The International Standards on Auditing and the Accuracy of Auditors’ Going Concern Disclosures: Evidence for Private Firms in a Low Litigious Environment

Marie-Laure Vandenhaute, Diane Breesch and Benjamin Kinnart

Accounting in Europe, 2024, vol. 21, issue 3, 356-387

Abstract: This paper examines the effect of adopting the International Standard on Auditing (ISA) 570 on going concern (GC) disclosures in the audit report in a European environment characterized by low litigation and reputation risk. We exploit a natural experiment in Belgium, where the global GC standard ISA 570 replaced the local GC standard. We examine whether this shift in standards changed the accuracy of auditors’ GC disclosures. Using a sample of 30,339 stressed private companies with audited financial statements for periods ending on or after 15 December 2012 till 14 December 2016, our findings suggest that the adoption of the ISA 570 improves the accuracy of auditors’ GC disclosures. Specifically, we find that the implementation of the ISA 570 is associated with an 8 percent decrease in false positive misclassifications (GC opinion without subsequent bankruptcy), while the rate of false negative misclassifications (bankruptcy without prior GC opinion) remains unchanged.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/17449480.2024.2332378 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:acceur:v:21:y:2024:i:3:p:356-387

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAIE20

DOI: 10.1080/17449480.2024.2332378

Access Statistics for this article

Accounting in Europe is currently edited by Lisa Evans

More articles in Accounting in Europe from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().