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

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  • Chung, Janne
  • Farrar, Jonathan
  • Puri, Poonam
  • Thorne, Linda

Abstract

This study compares the status of auditors’ legal liability to third parties in seven countries. It analyzes recent legislation, regulation, and case law as well as pronouncements from national accounting and auditing bodies. With the increasing internationalization of capital markets and audit firms, an understanding of auditor liability on a global basis is important. Our findings show that common law countries (the United States, Canada, the United Kingdom, Australia, and New Zealand) have enacted legislative reforms that directly or indirectly increased auditors’ liability. In contrast, civil law countries (Germany and France) did not mandate legislative or regulatory reforms.

Suggested Citation

  • Chung, Janne & Farrar, Jonathan & Puri, Poonam & Thorne, Linda, 2010. "Auditor liability to third parties after Sarbanes-Oxley: An international comparison of regulatory and legal reforms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 19(1), pages 66-78.
    • Handle: RePEc:eee:jiaata:v:19:y:2010:i:1:p:66-78
    DOI: 10.1016/j.intaccaudtax.2009.12.005
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    References listed on IDEAS

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    1. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    2. Quick, Reiner & Köhler, A. & Marten, K.-U. & Ruhnke, K., 2008. "Audit regulation in Germany: improvements driven by internationalization," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35710, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    4. Reiner Quick, 1996. "The legal liability of auditors in Germany," European Accounting Review, Taylor & Francis Journals, vol. 5(3), pages 507-521.
    5. Tim Bush & Shyam Sunder & Stella Fearnley, 2007. "Auditor Liability Reforms in the UK and the US: A Comparative Review," Yale School of Management Working Papers amz2575, Yale School of Management.
    6. Eric Nowak, 2001. "Recent Developments In German Capital Markets And Corporate Governance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(3), pages 35-48, September.
    7. Gietzmann, M. B. & Quick, R., 1998. "Capping auditor liability: The German experience," Accounting, Organizations and Society, Elsevier, vol. 23(1), pages 81-103, January.
    8. C. Richard Baker & Alain Mikol & Reiner Quick, 2001. "Regulation of the statutory auditor in the European Union: a comparative survey of the United Kingdom, France and Germany," European Accounting Review, Taylor & Francis Journals, vol. 10(4), pages 763-786.
    9. Quick, Reiner & Baker, R. & Mikol, A., 2001. "Regulation of the Statutory Auditor in the European Union: A Comparative Survey of the United Kingdom, France and Germany," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 67744, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
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    4. Samsonova-Taddei, Anna & Humphrey, Christopher, 2015. "Risk and the construction of a European audit policy agenda: The case of auditor liability," Accounting, Organizations and Society, Elsevier, vol. 41(C), pages 55-72.
    5. Dykxhoorn, Hans J. & Sinning, Kathleen E., 2010. "A review and analysis of international accounting research in JIAAT: 2002–2010," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 19(2), pages 137-153.
    6. Seyed Mahmoud Hosseinniakani & Helena Inacio & Rui Mota, 2014. "A Review on Audit Quality Factors," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 243-254, April.
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    8. Anna Samsonova-Taddei & Javed Siddiqui, 2016. "Regulation and the Promotion of Audit Ethics: Analysis of the Content of the EU’s Policy," Journal of Business Ethics, Springer, vol. 139(1), pages 183-195, November.

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