Auditors’ propensity and accuracy in issuing going‐concern modified audit opinions for charities

2021 ◽  
Author(s):  
Yitang (Jenny) Yang ◽  
Roger Simnett ◽  
Elizabeth Carson
Keyword(s):  
Going Concern ◽  
Audit Opinions

scholarly journals Does a Manager Respond to a Going-Concern Audit Opinion with an Asymmetry in Gain and Loss?

2021 ◽  
Vol 13 (8) ◽  
pp. 4425
Author(s):  
Taewoo Kim
Keyword(s):  
Time Series ◽  
Accounting Conservatism ◽  
Timely Manner ◽  
Audit Opinion ◽  
Going Concern ◽  
Asymmetric Timeliness ◽  
Gain And Loss ◽  
Audit Opinions ◽  
The Relationship

In this paper, I investigate the relationship between previous going-concern audit opinions and subsequent asymmetric timeliness in accounting. Using the time-series and price-based models and conservatism proxy, I find that firms with going-concern audit opinions subsequently report losses in a more timely manner than firms that did not receive going-concern audit opinions. Furthermore, I also find that firms exiting going-concern audit opinions are more likely to report losses rather than gains in a timely manner, compared to firms non-exiting from going-concern opinions. This study extends the prior research by exploring the association between going-concern opinions and accounting conservatism from the perspective of client firms—that is, how firms behave strategically and conservatively to bypass going-concern opinions, once the firms had received previous going-concern opinions.

The impact of qualified audit opinion on stock returns: an empirical study at Amman stock exchange

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rana Bayo Flees ◽  
Sulaiman Mouselli
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Content Type ◽  
Going Concern ◽  
Study Approach ◽  
Audit Opinions ◽  
The Impact ◽  
First Time

Purpose This paper aims to investigate the impact of qualified audit opinions on the returns of stocks listed at Amman Stock Exchange (ASE) after the introduction of the recent amendments by the International Auditing and Assurance Standard Board (IAASB) on audits reporting and conclusions. It further investigates if results differ between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. Design/methodology/approach Audit opinions’ announcements and stock returns data are collected from companies’ annual reports for the fiscal years 2016 to 2019 while stock returns are computed from stock closing prices published at ASE website. The authors apply the event study approach and use the market model to calculate normal returns. Cumulative abnormal returns (CARs) and average abnormal returns (AARs) are computed for all qualified audit opinions’ announcements. Findings The empirical evidence suggests that investors at ASE do not react to qualified audit opinions announcements. That is, the authors find an insignificant impact of qualified audit opinion announcements on stock returns using both CAR and AAR estimates. The results are robust to first time and sequenced qualifications, and for qualifications with going concern. Results are also robust to the use of risk adjusted market model. Research limitations/implications The insignificant impact of qualified audit opinions on stock returns have two potential conflicting research implications. First, the new amendments introduced to auditors’ report made them more informative and reduce the negative signals contained in the qualified opinions. That is, investors are now aware of the real causes of qualifications and not overreacting to the qualified opinion. Second, the documented insignificant impact confirms that ASE is not a semi-strong form efficient. Practical implications The apparent excessive use of qualifications should ring the bell on whether auditors misuse their power or companies are really in trouble. Hence, the Jordanian regulatory bodies need to warn auditors against the excessive use of qualifications on the one hand, and to raise the awareness of investors on the implications of auditors’ opinions on the other hand. Originality/value This study is innovative in twofold. First, it explores the impact of qualified audit opinions on stock returns after the introduction of new amendments by IAASB at ASE. In addition, it uses event study approach and distinguishes between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. The results are consistent with efficient market theory and behavioral finance explanations.

scholarly journals Audit Committee’s Role in Moderating the Effect of Financial Distress Towards Going Concern Audit Opinion

2020 ◽  
Vol 11 (4) ◽  
pp. 432
Author(s):  
Anna Kania Widiatami ◽  
Nanny Dewi Tanzil ◽  
Cahya Irawadi ◽  
Ahmad Nurkhin
Keyword(s):  
Financial Distress ◽  
Audit Committee ◽  
Supervisory Board ◽  
Financial Statements ◽  
Audit Opinion ◽  
External Auditors ◽  
Going Concern ◽  
Negative Effect ◽  
Audit Opinions ◽  
Relationship Of

Auditors are required to provide services in auditing financial statements presented by management and provide audit opinions on the fairness of the presentation of financial statements. Sometimes, in reality, management and auditors have their interests so that each party can achieve the goals. The conflict of interest appears on the independence of the auditor in issuing audit opinions, especially the audit opinion with the going concern explanatory paragraph. The audit committee, as a supervisory board, will continue to maintain the independence of the auditor in issuing audit opinions with the going concern explanatory paragraph. This study aims to examine the effectiveness of the audit committee in maintaining the independence of external auditors issuing audit opinions, especially the audit opinion with the going concern explanatory paragraph. Based on the purposive sampling method obtained a sample of 168 companies. Testing the hypothesis in this study using logistic regression and moderated regression analysis. The results showed that financial distress had a significant negative effect for the audit opinion with going concern explanatory paragraph. Furthermore, the audit committee was not able to strenghten the relationship of financial distress on the audit opinion with a going-concern explanatory paragraph.

Justifications for the Modified Opinions and for Other Observations in the Audit Reports

2020 ◽  
Vol 18 (160) ◽  
pp. 785-800
Author(s):  
Costel ISTRATE ◽  
◽  
Ovidiu Constantin BUNGET ◽  
Irimie Emil POPA ◽  
◽  
...  
Keyword(s):  
Stock Exchange ◽  
Legal Issues ◽  
Global Crisis ◽  
Going Concern ◽  
Tangible Assets ◽  
Fixed Assets ◽  
Main Observation ◽  
Audit Opinions ◽  
Audit Reports

The purpose of this paper is to identify and to comment the main justifications of modified audit opinions and the main observations included in the emphasis of matter paragraphs from the audit reports of Romanian companies listed on the regulated market of Bucharest Stock Exchange (BSE). The authors analyze a sample of more than 1,000 observations-year for the 2007-2019 period. They found that 25% of these reports contain a modified opinion and the main explanations relate to the revaluations of fixed tangible assets, to the provisions, to the impairment of the fixed assets, to some legal issues, to items concerning the closing inventory and, to a lesser extent, to the going concern matters. In 30% of the reports analyzed, there was identified emphasis of matter paragraphs; the main observation is by far related to the going concern, followed by the financial and operating difficulties of companies and by the effects of different global crisis (financial or others).

Costs Associated With Going-Concern-Modified Audit Opinions: An Analysis of the Australian Audit Market

Abacus ◽  
2008 ◽  
Vol 44 (1) ◽  
pp. 61-81 ◽  
Author(s):  
PETER J. CAREY ◽  
MARSHALL A. GEIGER ◽  
BRENDAN T. O’CONNELL
Keyword(s):  
Going Concern ◽  
Audit Market ◽  
Audit Opinions

Auditor Conservatism after Enron

2010 ◽  
Vol 29 (1) ◽  
pp. 267-278 ◽  
Author(s):  
Dorothy A. Feldmann ◽  
William J. Read
Keyword(s):  
Financial Statement ◽  
Going Concern ◽  
Corporate Scandals ◽  
Sarbanes Oxley ◽  
Audit Firms ◽  
The Media ◽  
Time Periods ◽  
Audit Opinions ◽  
Auditor Conservatism

SUMMARY: Corporate scandals and the resulting passage of the Sarbanes-Oxley Act (SOX) in 2002 significantly affected the auditing profession. The quality of financial statement audits was called into questioned and the media and regulators held audit firms responsible. Several studies found evidence of an increase in the issuance of going-concern opinions after the passage of SOX relative to earlier time periods (Geiger et al. 2005; Nogler 2008; Myers et al. 2008). Auditors, it appears, behave more conservatively when the profession is in the headlines. We replicate and extend this research to determine whether the heightened conservatism continues or whether it fades as time passes. We examine audit opinions issued 12 months or less prior to a bankruptcy filing for 565 companies from 2000–2008. Our findings indicate that while the proportion of going-concern modifications increases sharply in 2002–2003 compared to 2000–2001, it declines in the periods that follow, ultimately returning to its pre-Enron level.

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