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.
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© 2006 Geoffrey Owen, Tom Kirchmaier and Jeremy Grant
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Owen, G., Kirchmaier, T., Grant, J. (2006). Joshua Ronen on Financial Statement Insurance. In: Corporate Governance in the US and Europe. Palgrave Macmillan, London. https://doi.org/10.1057/9780230512450_16
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DOI: https://doi.org/10.1057/9780230512450_16
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-54717-3
Online ISBN: 978-0-230-51245-0
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