1. Corporate Governance and Financial Reporting Research Discussion of “Fraud type and auditor litigation: An analysis of SEC accounting and auditing enforcement releases” by Bonner et al. (1998) TAR 1

2. Purpose of the Paper To investigate whether certain types of financial reporting fraud lead to a higher likelihood of auditor litigation. 2

3. Motivation & Contribution I. Motivation: public questions – types of fraudulent financial reporting, failure of auditor monitoring, litigation risk of auditors; responses to SAS 82/99; II. Contribution: provide evidence to the public for certain types of fraud are additionally concerned by the SEC and investors. 3

4. Sample Data and Method I. Sample Data: 261 SEC AAER firms 1982-1995. II. Regression model is used: Auditor Litigation = controls + Fraud _Variables Controls for clients auditor, case characteristics; Fraud _Variables: 1. Fictitious transaction frauds; II. Frequent frauds; 4

5. Results/Conclusion T3: Frequent frauds are positively significant to auditor litigation (+1.17, p=0.07); T4: Frequent frauds are positively significant to auditor litigation (+0.95, p=0.07); Fictitious transaction frauds are positively significant to auditor litigation (+2.91, p=0.04; +1.39, p=0.03) 5

6. Extension I. Fraud types and firm litigation; II. Influences of corporate governance. III. Specialist auditors are less likely to be sued? IV. Fraud types and internal control weakness. V. Local applications. 6