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

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 mor...

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Bibliographic Details
Main Author: Taewoo Kim
Format: Article
Language:English
Published: MDPI AG 2021-04-01
Series:Sustainability
Subjects:
Online Access:https://www.mdpi.com/2071-1050/13/8/4425
Description
Summary: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.
ISSN:2071-1050