What’s in a Name? The Impact of U.S. Audit Partner Identification on Going Concern Audit Report Modifications

38 Pages Posted: 8 Feb 2018 Last revised: 18 Feb 2018

See all articles by Lawrence Abbott

Lawrence Abbott

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

Colleen Boland

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

William L. Buslepp

Louisiana State University, Baton Rouge - Department of Accounting

Sean McCarthy

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

Date Written: January 30, 2018

Abstract

After a lengthy and protracted debate, the Public Company Accounting Oversight Board (PCAOB) adopted new rules and related amendments to its auditing standards regarding the engagement partner and other accounting firms that took part in the audit (PCAOB 2015). The rules require disclosure of the engagement partner’s name and information about other accounting firms on new PCAOB Form AP, Auditor Reporting of Certain Audit Participants ("Form AP"). We investigate the impact of this regulation on audit behavior in the context of the auditor’s Going Concern Modification propensity. Consistent with the PCAOB’s motivation of enhancing audit partner-specific reputation, we document a reduction in the propensity to issue a going concern modification in the disclosure regime. Our results are sensitive to auditor type. Specifically, only Big 4 auditors exhibit a reduction in the going modification rate. Our evidence suggests reporting rates are more consistent with historical rates. The implication is going concern opinions may now reflect a more accurate, although less conservative, propensity to modify an audit report.

Keywords: Audit partner identification; Auditor Reporting, Going Concern Opinion

Suggested Citation

Abbott, Lawrence and Boland, Colleen and Buslepp, William L. and McCarthy, Sean, What’s in a Name? The Impact of U.S. Audit Partner Identification on Going Concern Audit Report Modifications (January 30, 2018). Available at SSRN: https://ssrn.com/abstract=3113890 or http://dx.doi.org/10.2139/ssrn.3113890

Lawrence Abbott

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

Colleen Boland (Contact Author)

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

William L. Buslepp

Louisiana State University, Baton Rouge - Department of Accounting ( email )

E.J. Ourso College of Business Administration
2800 Business Education Complex
Baton Rouge, LA 70803
United States

Sean McCarthy

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

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