“Legal Disputes Against Independent Auditors: Insights from Prominent Attorneys” by Dr. Eldar Maksymov
Dr. Eldar Maksymov
W. P. Carey School of Business
Arizona State University
In the early 1990’s, thought leaders within the auditing profession called for research examining factors related to the causes, outcomes, and effects of legal claims against auditors. Accountancy researchers vigorously responded to this call with archival research examining factors associated with the likelihood of trials and experimental research focusing on juror judgment and decision making, though the majority of cases never reach trial. While the extant literature is rich, its focus is narrow, lacking insights on many important questions related to facets of dispute resolution beyond jury trials. Our objective is to provide information that expands our knowledge of factors affecting all aspects of legal disputes against auditors and establishes a sound foundation for future research. To accomplish this, we interviewed 21 prominent attorneys with an average of 25 years of experience representing either plaintiffs and/or defendants in claims against auditors. We lever the key insights from these interviews, along with prior research, to develop a schematic representation of the full audit dispute resolution process. Further, we use insights from our interviews to discuss the behavioral, economic, and environmental factors that affect each facet of the full process. These insights in some cases support, and in other cases contradict, our prior literature-based understanding of factors impacting auditor legal liability. Last, within each facet of the process, we identify an abundant set of questions researchers can examine that will enhance the literature and contribute significantly to practice.