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Are Spanish auditors effective in transmitting manipulation practices? An analysis of the ambiguity implicit in modified reports


  • Laura Arnedo
  • Fermin Lizarraga
  • Santiago Sanchez


This study proposes auditors' effectiveness in the transmission (AET) of GAAP misstatements as a new measure of audit quality that is obtained from the audit report. We carry out a content analysis of the audit reports of a sample of 533 pre-bankrupt Spanish firms and find that the poorly enforced Spanish environment results in strategies of a lower than expected effectiveness in three aspects: the type of qualification chosen, the wording used and the adjustments proposed. We subsequently use AET to test for audit quality differences in three dimensions: auditor size, audit market experience and the client's closeness to failure. Larger auditors are more effective in the transmission of the GAAP misstatements. We also find increasing audit quality throughout our 1990-2001 period of analysis and with the clients' closeness to failure. Our results constitute a reference for regulators, not only in Spain, but also in similar European code-law regimes where qualifications for GAAP violations are usually included in the audit reports.

Suggested Citation

  • Laura Arnedo & Fermin Lizarraga & Santiago Sanchez, 2009. "Are Spanish auditors effective in transmitting manipulation practices? An analysis of the ambiguity implicit in modified reports," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 5(3), pages 229-251.
  • Handle: RePEc:ids:ijaape:v:5:y:2009:i:3:p:229-251

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    Cited by:

    1. Andrea Caputo & Alberto Tron, 2016. "The attestation of corporate turnaround plans in Italy: operating problems and possible solutions," International Journal of Critical Accounting, Inderscience Enterprises Ltd, vol. 8(1), pages 30-44.
    2. Campa, Domenico & Camacho-Miñano, María-del-Mar, 2015. "The impact of SME’s pre-bankruptcy financial distress on earnings management tools," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 222-234.


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