IDEAS home Printed from https://ideas.repec.org/a/eme/rafpps/v6y2007i4p391-403.html
   My bibliography  Save this article

Auditors as monitors: evidence from discretionary accruals of Laventhol and Horwath clients

Author

Listed:
  • Brad J. Reed
  • Linda M. Lovata
  • Michael L. Costigan
  • Alan K. Ortegren

Abstract

Purpose - This paper aims to provide evidence on the hypothesis that auditors differ in how they constrain discretionary accruals (DAs) of their clients. The paper seeks to analyze changes in DAs for clients of Laventhol and Horwath associated with the appointment of a successor auditor. Design/methodology/approach - The study uses regression and archival data to separate a firm's accounting accruals into discretionary and non‐DAs. The study then examines changes in a firm's DAs associated with a change in auditors. Findings - Replacing LH with a new auditor resulted in a statistically significant decrease in DAs. This result is contrary to prior research and could be due to the prior research using voluntary auditor changes where variables such as financial distress and opinion shopping could drive the results. Originality/value - The study provides results that differ from prior research. This study shows that the auditor change is associated with a systematic decline in the level of a firm's DAs. The results could be due to the forced nature of this auditor change as opposed to voluntary auditor changes used in prior research.

Suggested Citation

  • Brad J. Reed & Linda M. Lovata & Michael L. Costigan & Alan K. Ortegren, 2007. "Auditors as monitors: evidence from discretionary accruals of Laventhol and Horwath clients," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 6(4), pages 391-403, November.
    • Handle: RePEc:eme:rafpps:v:6:y:2007:i:4:p:391-403
    DOI: 10.1108/14757700710835050
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/14757700710835050/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/14757700710835050/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/14757700710835050?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:rafpps:v:6:y:2007:i:4:p:391-403. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.