Costs associated with going-concern-modified audit opinions: an analysis of the Australian audit market
Carey, Peter J., Geiger, Marshall A., and O'Connell, Brendan T. (2008) Costs associated with going-concern-modified audit opinions: an analysis of the Australian audit market. Abacus, 44 (1). pp. 61-81.
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This article examines the potential costs to Australian auditors and their clients from the issuance of first-time going-concern-modified audit opinions. We examine the population of Australian companies receiving a first-time going-concern-modified audit opinion during the period 1994–97 and a matched sample of financially distressed firms receiving a clean audit opinion. Results indicate that auditor switching is positively associated with receipt of a going-concern-modified opinion. However, we find no empirical evidence that there is a self-fulfilling prophecy of increased probability of company failure following the issuance of a going-concern-modified opinion for the Australian companies in our study. Our analyses of lost audit fees indicate that auditors issuing first-time going-concern-modified audit opinions lost proportionately more fees by losing clients (through switching or company failure) than firms not issuing a going-concern-modified opinion to financially stressed clients.
|Item Type:||Article (Refereed Research - C1)|
|Keywords:||audit reporting; bankruptcy; going-concern; qualification|
|FoR Codes:||15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1501 Accounting, Auditing and Accountability > 150102 Auditing and Accountability @ 100%|
|SEO Codes:||90 COMMERCIAL SERVICES AND TOURISM > 9002 Property, Business Support Services and Trade > 900299 Property, Business Support Services and Trade not elsewhere classified @ 100%|
|Deposited On:||08 Apr 2010 09:08|
|Last Modified:||20 May 2013 00:46|
Last 12 Months: 4
|Citation Counts with External Providers:||Web of Science: 3|
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