Audit Partner Trait Skepticism and Going-Concern Reporting Decisions

33 Pages Posted: 11 Feb 2022

See all articles by Kris Hardies

Kris Hardies

University of Antwerp

Sanne Janssen

Open University; University of Antwerp

Ann Vanstraelen

Maastricht University

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: December 6, 2021

Abstract

We investigate the relationship between audit partners’ professional skepticism and their going-concern reporting decisions. We link publicly-available archival data on audit opinions and companies’ financial characteristics with privately-collected audit partner data on professional skepticism (measured with the Hurtt Professional Skepticism Scale). We find a positive association between partners’ trait skepticism and the likelihood that a partner issues a going-concern opinion to a financially distressed company. In supplemental analyses, we investigate underlying nuances
relating to this association in terms of partner workload, Big 4 affiliation, and alternative measures of trait skepticism. We find that workload is negatively associated with the likelihood of issuing a going-concern opinion, but only when trait skepticism is relatively low; as trait skepticism increases, the probability of receiving a going-concern opinion increases with partner workload. Further, trait skepticism has a larger effect on going-concern reporting for Big 4 partners than for non-Big 4 partners. Alternative measures of trait skepticism prove to be less reliable predictors of partners’ going-concern reporting decisions.

Keywords: professional skepticism, trait skepticism, going-concern, Hurtt scale, workload

JEL Classification: M42, J24

Suggested Citation

Hardies, Kris and Janssen, Sanne and Vanstraelen, Ann and Zehms, Karla M., Audit Partner Trait Skepticism and Going-Concern Reporting Decisions (December 6, 2021). Available at SSRN: https://ssrn.com/abstract=3978879 or http://dx.doi.org/10.2139/ssrn.3978879

Kris Hardies (Contact Author)

University of Antwerp ( email )

Department of Accounting and Finance
Pleinlaan 13
Antwerp, 2000
Belgium

Sanne Janssen

Open University ( email )

P.O. Box 2960
Heerlen 6401DL
Netherlands

University of Antwerp ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

Ann Vanstraelen

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-234-1052 (Phone)
608-265-5031 (Fax)

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