A test of the determinants of auditor tendency to issue going-concern audit reports to nonfailing companies.

Persistent Link:
http://hdl.handle.net/10150/186091
Title:
A test of the determinants of auditor tendency to issue going-concern audit reports to nonfailing companies.
Author:
Guidry, Flora Gail.
Issue Date:
1992
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
The purpose of this study is to develop and test a model to explain why auditors issue going-concern reports to companies that subsequently do not fail. Given the auditor's access to records and unique interaction with management and legal council during the audit, it seems plausible that the auditor' s going concern report can serve as a useful indicator or "signal" of the company's potential inability to maintain itself as a going-concern. However, before one can even discuss the usefulness of the going-concern audit report, it must be shown to be reliable. Developing a model to explain why the auditor's signal of a client's going-concern status subsequently proves to be unreliable should help financial statement users better assess the information value or usefulness of the going-concern audit report. In this study the likelihood that the auditor has sent a reliable signal of the company's subsequent economic status to financial statement users was hypothesized to be a function of the client and auditor related factors which affect the auditor's judgements and/or reporting decisions. The tests showed that the company's estimated probability of bankruptcy, an indicator of ambiguity and complexity in the auditor's decision-making environment, was a significant determinant of signaling reliability. In addition, audit technology was found to be significantly related to signaling reliability, with more structured auditing firms issuing reports which appear to be more reliable than the audit reports issued by less structured auditing firms. Finally, subsequent mitigating actions or events which are reported between the date of the audit report and the subsequent financial statements are significantly negatively associated with signaling reliability of the going-concern audit report. The remaining client and auditor-related factors--audit/client tenure, auditor's industry concentration ratio, and client size relative to the auditor's total client base are not significantly associated with the report's signaling reliability. However, the results suggest that these factors should be further examined.
Type:
text; Dissertation-Reproduction (electronic)
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Business Administration; Graduate College
Degree Grantor:
University of Arizona
Committee Chair:
Mutchler, Jane F.

Full metadata record

DC FieldValue Language
dc.language.isoenen_US
dc.titleA test of the determinants of auditor tendency to issue going-concern audit reports to nonfailing companies.en_US
dc.creatorGuidry, Flora Gail.en_US
dc.contributor.authorGuidry, Flora Gail.en_US
dc.date.issued1992en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractThe purpose of this study is to develop and test a model to explain why auditors issue going-concern reports to companies that subsequently do not fail. Given the auditor's access to records and unique interaction with management and legal council during the audit, it seems plausible that the auditor' s going concern report can serve as a useful indicator or "signal" of the company's potential inability to maintain itself as a going-concern. However, before one can even discuss the usefulness of the going-concern audit report, it must be shown to be reliable. Developing a model to explain why the auditor's signal of a client's going-concern status subsequently proves to be unreliable should help financial statement users better assess the information value or usefulness of the going-concern audit report. In this study the likelihood that the auditor has sent a reliable signal of the company's subsequent economic status to financial statement users was hypothesized to be a function of the client and auditor related factors which affect the auditor's judgements and/or reporting decisions. The tests showed that the company's estimated probability of bankruptcy, an indicator of ambiguity and complexity in the auditor's decision-making environment, was a significant determinant of signaling reliability. In addition, audit technology was found to be significantly related to signaling reliability, with more structured auditing firms issuing reports which appear to be more reliable than the audit reports issued by less structured auditing firms. Finally, subsequent mitigating actions or events which are reported between the date of the audit report and the subsequent financial statements are significantly negatively associated with signaling reliability of the going-concern audit report. The remaining client and auditor-related factors--audit/client tenure, auditor's industry concentration ratio, and client size relative to the auditor's total client base are not significantly associated with the report's signaling reliability. However, the results suggest that these factors should be further examined.en_US
dc.typetexten_US
dc.typeDissertation-Reproduction (electronic)en_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineBusiness Administrationen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.chairMutchler, Jane F.en_US
dc.contributor.committeememberFelix, William L.en_US
dc.contributor.committeememberLassar, Sharonen_US
dc.identifier.proquest9310600en_US
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