Do Accounting and Audit Quality Affect World Bank Lending?

52 Pages Posted: 30 May 2014

See all articles by Phillip T. Lamoreaux

Phillip T. Lamoreaux

Arizona State University

Paul N. Michas

University of Arizona - Eller College of Management

Wendy Schultz

University of Manitoba

Multiple version iconThere are 2 versions of this paper

Date Written: May 18, 2014

Abstract

We investigate the role of accounting and audit quality in the allocation of international development aid loans provided by the World Bank. This aid is crucial to improve governance functions, infrastructure, and capital markets, and the accounting and audit environments in a country can provide the World Bank with confidence that aid is being used as intended rather than being diverted for personal or political gain. We find that development aid loans are higher for countries with stronger accounting quality, where IFRS use is mandated, and where the audit environment is stronger. However, we also find that United States geo-political interests influence these results. Specifically, it seems as though the World Bank “overlooks” accounting and audit quality in countries where geo-political interests are relatively aligned with those of the U.S. Finally, we find that accounting and auditing matter only in countries with relatively high corruption levels, indicating that the World Bank trusts, to some extent, that accounting and auditing are of relatively high quality in low corruption countries.

Keywords: accounting quality, audit profession development, audit quality, corruption, financial reporting quality, geo-political interests, International Bank for Reconstruction and Development, international development aid, International Financial Reporting Standards, World Bank

JEL Classification: A12, F33, F34, F35, H41, M41, O19

Suggested Citation

Lamoreaux, Phillip T. and Michas, Paul N. and Schultz, Wendy, Do Accounting and Audit Quality Affect World Bank Lending? (May 18, 2014). Available at SSRN: https://ssrn.com/abstract=2442990 or http://dx.doi.org/10.2139/ssrn.2442990

Phillip T. Lamoreaux

Arizona State University ( email )

Tempe, AZ 85287
United States

Paul N. Michas (Contact Author)

University of Arizona - Eller College of Management ( email )

Tucson, AZ 85721
United States

Wendy Schultz

University of Manitoba ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

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