Law Commons^™

Choosing Gatekeepers: The Financial Statement Insurance Alternative To Auditor Liability, Lawrence A. Cunningham

GW Law Faculty Publications & Other Works

Positioned in a lively current debate concerning how to design auditor incentives to optimize financial statement auditing, this Article presents the more ambitious financial statement insurance alternative. This breaks from the existing securities regulation framework to draw directly on insurance markets and law. Based on upon an evaluation of major structural and policy-related features of the concept, the assessment prescribes a framework to permit companies, on an experimental-basis and with investor approval, to use financial statement insurance as an optional alternative to the existing model of financial statement auditing backed by auditor liability.

The financial statement insurance concept, pioneered by …

A Model Financial Statement Insurance Act, Lawrence A. Cunningham

GW Law Faculty Publications & Other Works

Building on companion work investigating the efficacy of financial statement insurance (FSI) as an alternative to traditional auditor liability (ssrn.com/abstract=554863), this Article presents the terms of a national enabling statute to implement this concept. The Model Financial Statement Insurance Act uses the architecture of the U.S. Trust Indenture Act of 1939. It authorizes issuer application for qualification, in connection with annual proxy statement filings, of policies of financial statement insurance. The Model FSI Act deems a series of provisions necessary to achieve securities law objectives to be part of all financial statement insurance policies so proposed, and requires insurers to …