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Selected auditor communications and perceptions of legal liability

Author

Listed:
  • MARIANNE M. JENNINGS
  • DAN C. KNEER
  • PHILIP M.J. RECKERS

Abstract

. “The definition of auditing calls for the communication of the degree of correspondence between assertions and established criteria†(AAA. 1972). At present, there continues to be no precise scale for measuring the degree of credibility lent to financial statements by the auditor. Don Leslie recently recommended adoption of a standard requiring auditors to disclose their operational materiality levels [Leslie, 1985]. No serious research has examined this proposal. The American Auditing Standards Board recently modified the standard form auditor's report in the United States. Neither Leslie's recommendation nor universal definitions of materiality were adopted. Among the objectives of report revision are better auditor†user communication and abridgment of auditor legal liability. Few empirical studies have considered the former; none that we know of have examined the latter. This study enters that void and examines whether selected report modifications including explicit disclosure of the working materiality thresholds underlying preparation and audit of the financial statements serve to mitigate auditor liability. A behavioral experiment was conducted with 77 general jurisdiction judges serving as subjects. Findings support the potential for meaningful modifications to the standard auditor's report to abridge auditor liability. Résumé. « La définition de la vérification fait intervenir la communication du degré de correspondance entre des assertions et des critères établis», [Traduction. AAA 1972]. À l'heure actuelle, il n'existe toujours pas d'échelle précise permettant de mesurer le degré de fiabilité que le vérificateur accorde aux états financiers. Don Leslie recommandait récemment l'adoption d'une norme exigeant que les vérificateurs fassent état des niveaux d'importance relative qu'ils utilisent [Leslie, 1985]. Cette proposition n'a fait l'objet d'aucune recherche sérieuse. L'American Auditing Standards Board modifiait récemment aux États†Unis le rapport type du vérificateur. Ni la recommandation de Leslie, ni les définitions universelles de l'importance relative n'ont été adoptées. Parmi les objectifs de ce remaniement du rapport type du vérificateur figurent une meilleure communication entre le vérificateur et l'utilisateur et la limitation de la responsabilité civile du vérificateur. Peu d'études empiriques ont porté sur la première question et, à notre connaissance, aucune ne s'est intéressée à la seconde. Les auteurs, pour combler cette lacune, examinent si certaines modifications sélectionnées apportées au rapport type du vérificateur, parmi lesquelles la divulgation explicite des seuils de tolérance opérationnels sous†jacents à la préparation et à la vérification des états financiers, font en sorte de limiter la responsabilité des vérificateurs. Une expérience de comportement a été menée auprès de 77 juges de compétence générale qui ont servi de sujets. Les résultats de l'étude confirment que des modifications pertinentes au rapport type du vérificateur peuvent limiter la responsabilité de ce dernier.

Suggested Citation

  • Marianne M. Jennings & Dan C. Kneer & Philip M.J. Reckers, 1991. "Selected auditor communications and perceptions of legal liability," Contemporary Accounting Research, John Wiley & Sons, vol. 7(2), pages 449-465, March.
  • Handle: RePEc:wly:coacre:v:7:y:1991:i:2:p:449-465
    DOI: 10.1111/j.1911-3846.1991.tb00824.x
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