This paper examines auditor liability rules under imperfect information,costly litigation and risk averse auditors. A negligence rulefails in such a setting, because in equilibrium auditors will deviatewith positive probability from any given standard. It is shown thatstrict liability...

This paper deals with the determination of optimal liability rules under the assumption of risk aversion and loaded insurance premiums. While in a world with risk neutral economic actors and/or actuarially fair insurance premiums the allocation of risk does not matter for the efficiency of...