Do accounting and audit quality affect World Bank lending?

Phillip Lamoreaux, Paul N. Michas, Wendy L. Schultz

Research output: Contribution to journalArticlepeer-review

31 Scopus citations


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, the World Bank appears to "overlook" 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 has greater trust that accounting and auditing are of relatively high quality in low-corruption countries.

Original languageEnglish (US)
Pages (from-to)703-738
Number of pages36
JournalAccounting Review
Issue number2
StatePublished - 2015


  • Accounting quality
  • Audit profession development
  • Audit quality
  • Corruption
  • Financial reporting quality
  • Geo-political interests
  • International bank for reconstruction and development
  • International development aid

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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