Was Arthur Andersen Different? An Empirical Examination of Major Accounting Firms' Audits of Large Clients

35 Pages Posted: 26 Nov 2003

See all articles by Theodore Eisenberg

Theodore Eisenberg

Cornell University, Law School (Deceased)

Jonathan R. Macey

Yale Law School; European Corporate Governance Institute (ECGI)

Date Written: November 12, 2003

Abstract

Enron and other corporate financial scandals focused attention on the accounting industry in general and on Arthur Andersen in particular. Part of the policy response to Enron, the criminal prosecution of Andersen, eliminated one of the few major audit firms capable of auditing many large, public corporations. This article explores whether Andersen's performance, as measured by frequency of financial restatements, measurably differed from that of other large auditors. Financial restatements trigger significant negative market reactions and their frequency can be viewed as a measure of accounting performance. We analyze the financial restatement activity of approximately 1,000 large, public firms from 1997 through 2001. After controlling for client size, region, time, and industry, we find no evidence that Andersen's performance significantly differed from that of other large accounting firms.

JEL Classification: G30, M49, M41, K22

Suggested Citation

Eisenberg, Theodore and Macey, Jonathan R., Was Arthur Andersen Different? An Empirical Examination of Major Accounting Firms' Audits of Large Clients (November 12, 2003). Cornell Legal Studies Research Paper No. 04-03, Yale Law & Economics Research Paper No. 287, Available at SSRN: https://ssrn.com/abstract=468761 or http://dx.doi.org/10.2139/ssrn.468761

Theodore Eisenberg

Cornell University, Law School (Deceased) ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Jonathan R. Macey (Contact Author)

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
+203-432-7913 (Phone)
+203-4871 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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