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

Marty Butler, Andrew Leone, Michael Willenborg

Research output: Contribution to journalArticle

165 Citations (Scopus)

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 languageEnglish (US)
Pages (from-to)139-165
Number of pages27
JournalJournal of Accounting and Economics
Volume37
Issue number2
DOIs
StatePublished - Jun 2004
Externally publishedYes

Fingerprint

Empirical analysis
Abnormal accruals
Auditors
Audit opinion
Financial distress
Web-based
Methodology
Accruals
Inference
Going concern opinion
Sampling

Keywords

  • Abnormal accruals
  • Audit firms
  • Audit opinions
  • Earnings management
  • Financial distress

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

An empirical analysis of auditor reporting and its association with abnormal accruals. / Butler, Marty; Leone, Andrew; Willenborg, Michael.

In: Journal of Accounting and Economics, Vol. 37, No. 2, 06.2004, p. 139-165.

Research output: Contribution to journalArticle

Butler, Marty ; Leone, Andrew ; Willenborg, Michael. / An empirical analysis of auditor reporting and its association with abnormal accruals. In: Journal of Accounting and Economics. 2004 ; Vol. 37, No. 2. pp. 139-165.
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