审计外文文献翻译

AUDITMARKETFAILUREBENEDIKTKOEHLERTHEAUDITINGPROFESSIONHASCALLEDFORTHECURRENTREGIMEOFUNLIMITEDLIABILITYTOBEREPLACEDWITHLIABILITYCAPSTHEDEPARTMENTOFTRADEANDINDUSTRYHASTABLEDPROPOSALSTOREFORMTHESTRUCTUREOFTHEMARKETFORAUDITSERVICESTHESEPROPOSALSFALLSHORTOFMEETINGTHEDEMANDFORLIABILITYLIMITATIONBUTMODIFYHECURRENTREGIMEINASMUCHASAUDITORLIABILITY,THOUGHUNCAPPED,WOULDBEPROPORTIONALTOTHEDAMAGECAUSEDBYAUDITFAILURETHISSTEPISUNLIKELYTOREMEDYAUDITMARKETFAILURETHISARTICLEARGUESTHEDISTORTIONOFMARKETNCENTIVESINAUDITMARKETSCANBETRACEDTOGOVERNMENTINTERVENTIONANDTHEREMEDYLIESINREPLACINGGOVERNMENTINTERVENTIONWITHCOMPETITIONINTRODUCTIONPROPONENTSOFAUDITLIABILITYREFORMARGUETHATTHECURRENTWEIGHTOFOBLIGATIONSISUNTENABLEAREGIMEOFUNLIMITEDLIABILITY,COUPLEDWITHTHEDOCTRINEOFJOINTANDSEVERALLIABILITY,IMPLIESTHATEVERYCORPORATEINSOLVENCYCANTRIGGERLITIGATIONBYPLAINTIFFSARGUINGTHATAUDITORSARECULPABLEFORNOTSPOTTINGTROUBLEINTIMEWORSE,AUDITORSCANNOTONLYBEHELDTOACCOUNTBYACOMPANYSMANAGEMENT,BUTBYTHIRDPARTIESASWELLAUDITORSFEELTHATPROVIDINGANAUDITOPINIONINEFFECTISTANTAMOUNTTOUNDERWRITINGTHESOLVENCYOFTHEIRCLIENTSTHEGENERALACCOUNTINGOFFICEGAOFINDSINASURVEYOFCORPORATEFAILURESTHATAUDITORSHADQUALIFIEDTHEIROPINIONINONLYHALFOFALLCASESTHEREINLIESTHECRUXAUDITORSATTESTWHETHERACOMPANYSACCOUNTSAREDRAWNUPINACCORDANCEWITHAUDITINGSTANDARDSTHATISNOTTHESAMETHINGASTOVOUCHFORACOMPANYSSOLVENCYAUDITORSARGUEITISWRONGTOCONFLATEAUDITFAILUREANDCORPORATEFAILUREIN1992THEBIGSIXUSAUDITORSSTATEDTHATWITHOUTCHECKSTOTHIRDPARTYLITIGATION,ITWOULDONLYBEAQUESTIONOFTIMEUNTILTHEIRNUMBERDWINDLEDARTHURANDERSENETAL,1992USLEGISLATIONPASSEDIN1995SETHURDLESFORFILINGCLAIMSANDFORAWHILESEEMEDTOSTEMTHETIDEOFLITIGATIONYETTHEDEMISEOFARTHURANDERSENGAVEURGENCYTOTHECALLSFORAUDITMARKETREFORMAUDITORSAVERTHATINSOLVENCIESAREAFACTOFLIFEANDTHENEXTMAJORCORPORATECOLLAPSEISLIKELYTOSTARTANOTHERROUNDOFMUSICALCHAIRSINTHEAUDITSECTORANOTHERREDUCTIONINTHENUMBEROFAUDITORSWITHGLOBALREACHWOULDCONTRAVENETHEPUBLICINTERESTINSTABLEFINANCIALMARKETSNOTEVERYONEISCONVINCEDOFTHENEEDTOCAPAUDITORLIABILITYEUCOMMISSIONERFRITSBOLKESTEIN,FOREXAMPLE,HASLITTLESYMPATHYFORTHEAUDITINGPROFESSIONSPLEASFIRST,USERSOFFINANCIALACCOUNTSAREREASSUREDBYKNOWINGAUDITORSBACKTHEIRATTESTWITHUNLIMITEDLIABILITYUNLIMITEDLIABILITYCONCENTRATESTHEMINDSECONDLY,ARGUESBOLKESTEIN,THETHREATTOAUDITMARKETSTRUCTUREISENTIRELYSELFINFLICTEDAUDITORSPURSUEDASTRATEGYOFGLOBALGROWTHBYLEVERAGINGTHEREPUTATIONEARNEDINNATIONALMARKETSTHEYCOULDHARDLYCOMPLAINTHATTHETHREATOFCONTAGIONFROMPARTICULARMARKETSMIGHTAFFECTTHEENTIREOPERATIONBOLKESTEINISBUTONEOFTHOSEWHOBELIEVETHATCAPPINGCLAIMSAGAINSTAUDITORSISACUREWORSETHANTHEDISEASEBOLKESTEIN,2003BOLKESTEINTABLESTWOISSUESONEISMARKETSTRUCTURE,THEOTHERISUNLIMITEDTHIRDPARTYLIABILITYMARKETSTRUCTUREINALMOSTEVERYCOUNTRY,THEBIGFOURAUDITORSENJOYAVIRTUALMONOPOLYINAUDITINGTHELARGECOMPANYSECTORTHEGAPSEPARATINGTHEBIGFOURANDTHEVASTMAJORITYOFAUDITSERVICEPROVIDERSISENORMOUSTHEAUDITINGSECTORISMARKEDBYASTARKCONTRASTBETWEENFOURGLOBALFIRMSACCOUNTINGFORTHEBULKOFINDUSTRYREVENUE,ANDSMALLFIRMSWITHUPTOFOURPARTNERSACCOUNTINGFORTHEBULKOFINDUSTRYNUMBERSTHEGAPSEEMSUNBRIDGEABLETHEQUESTIONOFIDEALCOMPANYSIZEINAUDITING,ANDWHYTHEREISLITTLEMIGRATIONBETWEENSEGMENTS,ISUNSETTLEDGEORGESTIGLER1958SUGGESTEDSEGMENTINGANINDUSTRYINTOLAYERSOFCOMPANIESOFSIMILARSIZEANDCOMPARINGTHEIRRETURNSONCAPITALOVERTIME,FIRMSWILLGRAVITATETOWARDSASIZETHATMAXIMISESRETURNSSTIGLERSANALYTICALTOOLSDONOTEXPLAINTHEPECULIARSTRUCTUREOFTHEAUDITSECTORWECANNOTBESUREWHETHER,INTHEAUDITSECTOR,FIRMSIZECANBEDIVIDEDINTOACONTINUOUSORSTEPPEDCONTINUUMTHEFIRMSIZEDICHOTOMYINAUDITINGRAISESTHEQUESTIONOFWHETHERLARGEANDSMALLFIRMSAREINTHESAMEMARKETATALLWITHINTHELARGEFIRMSEGMENT,HOWEVER,GEORGESTIGLERSFORECASTTHATCOMPANIESGRAVITATETOWARDSIDEALCOMPANYSIZEHOLDSTRUESULLIVAN2002EXAMINESTHEPRICINGSTRUCTUREOFTHEBIGEIGHTFIRMSBEFOREANDAFTERMERGERSANDDISCOVERSPRICEDECLINESFORLARGECLIENTSBANKERETAL2003FINDTANGIBLEPRODUCTIVITYGAINSAFTERAUDITFIRMMERGERSATONEENDOFTHEAUDITMARKETSPECTRUM,SCALEECONOMIESAREREALSOMEPROFFERTHEWORKINGHYPOTHESISTHATAUDITINGSUNLIMITEDLIABILITYREGIMEDETERSMARKETENTRYTHUS,ENDINGUNLIMITEDLIABILITYWOULDFOSTERCONDITIONSALLOWINGSMALLERFIRMSTOSCALEUPOPERATIONSONCEAUDITORLIABILITYISCAPPED,ACCORDINGTOTHISLINEOFTHINKING,SMALLERFIRMSWOULDCOMPETEAGAINSTINDUSTRYLEADERSANDINDUECOURSEBREAKUPTHEINCUMBENTOLIGOPOLYTHEOFFICEOFFAIRTRADING2004EXAMINESTHISQUESTIONANDDOESNOTFINDTHEARGUMENTCOMPELLINGACONNECTIONBETWEENAUDITLIABILITYREGIMESANDMARKETSTRUCTUREISINANYEVENTEMPIRICALLYUNSUBSTANTIATEDTHREECOUNTRIESWITHCAPSONAUDITORLIABILITYAUSTRIA,GERMANYANDGREECEARENOTKNOWNTOHAVECONSPICUOUSLYHIGHERINTENSITYOFAUDITMARKETCOMPETITIONFORBIGCLIENTSIFTHESEARCHFORMEANSTOIMPROVEAUDITMARKETSHASBEENUNSUCCESSFUL,PERHAPSITWOULDMAKESENSETOLOOKELSEWHEREFORPOLICYSOLUTIONSARGUABLY,THEPROBLEMSOFTHEAUDITSECTORAREINDUCEDBYGOVERNMENTINTERVENTIONUNLIMITEDTHIRDPARTYLIABILITYGOVERNMENTSHAVEINTERVENEDINAUDITLIABILITYREGIMESFOROVER150YEARSTHEENGLISHJOINTSTOCKCOMPANIESACT1844ISTHEFIRSTINSTANCEOFMANDATORYAUDITPROVISIONINLEGISLATIONTHEREMITOFPUBLICLYMANDATEDAUDITSINTHEUKAUDITSWASEXTENDEDTOBANKSIN1879ANDTOLIMITEDLIABILITYCOMPANIESIN1900INTHEUNITEDSTATESINDEPENDENTAUDITSWEREVOLUNTARYUNTILTHE1934SECURITIESEXCHANGEACTATTHATPOINTAUDITORSACQUIREDTHEFUNCTIONOFPUBLICWATCHDOGSBEFORETHE1934SECURITIESEXCHANGEACTSECACTAUDITORSWEREONLYLIABLETOTHEPRINCIPALSWHOHIREDTHEMTHIRDPARTYLIABILITYCLAIMSDIDNOTSUCCEEDINCOURTUSSUPREMECOURTJUDGEBENJAMINCARDOZO,INHISRULINGINULTRAMARES1931,RINGFENCEDAUDITORSFROMALIABILITYINANINDETERMINATEAMOUNTFORANINDETERMINATETIMETOANINDETERMINATECLASSTHEHAZARDSOFABUSINESSCONDUCTEDONTHESETERMSARESOEXTREMEASTOENKINDLEDOUBTWHETHERAFLAWMAYNOTEXISTINTHEIMPLICATINGOFADUTYTHATEXPOSESTOTHESECONSEQUENCESTHE1934SECACTDIDNOTHEEDCARDOZOSWARNINGTHEIMPOSITIONOFAUDITSBYPUBLICMANDATEOPENEDTHEFLOODGATESTOTHEFLOWOFTHIRDPARTYLITIGATIONTHATCARDOZOSOUGHTTOSEALOFFTHESECACTMADEAUDITORSTHETARGETOFLIABILITYCLAIMSFILEDBYPLAINTIFFSWHOREADANAUDITOPINIONASASEALOFGOODHOUSEKEEPINGTHETIDEOFCLAIMSANDSETTLEMENTSROSEFORSEVERALDECADESANDHITITSHIGHWATERMARKBYTHE1990SINTHEUSATHE1995PRIVATESECURITIESLITIGATIONREFORMACTCURTAILEDTHESCOPEFORTHIRDPARTYLAWSUITSANDBROUGHTAMEASUREOFRELIEFTOTHEPROFESSIONSINCETHENTHETWINCORPORATEANDAUDITFAILURESOFENRONANDARTHURANDERSENHAVEONCEMOREBROUGHTTHEISSUEOFAUDITMARKETSTRUCTUREANDLIABILITYTOTHEFOREAUTHORITIESARELOOKINGFORWAYSTOIMPROVEMARKETSTRUCTUREANDENTRYCONDITIONSTHEFOLLOWINGCOMMENTSSUGGESTASAREMEDYFORTHEDYSFUNCTIONALAUDITMARKETTOREINBACKTHEREMITOFGOVERNMENTINTERVENTIONMARKETFAILUREORREGULATORYFAILURETHE1934SECACTMANDATEDAUDITSINTHEPUBLICINTERESTTHISSTEPBROADENEDTHERANGEOFAUDITORSCONTRACTUALOBLIGATIONSTHESECACTDIDNOTDEFINEWHATTHESELIABILITIESWEREANDITWASLEFTTOTHECOURTSTOINTERPRETTHEMTHEADDEDLIABILITYTOTHIRDPARTIESCHANGEDTHEINCENTIVESOFAUDITMARKETACTORSAUDITORSARELIABLETOTHECOMPANYTHATHIREDTHEM,ANDTOTHIRDPARTIESTHATDIDNOTCOMPANIESPAYAUDITORS,THIRDPARTIESDONOTTHEIMPACTOFTHIRDPARTYLITIGATIONRISKONAUDITSERVICEPRICINGISNOTTRANSPARENTTHIRDPARTYLITIGATIONRISKCANBEREFLECTEDINAUDITSERVICECONTRACTSINTHREEPOSSIBLEWAYSTHEFIRSTISTHATTHIRDPARTYLITIGATIONRISKISPRICEDINTOAUDITCONTRACTSANDCOMPANIESFOOTTHEBILLFORFREERIDINGPARTIESTHATMEANSCOMPANIESOVERPAYTHESECONDISTHATTHIRDPARTYLITIGATIONRISKISNOTPRICEDINTOAUDITSERVICECONTRACTSINTHATCASE,AUDITORSAREUNDERPAIDTHETHIRDPOSSIBILITYISTHATCOMPANIESPERCEIVEAUDITORACCOUNTABILITYTOTHIRDPARTYLIABILITIESASABENEFITTOTHEMSELVESANDAREPREPAREDTOREWARDTHISSERVICERESEARCHSUGGESTSTHISISTHECASEIFSO,THISHASSOMEBEARINGONTHEISSUEOFAUDITMARKETREFORMCOMPANIESINSPAIN,FOREXAMPLE,REPORTTHEYCHOOSEALARGEAUDITFIRMINTHEEXPECTATIONTHATTHISWILLIMPROVETHEIRCREDIBILITYWITHBUSINESSPARTNERSABROADMOIZERETAL,2004ANOTHERSTUDYRELATESTHEEFFECTOFAUDITMARKETREFORMINCANADA,WHEREIN1994LEGISLATIONGAVECERTAINLARGEPRIVATECOMPANIESANEXEMPTIONFROMMANDATORYAUDITSSUBSEQUENTLY,ABOUTAQUARTEROFALLELIGIBLECOMPANIESREDUCEDTHEEXTENTOFAUDITSERVICESTHOSETHATCONTINUEDAUDITSERVICESATPREREFORMLEVELSSTATEDTHATTHEIRMOTIVATIONWASTOMAINTAINCREDIBILITYWITHOUTSIDEPARTIESRENNIEETAL,2001CLEARLY,AUDITORTHIRDPARTYACCOUNTABILITYISAKEYBENEFITTOCOMPANIESTHISFINDINGHASSOMEBEARINGONREFORMSOFAUDITREGULATIONCOMPANIESTHATDONOTPROVIDETHEINFORMATIONINVESTORSEXPECTHAVEDIFFICULTYATTRACTINGINVESTMENTOVERTIME,ACOMPANYSCOSTOFCAPITALWILLSIGNALWHETHERTHELEVELOFDISCLOSUREISRIGHTTHECANADIANEXPERIENCESHOWSCOMPANIESCHOOSETHELEVELOFINDEPENDENTAUDITSTHATSUITTHEIRNEEDSIFCOMPANIESAREPREPAREDTOHIREAUDITORSVOLUNTARILY,GOVERNMENTSNEEDNOTCOMPELTHEMANOBJECTIONAGAINSTASWITCHFROMMANDATORYTOVOLUNTARYREPORTINGMIGHTBETHATTHISWOULDNOTMAKEADIFFERENCEIFPRIVATEANDPUBLICINCENTIVESOVERLAP,OUTCOMESINTHEMARKETWOULDBEIDENTICALTHISOBJECTIONOVERLOOKSTHATDROPPINGGOVERNMENTMANDATEDAUDITSWOULDALLOWFLEXIBILITYINTWORESPECTSBOTHTHELEVELANDTHEFORMOFAUDITSERVICESCOULDVARYWHEREREGULATIONDETERMINESTHELEVELOFAUDITSERVICES,THESEMAYBEOVERPROVIDEDORUNDERPROVIDEDANEXAMPLEOFEACHPOSSIBILITYFOLLOWSINFLORIDA,REGULATIONPRECLUDESSOMEMUNICIPALITIESFROMPUTTINGTHEIRAUDITCONTRACTSOUTTOTENDERREGULATORSWANTMUNICIPALITIESTOPICKTHEIRAUDITORSOLELYONQUALITYRESTRICTEDANDUNRESTRICTEDAUDITMARKETSINFLORIDAALLOWCOMPARISONOFTHEEFFECTONMARKETOUTCOMESMUNICIPALITIESWITHBIDDINGRESTRICTIONSTENDTOPAYMOREFORAUDITSERVICESANDTOWINMOREAWARDSFORHIGHSTANDARDSOFFINANCIALDISCLOSUREHACKENBRACKETAL,2000ONEMIGHTSUSPECTTHATTHISISACASEOFGOLDPLATINGACASEUNDERPROVISIONOFAUDITSERVICES,ONTHEOTHERHAND,BECAMEAPPARENTINGERMANYWHENCORPORATIONSWONTHERIGHTTOSWITCHFROMDOMESTICTOUSACCOUNTINGRULESDAIMLERBENZAVAILEDITSELFOFTHISOPPORTUNITYEVENTHOUGHITSRESTATEDACCOUNTSSHOWEDALOSSRATHERTHANAPROFIT,THECOMPANYSPOSTRESTATEMENTSHAREPRICEWENTUPTHISINVESTORREACTIONISCONSISTENTWITHTHEEXPECTATIONTHATCAPITALMARKETSREWARDINCREASEDTRANSPARENCYLEUZANDVERRECCHIA,2000MYDDELTON,2004MOREOVER,IMPOSINGUNIFORMACCOUNTINGSTANDARDSDIMINISHESSCOPEFORTHEAUDITSECTORTODEVELOPVARIANTDISCLOSUREFORMSREGULATORYCOMPETITIONINCORPORATEGOVERNANCEISTRIEDANDTESTEDINUSFINANCIALMARKETSANEXAMPLEISTHEHIGHLYSOPHISTICATEDFRAMEWORKFORCORPORATEGOVERNANCEINTHEUSAREGARDINGDOMICILEOFINCORPORATIONUSCORPORATIONSAREFREETOCHOOSETHEIRDOMICILEANDOVERTIMEREALISEDTHATPICKINGTHERIGHTLOCATIONFORINCORPORATIONGIVESANEDGEINRAISINGCAPITALMARKETDISCIPLINE,RATHERTHANGOVERNMENTDIRECTIVES,CREATESINCENTIVESFORCHOOSINGWHERETOINCORPORATESIMILARLY,GIVINGCOMPANIESANOPTIONTOEXPRESSAPREFERENCEFORALTERNATIVEACCOUNTINGSTANDARDSWOULDALLOWMARKETFORCESTODETERMINEOPTIMALREPORTINGREGIMESSUNDER,2002THEDEPARTMENTOFTRADEANDINDUSTRYSPROPOSALSWILLNOTAFFECTTHETOPHEAVYSTRUCTUREOFTHEAUDITMARKETAMOREEFFECTIVEWAYTOINCREASECOMPETITIONINAUDITMARKETSWOULDBETORELEASECOMPANIESANDAUDITORSFROMTHEREQUIREMENTTOCOMPLYWITHGUIDELINESIMPOSEDBYGOVERNMENTTHISSTEPWOULDENDTHEDISTORTIONOFINCENTIVESANDRELEASEPOTENTIALTONEGOTIATEAUDITCONTRACTSTHATMEETTHEREQUIREMENTSOFCOMPANIES,AUDITORSANDTHIRDPARTIESREFERENCESARTHURANDERSEN,COOPERSLYBRAND,DELOITTETOUCHE,ERNSTYOUNG,KPMGPEATMARWICKANDPRICEWATERHOUSE1992THELIABILITYCRISISINTHEUNITEDSTATESIMPACTONTHEACCOUNTINGPROFESSION,REPRINTEDINJOURNALOFACCOUNTANCY,174,1923BANKER,R,HCHANGANDRCUNNINGHAM2003THEPUBLICACCOUNTINGINDUSTRYPRODUCTIONFUNCTION,JOURNALOFACCOUNTINGANDECONOMICS,35,255281BOLKESTEIN,F2003AUDITORLIABILITYANEUPERSP