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

Marty Butler, Andrew J. Leone, Michael Willenborg

Research output: Contribution to journalArticle

174 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 languageEnglish (US)
Pages (from-to)139-165
Number of pages27
JournalJournal of Accounting and Economics
Volume37
Issue number2
DOIs
StatePublished - Jun 1 2004

Keywords

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

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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