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The watchdogs who failed to bark: the auditors of the Kingston Cotton Mill

Chandler, Roy Anthony 2014. The watchdogs who failed to bark: the auditors of the Kingston Cotton Mill. Accounting Auditing and Accountability Journal

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Abstract

Purpose of this paper: To examine in detail the facts behind one of the most enduring of cases in the long line of liability cases involving auditors and fraud Design/methodology/approach An exhaustive examination of contemporaneous records relating to the Kingston Cotton Mill. Findings: The Kingston Cotton Mill was an ambitious project financed by local businessmen with no knowledge of the cotton industry. They engaged the services of professional auditors in return for generous audit fees. These auditors failed to alert investors to material misstatements. One possible reason for the auditors’ apparent failure is the lack of professional independence. Research limitations/implications (if applicable) The incomplete nature of the surviving records is an unavoidable limitation. Practical implications: (if applicable) The case which is still cited in litigation to this day, is well known to auditing students but many of the important features have never been reported. The paper sheds new light on this classic case highlighting in particular the dangers of the erosion of independence and the failure to use professional scepticism. What is original/value of paper Very little has been written about the background to this classic case. The paper presents an exhaustive examination of the evidence which remains. Many of the details have never before featured in an academic review yet help to explain the conduct of the auditors in question.

Item Type: Article
Date Type: Submission
Status: Submitted
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Publisher: Emerald
ISSN: 0951-3574
Last Modified: 04 Jun 2017 05:33
URI: http://orca.cf.ac.uk/id/eprint/52002

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