The consequences of protecting audit partners' personal assets from the threat of liability

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)154-173
Journal / PublicationJournal of Accounting and Economics
Issue number2-3
Online published26 Jun 2012
Publication statusPublished - Oct 2012


This study investigates the audit firm's decision to protect its partners' personal assets by becoming a limited liability partnership (LLP). We find that the likelihood of an audit firm switching from unlimited to limited liability is increasing in its size and exposure to litigation risk. We find no evidence that audit firms supply lower audit quality, lose market share, or charge lower audit fees after they become LLPs. However, the mix of public and private clients in audit firms' portfolios exhibits a significant shift toward riskier publicly traded companies after the switch to limited liability.

Research Area(s)

  • Audit liability, Audit quality, LLP

Bibliographic Note

Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).