The Impact of Litigation Risk on Audit Pricing: A Review of the Economics and the Evidence.

Key Points

• The aim is to explore the relationship between audit pricing and litigation risk, addressing criticisms of previous analyses.
• Reviewed existing literature on audit pricing and litigation risk.
• Analyzed economic arguments related to negligence and legal liability standards.
• Considered the effects of changes in the litigation environment.
• Identified mispricing of litigation risk by auditors.
• Discussed economic implications of increased litigation risk on audit pricing.
• Examined how shifts in the litigation landscape impact auditor liability and pricing.