Legal Liability - Compensatory and Punitive Damages.pptx -...

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Research Aim Investigates the impact of an audit failure on the auditor’s legal liability as a result of audit procedures being completed by the audit firm and/or a separate third party located domestically and/or internationally. Legal Liability: Compensatory and Punitive Damages “Counterfactual reasoning” (what-if scenarios) from the jurors’ perspective is used in the hypotheses.
Hypotheses - Compensatory Damages H1: Outsourcing audit procedures to another firm will result in higher compensatory damages when an audit failure occurs. Reasoning: The audit firm failed its responsibility to supervise the work of the other firm and could have performed the audit procedures themselves. H2 : When an audit failure occurs, the difference in compensatory damages between insourced and outsourced audit work will increase if the outsourced work also becomes offshored. Reasoning: Movement of work to different country will worsen the jurors’ view of lack of care and inadequate supervision Different jurisdiction may not have MRA (Mutual Recognition Agreement) resulting in poor quality audits

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