Journal article
Was audit quality of Laventhol and Horwath poor?
Journal of Accounting and Public Policy, Vol.27(3), pp.217-237
2008
Abstract
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.
Details
- Title
- Was audit quality of Laventhol and Horwath poor?
- Authors
- Kam-Wah Lai (Corresponding Author) - Hong Kong Polytechnic UniversityFerdinand A. Gul (Author) - Hong Kong Polytechnic University
- Publication details
- Journal of Accounting and Public Policy, Vol.27(3), pp.217-237
- Publisher
- Elsevier Inc.
- DOI
- 10.1016/j.jaccpubpol.2008.02.002
- ISSN
- 1873-2070
- Organisation Unit
- University of the Sunshine Coast, Queensland; School of Business and Creative Industries
- Language
- English
- Record Identifier
- 99678894802621
- Output Type
- Journal article
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