Auditor Litigation and Modified Reporting on Bankrupt Clients
研究破产前出具的修正审计报告是否保护审计师免受诉讼影响，基于1972-1992年间655家破产公司数据，比较有审计师诉讼、有其他诉讼和无诉讼三组公司的审计报告情况。
This study examines whether modified audit reports issued prior to bankruptcy protect auditors from certain effects of legal liability, including both lawsuits claiming audit failure and payments made to resolve such suits. Using a sample of 655 public companies that declared bankruptcy between 1972 and 1992 with Big Six (Big Eight) auditors prior to bankruptcy, we compare auditor reporting among three groups of firmsthose with auditor litigation, those with reporting and disclosure litigation not involving auditors (other litigation), and those with no reporting and disclosure litigation. The first two groups provide evidence on the overall level of reporting and disclosure litigation against bankrupt companies and the extent of auditors' involvement in such litigation. We provide insights on why auditors are (are not) included as defendants in this litigation; of particular interest is the role of modified reporting. Finally, we identify and discuss a number of empirical regularities regarding auditor reporting for those bankrupt clients with litigation against auditors.