Abstract This study describes auditor litigation disclosures for a sample of 761 cases from 1960-1990 for the largest audit firms. The study develops a disclosure spectrum, whereby information sources are classified as general, specialized, or private. Being widely and cost-effectively observable, general sources are the focus for much of the study. The WSJ serves as the representative general source. Findings include that only about 20 percent of auditor litigation cases have any widely disclosed information. A small number of cases (52) account for nearly half of the total WSJ disclosures. Characteristics of these highly visible cases include management fraud, severe financial distress, SEC enforcement actions against auditors, and regulated industry affiliations. Except for highly visible cases, general sources provide only limited final resolution information. Most final resolutions disclosed in the WSJ lend to confirm allegations of audit failure by disclosing auditor payments and settlement contributions rather than auditor dismissals and no auditor contributions to settlement funds.
Zoe‐Vonna Palmrose (Sat,) studied this question.