SCIENCE CHAPTER I THE CHANGING PATTERN § i THE case presented in this book is not likely to survive criticism in every detail. There never was and there ...

This paper examines the effects of a decrease in auditor litigation risk in a setting that isolates a change in auditor litigation risk from changes in auditor reputation. _StoneRidge Investment Partners v. Scientific Atlanta_ is a 2008 U.S. Supreme Court ruling that restricted secondary actor liability in class action suits, resulting in a decrease in class actions that listed auditors as defendants. We document that the _StoneRidge_ decision is associated with a negative CAR for clients of Big 4 auditors and (...) industry specialist auditors, in particular those associated with high-litigation risk, low cash, and past incidences of modified going concern opinions. These findings are consistent with investor perception of lower potential payoffs from secondary defendants in class action suits, in particular auditors, following the _StoneRidge_ decision. We also document that auditors are more (less) likely to accept (reject) risky clients and charge lower audit fees to risky clients after _StoneRidge_, consistent with a decrease in auditor litigation risk that increases auditor risk tolerance. Finally, we provide evidence that audit firms issue fewer going concern opinions following _StoneRidge_, consistent with a decrease in litigation risk leading to lower audit quality_._ Our results are relevant to policy makers as they consider the disciplinary role of litigation on audit markets. (shrink)

Christopher Caudwell’s The Crisis in Physics is a stylish and readable analysis of the lines of connection between scientific theories and economic realities. Caudwell provides a trenchant critique of mechanism and positivism. In the words of J.B.S. Haldane, The Crisis in Physics offers a “quarry of ideas” for future philosophers: a wealth of insights and arguments that demands continuing critical reflection.

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