Was Andersen’s audit quality lower than its peers? A comparative analysis of audit quality

Krishna Kumar (Department of Accounting George Washington University Washington D.C. USA)
Lucy Lim (Department of Accounting, Howard University, Washington D.C., USA)

Managerial Auditing Journal

ISSN: 0268-6902

Publication date: 5 October 2015



This paper aims to examine whether Andersen’s audit quality in the five years preceding its collapse lagged that of other Big-Five auditors.


This paper compares Andersen’s audit quality and the other Big-Five auditors using five methodologies, namely, earnings response coefficients, magnitudes of abnormal accruals, propensities to issue going-concern opinions, usefulness of going-concern opinions in predicting bankruptcy and the frequency of Accounting and Auditing Enforcement Releases. The comparisons are based on both pooled samples of all observations and propensity-score-based matched-pairs.


The preponderance of evidence shows that Andersen’s audit quality did not differ materially in audit quality from other Big-Five auditors prior to its failure. However, it was found that Andersen’s independence was compromised in the year leading to its collapse (2000), as indicated by the lower likelihood to issue going-concern opinions.


This paper complements and improves on Cahan et al. (2011) by using more measures of audit quality, as no one measure is perfect, showing that their results using discretionary accruals are sensitive to the model used and showing that there is a more powerful direct measure of audit quality, namely, going-concern opinions.



The authors acknowledge gratefully helpful comments and suggestions from two anonymous reviewers, Bill Baber, Steve Hansen, Chris Jones, Santanu Mitra and participants at the accounting research workshop of The George Washington University, the 2007 Annual Meeting of the American Accounting Association at Chicago, Illinois; the 2008 International Symposium on Audit Research at Pasadena, California; and the 2011 Annual Congress of the European Accounting Association at Rome, Italy.

In memory of my mentor and advisor, Krishna Kumar, 19 March 2014.


Kumar, K. and Lim, L. (2015), "Was Andersen’s audit quality lower than its peers? A comparative analysis of audit quality", Managerial Auditing Journal, Vol. 30 No. 8/9, pp. 911-962. https://doi.org/10.1108/MAJ-10-2014-1105

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