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Beware of the Watchdog: Rethinking the Normative Justification of Gatekeeper Liability

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  • Miguel Alzola

    (Fordham University)

Abstract

One of the prevailing explanations of the corporate scandals of the Enron era and the recent financial crisis is the failure of professional gatekeepers—such as auditors, corporate lawyers, and securities analysts—to detect and disrupt corporate misconduct. The alleged solution to this failure—typically proposed and justified on consequentialist grounds—is to impose legal liability on professionals. The purpose of this paper is to critically examine the normative foundations of gatekeeper liability. In the course of this paper, I shall defend the claim that gatekeeper liability may be morally objectionable not only on grounds of fairness but also on consequentialist grounds. The expected contribution of this paper is threefold. First, it systematizes the framing and moral justification of gatekeeping duties. Second, it calls into question the normative underpinnings for targeting intermediaries instead of primary wrongdoers. Third, it anticipates some negative (and often overlooked) results of gatekeeping strategies in the accounting profession, specifically in the realm of clientele selection, the expectation gap, and auditor compensation.

Suggested Citation

  • Miguel Alzola, 2017. "Beware of the Watchdog: Rethinking the Normative Justification of Gatekeeper Liability," Journal of Business Ethics, Springer, vol. 140(4), pages 705-721, February.
    • Handle: RePEc:kap:jbuset:v:140:y:2017:i:4:d:10.1007_s10551-017-3460-3
    DOI: 10.1007/s10551-017-3460-3
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    1. Smith, Deborah Drummond & Gleason, Kimberly C. & Kannan, Yezen H., 2021. "Auditor liability and excess cash holdings: Evidence from audit fees of foreign incorporated firms," International Review of Financial Analysis, Elsevier, vol. 78(C).
    2. Yan Yan & Juan Gao & Xinying Jiang & Yuqing Geng & Enzhong Lin, 2024. "A Study on a New 5S Model of Decent Work Perception," Sustainability, MDPI, vol. 16(3), pages 1-24, January.
    3. Chambers, Valerie A. & Reckers, Philip M.J., 2022. "Auditor interventions that reduce auditor liability judgments," Advances in accounting, Elsevier, vol. 58(C).
    4. Awolowo Ifedapo Francis & Garrow Nigel & Chan Dora & Oni Anthony & Abidoye Adenike, 2024. "Auditors’ Evolving Responsibilities and the Rising Costs of Professional Negligence: A Comprehensive Examination," Journal of Forensic Accounting Profession, Sciendo, vol. 4(2), pages 20-33.
    5. Deqiang Deng & Chenchen Ye & Fan Wu & Yijing Guo & Hao Li & Changsheng Wang, 2023. "Effect of organizational ethical self-interest climate on unethical accounting behaviour with two different motivations in China: the moderating effect of Confucian ShiZhong Thinking," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    6. Wang, Yang & Ashton, John K. & Jaafar, Aziz, 2019. "Does mutual fund investment influence accounting fraud?," Emerging Markets Review, Elsevier, vol. 38(C), pages 142-158.

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