What’s in a Name? The Impact of U.S. Audit Partner Identification on Going Concern Audit Opinions

• In Event: Break and Research & Education Poster Forum

Abstract

After a lengthy and protracted debate, the Public Company Accounting Oversight Board (PCAOB) adopted new rules and related amendments to its auditing standards regarding the engagement partner and other accounting firms who take part in an audit (PCAOB 2015). The rules require the engagement partner’s name and information about other accounting firms be disclosed on the new PCAOB Form AP, Auditor Reporting of Certain Audit Participants ("Form AP"). We use the auditor’s Going Concern Opinion propensity to investigate the impact of this regulation on audit behavior. Consistent with the PCAOB’s motivation of enhancing audit partner-specific reputation, we document a reduction in the propensity to issue a going concern opinion in the disclosure regime. Our results are sensitive to auditor type. Specifically, only Big 4 auditors exhibit a reduction in the going concern opinion rate. Our evidence suggests reporting rates are more consistent with historical rates. The implication is going concern opinions may now reflect a more accurate, although less conservative, propensity to modify an audit report.

Authors

• Lawrence J Abbott, University of Wisconsin-Milwaukee

• Colleen M Boland, University of Wisconsin-Milwaukee

• William L Buslepp, Louisiana State University

• Sean McCarthy, University of Wisconsin-Milwaukee