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http://ssrn.com/abstract=1664727
 
 

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The Impact of Religion on the Going Concern Reporting Decisions of Local Audit Practice Offices


Thomas C. Omer


University of Nebraska at Lincoln - School of Accountancy

Nathan Y. Sharp


Texas A&M University - Department of Accounting

Dechun Wang


Texas A&M University

May 2014


Abstract:     
We extend research on the effects of local audit practice office characteristics on audit quality by investigating whether audit offices in highly religious U.S. Metropolitan Statistical Areas (MSAs) exhibit going concern decisions that are systematically different from audit offices in less religious MSAs. Prior research links religiosity to risk aversion and suggests audit practice offices in more religious MSAs could be more likely to resist client pressure to withhold going concern opinions because of aversion to litigation risk. However, prior research also indicates that religion is an important element of social identity; therefore, audit offices in more religious areas may be more likely to acquiesce to a client-preferred position if religion creates social connections between auditors and their clients or helps auditors better identify with their clients. Our results indicate that audit practice offices located in highly religious MSAs are more likely to issue going concern audit opinions. Additional tests provide direct evidence consistent with the argument that these audit offices are more risk averse in issuing going concern opinions. In addition, we find that they issue going concern reports with greater bankruptcy prediction accuracy. Our findings are relevant to auditors, audit clients, researchers, and regulators.

Number of Pages in PDF File: 58

Keywords: going concern opinions, audit quality, religion, social identity

JEL Classification: M41, M42, Z12

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Date posted: August 24, 2010 ; Last revised: May 21, 2014

Suggested Citation

Omer, Thomas C. and Sharp, Nathan Y. and Wang, Dechun, The Impact of Religion on the Going Concern Reporting Decisions of Local Audit Practice Offices (May 2014). Available at SSRN: http://ssrn.com/abstract=1664727 or http://dx.doi.org/10.2139/ssrn.1664727

Contact Information

Thomas C. Omer
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
Nathan Y. Sharp
Texas A&M University (TAMU) - Department of Accounting ( email )
430 Wehner
College Station, TX 77843-4353
United States
979-845-0338 (Phone)

Dechun Wang (Contact Author)
Texas A&M University ( email )
430 Wehner
College Station, TX 77843-4353
United States
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