File(s) under permanent embargo
Was audit quality of Laventhol and Horwath poor?
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. © 2008 Elsevier Inc. All rights reserved.
History
Journal
Journal of Accounting and Public PolicyVolume
27Issue
3Pagination
217 - 237Publisher DOI
ISSN
0278-4254Publication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
2008, ElsevierUsage metrics
Categories
No categories selectedKeywords
Licence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC