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

Abstract

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

Feng, Nancy Chun, Economic Consequences of Going Concern Audit Opinions in Nonprofit Charitable Organizations (December 20, 2011). Journal of Governmental and Nonprofit Accounting, December 2014, Vol. 3, No. 1, pp. 20-34, Available at SSRN: https://ssrn.com/abstract=2014803 or http://dx.doi.org/10.2139/ssrn.2014803

Nancy Chun Feng (Contact Author)

Suffolk University ( email )

120 Tremont St
Boston, MA 02108
United States
617-573-8719 (Phone)

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