Accounting and auditing - predicting the failure of a bank

This research on the banking crisis of 2007 working on a sample of American banks attempted to identify the contribution of accounting and auditing to the occurrence of the crisis. It was shown that large banks audited by specialist BIG 4 firms were less likely to fail. Similarly financial institutions with strong balance sheets and sufficient liquidity do not stop payments. In addition we found that a diversified loan portfolio with few non-performing loans helps to cushion the effects of economic downturns. This research also looked at the new challenges of prudential banking regulation research perspectives and the accounting profession.