What question is the study trying to answer?
The study tries to generate alternate procedures that could have been used to avert audit failure.

Why should we care about the study?
Evaluating actual audit procedures from an audit failure has been nearly impossible for audit researchers because workpapers are usually owned by the defending firm and sealed in litigation cases or destroyed. It provides an important basis on which future research could be built. Additionally, the LSL case involves management fraud, which is present in nearly 50% of lawsuits against auditors. It is also important to note that it was the single largest savings and loan bailout in history.

What do the authors predict they will find and how do they motivate their predictions?
They did not make specific predictions, but they did indicate that by studying the workpapers and available information on this case, they would be able to derive some specific points in which auditors may have been weak or lacking.

How do the authors test their predictions?
The authors gathered, analyzed, and tested information that should have been used during the audit to determine whether the auditors’ decisions could have been altered by them. They applied and integrated business, industry, and economic knowledge into a review of the reasonable and substance of these transactions to see if the results would have led the auditors to a different opinion about LSL.

What are the primary results of the study?
First, had the auditors obtained information about LSL’s business and industry, they would have realized that the increase in value of Hidden Valley was not reasonable. Second, if they would have studied the motivation behind the transactions, they would have realized that the transactions did not have a real business purpose. Third, had the auditors studied the contractual constraints on LSL