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Issue 5(1), October 2010 -- Paper Abstracts

Girard  (p. 9-22)

Cooper (p. 23-32)

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Coulmas-Law (p.42-46)

Stasio (p. 47-56)

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JOURNAL OF ACCOUNTING AND FINANCE

An Investigation of the Change in the Likelihood of Auditor

Litigation due to Fraud in the Post-SOX Section 404 Era

Author(s): Ifeoma A. Udeh, Ruth W. Epps

Citation: Ifeoma A. Udeh, Ruth W. Epps, (2013) "An Investigation of the Change in the Likelihood of Auditor Litigation due to Fraud in the Post-SOX Section 404 Era," Journal of Accounting and Finance, Vol. 13, Iss. 6, pp. 118 - 133

Article Type: Research paper

Publisher: North American Business Press

Abstract:

Using 629 observations of firms with frauds we investigate the change in auditor litigation in the Post-

SOX 404 era. The likelihood of fraud heightens when internal controls are inadequate or non-existent.

Failure to detect timely financial statement fraud exposes auditors to litigations since regulators may

attribute the failure to a lack of due care. We find the probability of auditor litigation due to fraud

increases in the Post-SOX 404 era. Interestingly, we find no evidence of further increase in auditor

litigation when misappropriation of assets also occurs. The results suggest an enhanced enforcement of

accountability by the SEC.