| Summary: | 碩士 === 國立臺北大學 === 會計學系 === 103 === This study extends Schwartz(1997)’s model, studying the impact of the upper limit of the auditors’ legal liabilities on audit quality and investment level chosen by investors. This study assumes two kinds of upper limits: The multiple of audit fees and the percentage of investment. Our main results are as follows:
1. When the multiple of audit fees is used, under vague liability rule, audit effort can be more than, equal to, or less than the social optimal level. This effort level is also lower than the one chosen without upper limit. However, effort level is below the social optimal under strict liability rule. On the other hand, investment levels will both reach the social optimum under these two liability systems.
2. When the percentage of investment is used, the conclusions about the audit effort are similar to the case of the multiple of audit fees. The investment level will be higher than the social optimal. However, the higher the percentage is, the lesser the over-investment will be.
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