Disclosure of Internal Control Weaknesses and Auditors’ Litigation Risk
研究了股东诉讼担忧是否促使审计师披露内部控制缺陷，发现出具负面内控意见能降低审计师被列为被告的概率，且对事前诉讼风险高的客户更及时出具意见。
SUMMARY We investigate whether the concern of shareholder litigation motivates auditors to disclose internal control weaknesses. We document that issuing adverse internal control opinions reduces the likelihood of auditors being named with their clients as defendants in shareholder lawsuits. This finding suggests that auditors can reduce their legal liability arising from failed financial statement audits by increasing the quality of internal control audits. Consistent with this expectation, we find that auditors are more likely to issue such opinions in a timely manner for clients with higher ex ante litigation risk. Overall, our evidence suggests that the threat of litigation provides an incentive rather than a disincentive for auditors to issue adverse internal control opinions for clients with higher litigation risk. Data Availability: The data are available from public sources indicated in the paper. JEL Classifications: M42; K41.