Are PCAOB Identified Audit Deficiencies Associated with a Change in Reporting Decisions of Triennially Inspected Audit Firms?
Auditing: A Journal of Practice & Theory, Forthcoming
Posted: 10 Feb 2008 Last revised: 21 Apr 2014
Date Written: February 2011
The primary issue we examine is whether PCAOB identified audit deficiencies are associated with a change in triennially inspected audit firms’ going concern (GC) reporting decisions for their financially distressed clients. Our analysis generally indicates that firms with PCAOB deficiencies were more likely to issue a GC opinion for financially distressed clients subsequent to their PCAOB inspection than prior to their inspection. We also examine the same issue for audit firms with a PCAOB inspection report indicating no audit deficiencies. For these firms, our results provide only limited evidence of a change in the likelihood of issuing a GC opinion, with audit firms becoming more conservative (i.e., greater likelihood of issuing a GC opinion).
Keywords: PCAOB Inspection, Going-Concern, Audit Deficiencies
JEL Classification: G18, G38, L84, M41, M49
Suggested Citation: Suggested Citation