Executive Profiling and Firm Resolutions

• In Event: Financial Accounting and Reporting II

Abstract

Legislative pressures continue to scrutinize auditors for failing to warn investors of subsequent company failures in their audit report. Multiple studies have highlighted auditor’s reporting failures to provide a warning to investors. Using a sample of 1,053 firms receiving a GCM (Going Concern Modified Opinion) during the period from 2003 through 2005 fiscal year end, we analyze whether executive profiling is associated with subsequent company failures. The paper extends earlier work done by modeling and testing the association between the client subsequent performance and mitigating factors. After controlling for financial condition, size, and leverage, the results of the study indicate that client’s future resolution is strongly linked to having a new Chief Executive on board.

Author

• Angie M Abdel Zaher, American University In Cairo