Conservative Accounting, Audit Quality, and Litigation
研究发现，诉讼威胁对会计保守性的影响取决于审计师的查错成本：成本高时促进保守报告，成本低时反而降低保守性。
Investors are much more likely to sue corporations and their auditors for overstated earnings reports than for understated reports. This asymmetry in litigation exposure is viewed as an important driver for conservative accounting practices in corporations because conservatism reduces the probability of overstatements and hence, investor litigation. This argument is incomplete, however, because it ignores that litigation concerns also affect the incentives of the auditor, which, in turn, affect the firm’s optimal reporting system. We find that the threat of litigation encourages firms to report more conservatively only when the auditor’s cost of detecting misstatements is relatively high but promotes less conservative reporting when the auditor’s cost of auditing is low. This paper was accepted by Brian Bushee, accounting