The quotes are preserved, but backquote expansion fills the argument list using any whitespace as a delimiter.

    $ for f in `ls`; do echo "$f"; done
    foo
    "bar
    baz

If you absolutely must parse ls (let's assume it's some other script that outputs items with spaces) and the output can contain spaces, you have a few options:

    $ ls | while read f; do echo "$f"; done
    foo "bar baz

    # parens keep the IFS change isolated to a subshell
    $ (IFS="\n"; for f in `ls`; do echo "$f"; done)
    foo "bar baz

But if your filenames contain newlines, you'll really want to stick with the glob expansion, or output custom delimiters and set IFS to that.