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On the relationship between audit risk and security market measures of risk Stein, Michael T.
Abstract
This research investigates the relationship between security market measures of risk and audit risk. The auditor's decision making environment is extended to include the actions of the client firm's shareholders. Using the Nash equilibrium concept it is shown that, in equilibrium, the expected costs of auditing increase with the probability of a "bad" outcome in the securities markets. This result obtains in both strict liability and negligence regimes. The result is driven, in part by the insurance role of auditing. In empirical tests an association is established between security risk and audit fees. These tests suggest that security market measures of risk may provide information useful to the auditor in his decision making.
Item Metadata
Title |
On the relationship between audit risk and security market measures of risk
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Creator | |
Publisher |
University of British Columbia
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Date Issued |
1988
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Description |
This research investigates the relationship between security market measures of risk and audit risk. The auditor's decision making environment is extended to include the actions of the client firm's shareholders. Using the Nash equilibrium concept it is shown that, in equilibrium, the expected costs of auditing increase with the probability of a "bad" outcome in the securities markets. This result obtains in both strict liability and negligence regimes. The result is driven, in part by the insurance role of auditing. In empirical tests an association is established between security risk and audit fees. These tests suggest that security market measures of risk may provide information useful to the auditor in his decision making.
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Genre | |
Type | |
Language |
eng
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Date Available |
2010-10-21
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Provider |
Vancouver : University of British Columbia Library
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Rights |
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
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DOI |
10.14288/1.0098273
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URI | |
Degree | |
Program | |
Affiliation | |
Degree Grantor |
University of British Columbia
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Campus | |
Scholarly Level |
Graduate
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Aggregated Source Repository |
DSpace
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Item Media
Item Citations and Data
Rights
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.