Why Do Audits Fail Evidence from Lincoln Savings and Loan
Accounting Research Center, Booth School of Business, University of Chicago
Why Do Audits Fail? Evidence from Lincoln Savings and Loan
Author(s): Merle Erickson, Brian W. Mayhew, William L. Felix, Jr.
Reviewed work(s):
Source: Journal of Accounting Research, Vol. 38, No. 1 (Spring, 2000), pp. 165-194
Published by: Blackwell Publishing on behalf of Accounting Research Center, Booth School of Business,
University of Chicago
Stable URL: http://www.jstor.org/stable/2672927 .
Accessed: 30/01/2012 17:52
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.
Blackwell Publishing and Accounting Research Center, Booth School of Business, University of Chicago are collaborating with JSTOR to digitize, preserve and extend access to Journal of Accounting Research.
http://www.jstor.org
Journal of AccountingResearch
Vol. 38 No. 1 Spring 2000
Printed in US.A.
Why Do Audits Fail? Evidence from Lincoln Savings and Loan
MERLE
ERICKSON,
AND WILLIAM
BRIAN W. MAYHEWt
L. FELIX,
JR.4
1. Introduction
This study describes and critiques the audit procedures applied to a set of material transactions from the Lincoln Savings and Loan (LSL) audit failure. ' Auditor deposition testimony and audit working papers produced in the civil litigation against the auditors of LSL provide the basis for this analysis. We propose alternative procedures, based on information available to the auditors at the time of the audit, that might have prevented the audit failure. Other research methods have provided only very
Why Do Audits Fail? Evidence from Lincoln Savings and Loan
Author(s): Merle Erickson, Brian W. Mayhew, William L. Felix, Jr.
Reviewed work(s):
Source: Journal of Accounting Research, Vol. 38, No. 1 (Spring, 2000), pp. 165-194
Published by: Blackwell Publishing on behalf of Accounting Research Center, Booth School of Business,
University of Chicago
Stable URL: http://www.jstor.org/stable/2672927 .
Accessed: 30/01/2012 17:52
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.
Blackwell Publishing and Accounting Research Center, Booth School of Business, University of Chicago are collaborating with JSTOR to digitize, preserve and extend access to Journal of Accounting Research.
http://www.jstor.org
Journal of AccountingResearch
Vol. 38 No. 1 Spring 2000
Printed in US.A.
Why Do Audits Fail? Evidence from Lincoln Savings and Loan
MERLE
ERICKSON,
AND WILLIAM
BRIAN W. MAYHEWt
L. FELIX,
JR.4
1. Introduction
This study describes and critiques the audit procedures applied to a set of material transactions from the Lincoln Savings and Loan (LSL) audit failure. ' Auditor deposition testimony and audit working papers produced in the civil litigation against the auditors of LSL provide the basis for this analysis. We propose alternative procedures, based on information available to the auditors at the time of the audit, that might have prevented the audit failure. Other research methods have provided only very
References: APCAR, L. "Loose Lending: Texas S&L Disasters Are Blamed, in Part, on Freewheeling Style." WallStreetJournal(July 13, 1987): Al. Arizona Daily Stain "Judge Orders Opening of Keating Records." (July 8, 1994): 2B. Professionals Paved Way for Crisis." Wall StreetJournal (November 2, 1990): Al. Arnold M. Wright. New York: AICPA, 1995. gic-Systems Process.Montvale, N.J.: KPMGPeat Marwick LLP, 1997. Wall Street Journal (March 11, 1991): CIO. (February 18, 1987): B6. September 21-22, 1994 "Hot Housing Markets See Lot Prices Rise, Study Says." Wall StreetJournal(July 31, 1987): BlO. Washington, D.C.: Government Publications Office, 1990. KINNEY, W. "Audit Litigation Research: Professional Help Is Needed." Accounting Horizons 8 (June 1994): 80-86. Lys, T., AND R. L. WATTS. "Lawsuits against Auditors." Journal of Accounting Research(Sup- plement 1994): 65-93. PALEPU, K.; V. BERNARD; AND P. HEALY. Business Analysis and Valuation.Cincinnati: South- western College Publishing, 1996. PALMROSE, Z. V "Litigation and Independent Auditors: The Role of Business Failures and Management Fraud."Auditing: AJournal of Practiceand Theory6 (Spring 1987): 90-103. Phoenix BusinessJournal (AuREINKE, M. "Layoffs Start to Hit Real Estate Industry." Greater gust 17, 1987): 1. ___._ BusinessJournal (January 4, 1988): 13. Jou-rnal(February 7, 1991): B4.