search query: @indexterm Quality / total: 1290
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Author: | Schwartz, R. |
Title: | Legal regimes, audit quality and investment |
Journal: | Accounting Review
1997 : JUL, VOL. 73:3, p. 385-406 |
Index terms: | AUDITORS QUALITY LIABILITY INVESTMENTS |
Language: | eng |
Abstract: | This article explores the impact of auditor's legal ability on audit quality and investment, by presenting an analytical model which is particularly concerned with the impact of damage measures on investments. For the auditor the threat of liability payments creates an incentive to work hard. The potential liability payments can also provide an "insurance" for investors in the event state of nature is bad. Investors can increase the liability payments by over-investing, if damages are measured based on actual investments. The potential transfer of wealth from auditors to investors can lead to over-investment in risky assets, relative to a socially optimal level, even with a high-quality audit. |
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