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Audit failure, litigation, and insurance in early twentieth century Britain

Chandler, Roy Anthony and Fry, Nadine 2005. Audit failure, litigation, and insurance in early twentieth century Britain. Accounting History 10 (3) , pp. 13-38. 10.1177/103237320501000302

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Abstract

The relationships between audit failure, judicial fault-finding and the availability of professional indemnity insurance have been debated by legal and accounting writers in both academic and professional circles. This paper adds an historical perspective to the current literature by presenting a review of cases involving allegations of auditors’ negligence over a fifty year period starting with the first significant case involving the question of auditors’ duties. Amateur auditors who failed to carry out a proper audit could expect little sympathy in the professional press but when large law suits were brought against recognised accountants, the profession was forced to consider the risks of the consequences of adverse judicial decisions. It was not long before practitioners sought to manage those risks through professional indemnity insurance. However, we find no evidence that the availability of insurance increased auditors’ risk by opening the floodgates of litigation.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Uncontrolled Keywords: Audit failure; litigation; liability; professional indemnity insurance
Publisher: SAGE Publications
ISSN: 1032-3732
Last Modified: 04 Jun 2017 05:33
URI: http://orca.cf.ac.uk/id/eprint/51990

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