large south‐eastern US public university who were asked to assume the role of a juror in a professional negligence case.…”

Section: Prior Research and Research Questionsmentioning

confidence: 99%

Bank Directors’ Perceptions of Expanded Auditor's Reports

2016

View full text Add to dashboard Cite

Subsequent to the financial crisis, standard setters developed suggestions for enhancing the audit function, in order to increase financial stability. One related idea is to expand the audit report disclosed to the public, to ensure that it is fit for purpose. This study investigates the impact of expanded audit reports, namely information on the assurance level, materiality levels and key audit matters (KAM), on bank director perceptions of the quality of the financial statements, the audit and the audit report, as well as on their credit approval decisions. We conduct an experiment involving a sample of 105 bank directors and use ANCOVA to determine the predictors of bank director perceptions and decisions. Our findings suggest that disclosing the assurance level has a significantly positive impact. In contrast, we cannot demonstrate a material effect of expanding the audit report to include the materiality level or KAM. As a consequence, standard setters should carefully analyse the effect of additional information before making decisions on expanding the content of the audit report. Such expansions are not necessarily perceived as useful by stakeholders.

show abstract

“…Although these results, coupled with results in contemporaneous studies (Brown, Majors, and Peecher 2015;Kachelmeier, Schmidt, and Valentine 2015) should provide standard setters with a degree of comfort that disclosing CAMs will not increase auditor liability, there undoubtedly are exceptions that future research should examine to further inform policymakers. For example, two contemporary studies report that, in certain situations, disclosing CAMs can increase jurors' judgments of auditor liability such as when misstatements pertain to violations of rules-based/bright line standards (Gimbar, Hansen, and Ozlanski 2016) and/or when the concept of reasonable assurance is not explained to jurors (Backof, Bowlin, and Goodson 2015).…”

Section: Discussionmentioning

confidence: 99%

Risk Disclosure Preceding Negative Outcomes: The Effects of Reporting Critical Audit Matters on Judgments of Auditor Liability

Brasel

Doxey

Grenier

et al. 2016

Current Issues in Auditing

View full text Add to dashboard Cite

SUMMARY:The PCAOB and the IAASB recently proposed several significant changes to the audit reporting model, including requiring auditors to disclose critical audit matters (CAMs) in their audit reports. While investors appear to support such additional disclosures, some audit practitioners, academics, and attorneys contend that requiring auditors to disclose CAMs will make it easier for plaintiffs' attorneys to successfully sue auditors when audits fail to detect material misstatements. A recent study, ''Risk Disclosure Preceding Negative Outcomes: The Effects of Reporting Critical Audit Matters on Judgments of Auditor Liability'' (Brasel, Doxey, Grenier, and Reffett 2016), reports results of an experiment that inform this issue. Contrary to the above concerns, results of the study indicate that disclosing CAMs, either related or unrelated to an undetected material misstatement, likely will not increase, and could decrease (depending on the type of misstatement), the probability of jurors holding auditors liable when audits fail to detect material misstatements. Further, results indicate that explicitly stating in the audit report that there were no CAMs, an option allowed within the PCAOB's proposal, would increase negligence verdicts against audit firms. The following article summarizes the We acknowledge the anonymous reviewers and editor for their helpful comments throughout the review process.Editor's note: Accepted by J. Gregory Jenkins. Submitted: February 2016Accepted: July 2016 Published Online: July 2016 1 study's motivation, method, results, and implications for both audit reporting and risk disclosure in general.

show abstract

The Impact of Proposed Changes to the Content of the Audit Report on Jurorss Assessments of Auditor Negligence

Cited by 38 publications

References 33 publications

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Bank Directors’ Perceptions of Expanded Auditor's Reports

Risk Disclosure Preceding Negative Outcomes: The Effects of Reporting Critical Audit Matters on Judgments of Auditor Liability

Contact Info

Product

Resources

About