Abstract
The objectives of the paper are to provide descriptive data related to trial outcomes involving auditors and to interpret the trial outcomes using an analytical model provided by Priest and Klein (henceforth P&K) [1984], summarized in appendix A of the paper. The P&K analysis has considerable intuitive appeal and has been heavily cited in the legal economics literature. However, it also has drawbacks which limit its usefulness. First, the P&K analysis relies on numerous simplifying assumptions which may not adequately capture essential features of auditor litigation. Second, other analytical studies, utilizing different assumptions, yield different inferences. Third, the
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