An empirical analysis of auditor reporting and its association with abnormal accruals

Marty Butler; Andrew J. Leone; Michael Willenborg

doi:10.1016/j.jacceco.2003.06.004

An empirical analysis of auditor reporting and its association with abnormal accruals

Marty Butler, Andrew J. Leone^*, Michael Willenborg

^*Corresponding author for this work

Accounting Information and Management

Research output: Contribution to journal › Article › peer-review

178 Scopus citations

Abstract

In this paper, we use a web-based sampling methodology to obtain and content analyze a large sample of modified audit opinions. Based on this analysis, we re-examine whether certain modified audit opinions are associated with abnormal accruals. We find that the documented relation between modified opinions and abnormal accruals rests with companies that have going-concern opinions. These firms have large negative accruals that are likely due to severe financial distress. Overall, we find no evidence to support inferences in previous research that firms receiving modified audit opinions manage earnings more than those receiving clean opinions.

Original language	English (US)
Pages (from-to)	139-165
Number of pages	27
Journal	Journal of Accounting and Economics
Volume	37
Issue number	2
DOIs	https://doi.org/10.1016/j.jacceco.2003.06.004
State	Published - Jun 1 2004

Keywords

Abnormal accruals
Audit firms
Audit opinions
Earnings management
Financial distress

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

Access to Document

10.1016/j.jacceco.2003.06.004

Fingerprint Dive into the research topics of 'An empirical analysis of auditor reporting and its association with abnormal accruals'. Together they form a unique fingerprint.

Cite this

@article{bb3f1048bb61485c9a09a5aac8a622cb,

title = "An empirical analysis of auditor reporting and its association with abnormal accruals",

abstract = "In this paper, we use a web-based sampling methodology to obtain and content analyze a large sample of modified audit opinions. Based on this analysis, we re-examine whether certain modified audit opinions are associated with abnormal accruals. We find that the documented relation between modified opinions and abnormal accruals rests with companies that have going-concern opinions. These firms have large negative accruals that are likely due to severe financial distress. Overall, we find no evidence to support inferences in previous research that firms receiving modified audit opinions manage earnings more than those receiving clean opinions.",

keywords = "Abnormal accruals, Audit firms, Audit opinions, Earnings management, Financial distress",

author = "Marty Butler and Leone, {Andrew J.} and Michael Willenborg",

year = "2004",

month = jun,

day = "1",

doi = "10.1016/j.jacceco.2003.06.004",

language = "English (US)",

volume = "37",

pages = "139--165",

journal = "Journal of Accounting and Economics",

issn = "0165-4101",

publisher = "Elsevier",

number = "2",

}

TY - JOUR

T1 - An empirical analysis of auditor reporting and its association with abnormal accruals

AU - Butler, Marty

AU - Leone, Andrew J.

AU - Willenborg, Michael

PY - 2004/6/1

Y1 - 2004/6/1

N2 - In this paper, we use a web-based sampling methodology to obtain and content analyze a large sample of modified audit opinions. Based on this analysis, we re-examine whether certain modified audit opinions are associated with abnormal accruals. We find that the documented relation between modified opinions and abnormal accruals rests with companies that have going-concern opinions. These firms have large negative accruals that are likely due to severe financial distress. Overall, we find no evidence to support inferences in previous research that firms receiving modified audit opinions manage earnings more than those receiving clean opinions.

AB - In this paper, we use a web-based sampling methodology to obtain and content analyze a large sample of modified audit opinions. Based on this analysis, we re-examine whether certain modified audit opinions are associated with abnormal accruals. We find that the documented relation between modified opinions and abnormal accruals rests with companies that have going-concern opinions. These firms have large negative accruals that are likely due to severe financial distress. Overall, we find no evidence to support inferences in previous research that firms receiving modified audit opinions manage earnings more than those receiving clean opinions.

KW - Abnormal accruals

KW - Audit firms

KW - Audit opinions

KW - Earnings management

KW - Financial distress

UR - http://www.scopus.com/inward/record.url?scp=2542458385&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=2542458385&partnerID=8YFLogxK

U2 - 10.1016/j.jacceco.2003.06.004

DO - 10.1016/j.jacceco.2003.06.004

M3 - Article

AN - SCOPUS:2542458385

VL - 37

SP - 139

EP - 165

JO - Journal of Accounting and Economics

JF - Journal of Accounting and Economics

SN - 0165-4101

IS - 2

ER -