Auditor Reporting Conservatism After the Global Financial Crisis

• In Event: Breakfast and Rountable
  In Roundtable: Table 2

Abstract

Similar to the corporate scandals of Enron and the like and the passage of the Sarbanes-Oxley Act (SOX) in 2002, the “Global Financial Crisis” (GFC) and the enactment of the Dodd-Frank Act in 2010 has had a significant impact on the auditing profession. Prior studies investigating the likelihood of issuing a going-concern modified opinion (GC) in the wake of these economic catastrophes have found evidence suggesting that auditors behave more conservatively when the profession is under scrutiny (Geiger et al. 2005; Nogler 2008; Myers et al. 2013; Geiger et al. 2014), but, with respect to the Enron debacle and the passage of SOX, this conservatism wanes in the periods that followed (Feldmann and Read 2010). We replicate and extend this research by examining audit opinions issued prior to bankruptcy filing for 305 companies from 2008–2014 and find that issuing a GC modified opinion is positively (negatively) associated with the GFC (post-GFC) time period suggesting that auditors behaved more (less) conservatively during (after) the GFC.

Authors

• Maria Rickling, Stetson University

• Michael Edward Bitter, Stetson University

• Jessica West, Stetson University