Legal liability, government intervention, and auditor behavior : evidence from structural reform of audit firms in China

This paper investigates how legal liability influences audit quality and audit fees, particularly in the presence of government intervention. Since 2010, all Chinese audit firms were required to transform from a structure of limited liability company (LLC) to limited liability partnership (LLP), which removes the cap on the liability exposure of negligent auditors. By adopting this natural experiment, we document the following findings: first, after audit firms reorganize as LLPs, auditors are more likely to (1) issue modified audit opinions and going-concern opinions, (2) constrain clients’ earnings management, and (3) charge a premium in audit fees, which suggest that exerting unlimited legal liability on negligent auditors improves both audit quality and audit fees. Second, the effect of the LLP adoption is more pronounced when auditors are from local audit firms, and clients are controlled by local governments. Further analyses suggest that the stock prices of clients positively react to the reform event, which indicates that LLP adoption improves the overall value of audits. In summary, our empirical findings are consistent with the argument that legal liability is able to effectively shape auditor behavior in emerging markets where the other institutional mechanisms are relatively weaker and government intervention is heavy.

Methodological considerations in the measurement of institutional and structural forms of HIV discrimination

The systematic measurement of HIV/AIDS-related discrimination is imperative within the current rhetoric that holds discrimination as one of the two ‘biggest' barriers to HIV/AIDS pandemic intervention. This paper provides a methodological critique of the UNAIDS (2000b) Protocol for the Identification of Discrimination against People Living with HIV (the Protocol) . Specifically, the paper focuses on the Protocol's capacity to accurately identify and measure institutional levels of HIV-related discrimination that allows data that are reliable and comparable across time and contexts. Conceptual issues including the Protocol's objective as an indicator versus a direct measure of discrimination and the role of the Protocol as a tool of research versus a tool of advocacy are explored. Design issues such as the operationalization of discrimination, appropriateness of indicator content, sampling and data collection strategies and issues of scoring are also evaluated. It is hoped that the matters outlined will provide readers with ways of critically reflecting and evaluating the findings of the research papers presented in this Special Issue, as well as pointing to ways of improving research design.

A randomised controlled trial of a social support intervention

Background: Much evidence has accumulated over the last three decades that low social support is related to both mental and physical health. Despite this large and convincing literature, reviewers have noted that there exists remarkably little evidence that social support can be increased by an appropriate intervention. This study reports on the development and evaluation of a new intervention for social support which takes account of the stress-buffering and direct effect models.

Method: Eighty-one individuals scoring low on social support were randomly allocated to the intervention or a waiting-list control condition. Treatment consisted of 10 weekly sessions administered in a group format, and 49 participants (nine males) completed assessments at the beginning and end of a 10-week period, and at 10-week follow-up (intervention condition only).

Results: The intervention proved to be successful at increasing functional support but not structural support. The intervention was also successful in increasing the social skill of self-disclosure, and decreasing depression. Gains made between pre- and post-treatment were maintained at 10-week follow-up.

Conclusions: Based on published analyses of the effects of social support on health, the results imply that the intervention would be useful for stress-buffering purposes, but not for the general health-promoting effects that are associated with good social integration.