Joshua Ronen on Financial Statement Insurance

Geoffrey Owen, Tom Kirchmaier (t.kirchmaier@lse.ac.uk) and Jeremy Grant
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Geoffrey Owen: Interdisciplinary Institute of Management, London School of Economics and Political Science
Jeremy Grant: Graduate Institute of International Studies

Chapter 16 in Corporate Governance in the US and Europe, 2006, pp 88-90 from Palgrave Macmillan

Abstract: Abstract It is suggested that financial statement insurance against omissions and misrepresentations can be an effective tool to improve both the quality of audits and financial statements, while reducing the equilibrium amount of losses. By delegating the hiring decision of auditors to the insurance company, the inherent conflict of interest between auditors and the management that hires them will be solved. Both the insurance coverage and premium paid will be publicised. This will work as an effective signal of the quality of audits and should help companies with good financial statements to lower their cost of capital.

Keywords: Business Ethic; Corporate Governance; Incentive Structure; Earning Announcement; Audit Quality (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-51245-0_16

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DOI: 10.1057/9780230512450_16

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