Economic Consequences of Going Concern Audit Opinions in Nonprofit Charitable Organizations
Journal of Governmental and Nonprofit Accounting, December 2014, Vol. 3, No. 1, pp. 20-34
25 Pages Posted: 4 Mar 2012 Last revised: 20 Sep 2014
Date Written: December 20, 2011
This study examines the economic consequences of going concern audit reports (GCARs) in nonprofit charitable organizations (NPOs) using a sample of public charities that received initial GCARs between 1998 and 2003. I find that GCARs are negatively correlated with subsequent government grants. This evidence suggests either that the government utilizes GCARs as a screening criterion in its funding decisions or that affected NPOs voluntarily withdraw their grant applications. GCARs and subsequent contributions are also negatively correlated. There is no evidence of a significant correlation between a GCAR and the NPO’s subsequent public support. The findings indicate detectable adverse economic consequences of GCARs in the nonprofit sector.
Keywords: Going concern audit report, nonprofit audit, financial distress, economic consequences of going concern audit opinions
JEL Classification: G14, L31, M41, M42
Suggested Citation: Suggested Citation