Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting
Filtern
Erscheinungsjahr
- 1999 (1) (entfernen)
Dokumenttyp
- Arbeitspapier (1) (entfernen)
Sprache
- Englisch (1) (entfernen)
Volltext vorhanden
- ja (1)
Gehört zur Bibliographie
- nein (1)
Schlagworte
- auditor liability (1)
- liability insurance (1)
- risk allocation (1)
Institut
28
This paper examines auditor liability rules under imperfect information, costly litigation and risk averse auditors. A negligence rule fails in such a setting, because in equilibrium auditors will deviate with positive probability from any given standard. It is shown that strict liability outperforms negligence with respect to risk allocation, and the probability that a desired level of care is met by the audi tor if competitive liability insurance markets exist. Furthermore, our model explains the existence of insurance contracts containing obligations - a type of contract often observed in liability insurance markets.