Audit Reports For Litigation Loss Contingencies

Abstract

The relationship between the type of audit opinion received by 212 U.S. firms defending pending litigation and auditor, size, leverage, liquidity, and profitability was analyzed using hierarchical loglinear models.  Using control and experimental groups which included only firms named as defendants in pending litigation, a model was identified which provided an excellent fit to the data and furnished evidence that size and audit firm alone are sufficient to describe the type of audit opinion received.