Independent auditor litigation: Recent events and related research

Abstract

The public accounting profession's difficulties with litigation have been widely asserted (e.g., Hill and Metzger, 1992, pp. 263–265; Mednick and Peck, 1994. pp. 897–898; Miller and Young, 1997, pp. 1990–1991, 2027). Public accountants have recently won several major victories in their efforts to reduce litigation based on allegedly negligent auditing. We discuss three of the more important of these recent victories for public accountants and their implications for auditor litigation. We conclude that, despite recent events, the debate over independent auditor litigation is far from over and long-term trends are uncertain. We also briefly examine some of the recent research in response to the public accounting profession's call in the early 1990s for academic research related to independent auditor litigation. In doing so, we briefly comment on some of the articles in this and the Winter 1997 issue of the Journal of Accounting and Public Policy which was dedicated to independent auditor litigation issues. We conclude that research to date in response to this call is providing useful evidence on litigation issues involving the profession, but that additional research is needed to shed light on unresolved issues. Suggestions are made for research that might address some of these questions.