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The Effect of Tenure, Specialization, Conservatism, and Fees on the Relationship between Going-Concern Opinions and Client Bankruptcy

Kam‐Wah Lai

Accounting and the Public Interest2023https://doi.org/10.2308/api-2022-005article
AJG 2ABDC B
Weight
0.46

Abstract

This paper uses the relationship between a going-concern modified audit opinion and client bankruptcy as an audit quality indicator to investigate factors that could affect audit quality. The setting is important because, although stakeholders often view bankruptcies without a preceding going-concern opinion as evidence of impaired auditor independence, there could be various reasons behind them. Using a matched sample of bankrupt and nonbankrupt clients, this paper finds that the relationship is less positive when auditors are nonspecialists, allow more income-increasing discretionary accruals, or receive higher audit fees. These results suggest that auditors provide lower audit quality when they lack sufficient industry knowledge, are less conservative, or are more reliant on audit fees. Data Availability: Data are publicly available from the sources identified in the paper.

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https://doi.org/https://doi.org/10.2308/api-2022-005

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@article{kam‐wah2023,
  title        = {{The Effect of Tenure, Specialization, Conservatism, and Fees on the Relationship between Going-Concern Opinions and Client Bankruptcy}},
  author       = {Kam‐Wah Lai},
  journal      = {Accounting and the Public Interest},
  year         = {2023},
  doi          = {https://doi.org/https://doi.org/10.2308/api-2022-005},
}

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Evidence weight

0.46

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.28 × 0.4 = 0.11
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.