Litigation Risk and Audit Fees: Evidence from UK Firms Cross-Listed on Us Markets

Posted: 8 Jan 2002

See all articles by Ananth Seetharaman

Ananth Seetharaman

Saint Louis University - Department of Accounting

Ferdinand A. Gul

Monash University Sunway Campus

Stephen Gregory Lynn

City University of Hong Kong (CityUHK) - Department of Accountancy

Abstract

Two ingredients necessary to examine the relation between litigation risk and audit pricing are (a) a litigious legal environment, and (b) publicly disclosed auditor remuneration. We combine both ingredients by focusing on UK firms offering to sell their securities publicly in the United States. We find that UK auditors charge higher fees for their services when their clients access U.S., but not non-U.S., capital markets. Further, we show that the higher fees cannot be fully explained by the SEC's extensive disclosure requirements. Rather, these findings are consistent with audit fees reflecting risk differences across liability regimes.

Keywords: Audit fees, Litigation risk, Cross-listing, Cross-border listing

JEL Classification: L84, M40, M49

Suggested Citation

Seetharaman, Ananth and Gul, Ferdinand A. and Lynn, Stephen, Litigation Risk and Audit Fees: Evidence from UK Firms Cross-Listed on Us Markets. Available at SSRN: https://ssrn.com/abstract=286426

Ananth Seetharaman

Saint Louis University - Department of Accounting ( email )

3674 Lindell Blvd.
St. Louis, MO 63108
United States
314-977-2473 (Phone)
314-977-1473 (Fax)

Ferdinand A. Gul (Contact Author)

Monash University Sunway Campus ( email )

Jalan Lagoon Selatan
Selangor Darul Ehsan
Bandar Sunway, 46150
Malaysia

Stephen Lynn

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

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