AAA Spark Meeting of Regions

Effects of Financial Distress Duration and Type on Going Concern Opinions

• In Event: Going Concern Opinions

Abstract

This study examines the effects of financial distress duration and distress type on auditors’ going concern opinions. The recent studies examine the association of going concern opinion with auditor and client level factors for the financially distressed firm samples in which financial distress types and distress periods of these firms are distinct. In other words, common practice in prior research combines different financial distress periods and distress types of key firm financials which might lead to individual impacts of key firm financials on going-concern opinion to become obscure. To attain a more detailed assessment, the current study includes a review of five financial distress types and three distress durations in terms of their effects on auditors’ going concern opinions, using auditor- and client-level factors as control determinants. The sample includes North American publicly listed industrial firms, for the years 2004–2017. The results highlight that auditors might consider the information content provided by different financial distress types and durations with varying magnitudes in developing their going concern opinions. Thus, researchers and practitioners should be cautious when establishing financial distress samples for research designed to understand and predict auditors’ going concern opinions.

Author

• Ibrahim Onur Oz, University of Hartford