Audit Reporting for Going-Concern Uncertainty:

Auditing: A Journal of Practice & Theory Vol. 32, Supplement 1 2013 pp. 353–384

American Accounting Association DOI: 10.2308/ajpt-50324

Audit Reporting for Going-Concern Uncertainty: A Research Synthesis

Elizabeth Carson, Neil L. Fargher, Marshall A. Geiger, Clive S. Lennox, K. Raghunandan, and Marleen Willekens

SUMMARY: In this synthesis we review research on going-concern modified audit opinions (GCOs) and develop a framework to categorize this research. We identify three major areas of research: (1) determinants of GCOs that include client factors, auditor factors, auditor-client relationships, and other environmental factors; (2) accuracy of GCOs; and (3) consequences arising from GCOs. We identify method-related considerations for researchers working in the area and identify future research opportunities. Keywords: going-concern; audit reporting; bankruptcy.

INTRODUCTION he global financial crisis starting in 2007 has resulted in a significant increase in company failures and has generated renewed interest in auditor reporting on financially troubled clients. Issues of immediate concern relate to the exceptional risks faced by companies at the height of the liquidity and credit problems during 2007 and 2008 and the role that auditors had to

Elizabeth Carson is an Associate Professor at The University of New South Wales, Neil L. Fargher is a Professor at The Australian National University, Marshall A. Geiger is a Professor at the University of Richmond and an Academic Fellow at the SEC, Clive S. Lennox is a Professor at Nanyang Technology University, K. Raghunandan is a Professor at Florida International University, and Marleen Willekens is a Professor at Katholieke Universiteit Leuven.

We greatly appreciate the research assistance of Afsana Hassan, Christophe Van Linden, Ashna R. Prasad, Qingxin Ye, and Qiang Wei. We thank Bill Read for the helpful provision of data. The Securities and Exchange Commission, as a matter of policy, disclaims...