Was audit quality of Laventhol and Horwath poor?

Lai, Kam-Wah and Gul, Ferdinand A 2008, Was audit quality of Laventhol and Horwath poor?, Journal of accounting and public policy, vol. 27, no. 3, pp. 217-237, doi: 10.1016/j.jaccpubpol.2008.02.002.

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Title Was audit quality of Laventhol and Horwath poor?
Author(s) Lai, Kam-Wah
Gul, Ferdinand AORCID iD for Gul, Ferdinand A orcid.org/0000-0001-8260-1472
Journal name Journal of accounting and public policy
Volume number 27
Issue number 3
Start page 217
End page 237
Total pages 20
Publisher Elsevier
Place of publication Amsterdam, Netherlands
Publication date 2008-05
ISSN 0278-4254
Summary Laventhol and Horwath (L&H), the then seventh largest accounting firm in the US, declared bankruptcy in November 1990. The firm claimed that its bankruptcy was due to the perception of it being a deep pocket rather than inherent deficiencies in its performance. In this study, we examine whether the audit quality of L&H was lower than other auditors. Results do not show that L&H is associated with lower quality audits either in terms of lower likelihood of issuing modified audit opinion, higher levels of discretionary accruals for its clients, or lower predictability of discretionary accruals for future non-discretionary net income for its clients than for clients of other auditors. Results of additional tests also do not suggest that auditors that take up clients of L&H report differently from L&H. This evidence does not support the proposition that L&H’s audit quality was less than audit quality of other audit firms during the period leading up to the bankruptcy.
Language eng
DOI 10.1016/j.jaccpubpol.2008.02.002
Field of Research 150102 Auditing and Accountability
1501 Accounting, Auditing And Accountability
Socio Economic Objective 970115 Expanding Knowledge in Commerce
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2008, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30086477

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Accounting
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