Litigation and Independent Auditors: The Role of Business Failures and Management Fraud.

The Auditing Standards Board, the National Commission on Fraudulent Financial Reporting, and the House Subcommittee on Oversight and Investigations are all engaged in examining auditors' responsibilities with a focus on two areas-business failures and management fraud. This study describes the role of business failures and management fraud in both legal actions brought against independent auditors and the settlement of such actions. The study uses a sample of over 450 cases involving the 15 largest audit firms from 1960- 1985.