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

Taewoo Kim
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Taewoo Kim: Department of Accounting and Finance, Jack H. Brown College, California State University San Bernardino, San Bernardino, CA 92407, USA

Sustainability, 2021, vol. 13, issue 8, 1-18

Abstract: 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.

Keywords: going-concern audit opinion; accounting conservatism; business sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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