An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Siew H. Chan
Washington State University

Lee Yao
Monash University

Abstract: We identify the impact of the following factors -- individual risk attitude, perception of the auditor's role in fraud detection, and perceived change in the objectives and reliability of the financial reporting and audit functions -- on assessment of auditor responsibility in an audit litigation. In a laboratory setting, participants read a hypothetical audit failure case and completed a series of attitude and demographic questions. Our results showed that risk-seeking individuals attributed a lower loss responsibility to the auditor. We also found that individuals who thought that the role of the auditor was to detect fraud attributed a higher loss responsibility to the auditor. Finally, the findings suggested that perceived change in the objectives and reliability of the financial reporting and audit functions led to assessment of a higher loss responsibility against the auditor.

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