Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/14717
Title: Was audit quality of Laventhol and Horwath poor?
Authors: Lai, KW 
Gul, FA
Keywords: Audit quality
Discretionary accruals
Laventhol and Horwath
Modified opinion
Issue Date: 2008
Publisher: Elsevier Science Inc
Source: Journal of accounting and public policy, 2008, v. 27, no. 3, p. 217-237 How to cite?
Journal: Journal of Accounting and Public Policy 
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.
URI: http://hdl.handle.net/10397/14717
DOI: 10.1016/j.jaccpubpol.2008.02.002
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