Why Do Audits Fail Evidence from Lincoln Savings and Loan

13093 Words Feb 19th, 2014 53 Pages
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
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In spite of objections from the audit firms ' legal counsel, U.S. District Judge Richard Bilby released to the public deposition transcripts and associated audit working papers from the civil litigation against the former auditors of LSL.2 We use these documents as the basis for our analysis. To our knowledge, this is the first study to examine audit procedures documented in depositions and working papers from litigation over the adequacy of an auditor 's performance.
Prior research has been unable to review actual audit procedures applied to transactions from an alleged audit failure.3 Our access to LSL 's auditor 's depositions and workpapers enables us to evaluate the audit procedures that were applied by LSL 's auditors and the information they used. More importantly, we are able to identify the information that was not used and procedures that were not performed. Other researchers have been unable to study audit procedures associated with audit failures, in spite of the compelling importance of such an inquiry, using traditional research methods.4 Our ability to study these issues highlights the potential value of a detailed analysis of legal documents from a single case.
Moreover, the current approach enables us to generate alternative pro-

2 "Bilby said concerns relating to possible embarrassment from disclosure of someone 's deposition testimony 'is

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