Relative Liability Exposure for Negligence and Financial Reporting Quality: Evidence from the Audit Interference Rule
利用美国各州采纳或拒绝审计干扰规则（AIR）的差异，研究发现当规则被拒绝、客户承担更多法律责任时，财务重述减少，审计费用增加，财务报告质量提升。
ABSTRACT We examine how the shifting of legal liability between auditors and clients affects financial reporting quality. We exploit the state-level adoption and rejection of a common law doctrine, the Audit Interference Rule (AIR), which shifts legal liability between auditors and clients, while not affecting total legal liability. The likelihood of restatements declines following staggered rejections of the AIR that shift risk to clients. Path analysis indicates that audit fees increase following AIR rejections, suggesting that relatively greater liability exposure for clients leads to a greater demand for assurance services that, in turn, reduces the likelihood of restatements. We further find greater improvements in financial reporting quality following the rejections of the AIR among clients with higher litigation risk and larger clients. Broadly, we provide novel evidence that clients’ incentives relating to increased liability exposure appear to dominate auditors’ disincentives relating to decreased liability exposure on financial reporting quality. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: K15; M41; M42.