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(n294) See supra note 292. See also Jennings et al., supra note 102, at 103 and n.15. Quantitative definitions of materiality have proved to be elusive. Different authorities use different bases of financial activity as benchmarks: e.g., earnings per share; consolidated revenues; gross profit; and a combined base of income, assets, and profit.

(n295) See id. at 104 n.22 citing eases. See also supra note 57 discussing Bily v. Arthur Young and Co., 271 Cal Rptr. 470 (Cal. Ct. App. 1991) rev'd on other grounds, 834 P.2d 745 (Cal. 1992).

(n296) Under negligence principles serious injury can occur in the absence of negligence if a reasonable calculation of potential harm was made and guarded against, but either the improbable event occurred or the injury was more severe than could reasonably have been anticipated.

(n297) In Business Risk, supra note 288, the authors advise auditors to conduct more stringent audits than GAAS requires when the auditors perceive that their liability risk has increased. In short, they urge that GAAS requirements should be treated as a minimum standard.

(n298) See supra note 102 and accompanying text.

(n299) The actual reliance argument is based on cause-in-fact. If X number of creditors and investors use their own information (or perhaps ouija boards) exclusively to make their business decisions while ignoring audit opinions, presumably, they should be unable later to maintain lawsuits against the auditors for negligent misrepresentation. See supra note 5 and accompanying text.

(n300) Richard A. Epstein, Liability of Accountants for Negligence: How To Tell the Best Rule? in BUSINESS LAW 1134 (Mark E. Roszkowski ed. 1987).

(n301) Although insurance companies have significant incentives to reduce the risks they contract to bear, they rarely have the expertise or the resources to do much more than a superficial job of monitoring. It is difficult enough for auditors to obtain some expertise in their clients' businesses, how much less expert must the auditors' insurers be in assessing the insolvency risks of those same businesses?

(n302) We do not include here dispute resolution costs (primarily attorney fees). These, of course, are horrendous. When tort litigation costs are included in the overall administration of claims, generally less than a third of insurance premiums are returned to victims to compensate them for their injuries. See, e.g., authorities cited in ECONOMIC STRUCTURE, supra note 272. at 57-58 nn.9-10. Although this performance relates to product liability and motor vehicle crash experience, there is little reason to believe other tort areas are cheaper to administer.

(n303) It is important to distinguish the insurance mechanism from the tort system per se. The latter serves efficiency by deterring unsafe behavior, but at a huge loading cost. ECONOMIC STRUCTURE, supra note 292, at 58. The insurance mechanism provides some minimal additional deterrence through monitoring of the risk environment, but savings from that score is


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