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  • The Auditing Section
    Recent Changes in the Association between Bankruptcies and...
    research summary posted April 13, 2012 by The Auditing Section, tagged 09.04 Going Concern Decisions, 12.0 Accountants’ Reports and Reporting, 12.01 Going Concern Decisions in Auditing Section Research Summary Database > Auditing Section Research Summaries Space public
    Title:
    Recent Changes in the Association between Bankruptcies and Prior Audit Opinions
    Practical Implications:

    The evidence from this study can beused to support the perspective that the auditing profession is essentially self-correcting in that it seeks to maintain a positive image and control litigation costs.  This has practical implications for regulators and legislators in that these groups should evaluate the extent of the auditing profession’s changed behavior in the post-December 2001 period before promulgating further detailed, prescriptive regulations.  Specifically, this study implies that there are multiple ways to influence auditor behavior in addition to the traditional means of changing laws and auditing standards, such as litigation, harsh media and congressional pressure.  Another source of pressure on auditor behavior, not included in the article, would be the threat of sanctions on firms and individual partners (which arguably becomes more visible in recent years with the presence of PCAOB). Further, this study has implications for regulators and legislators in that it provides evidence that auditors’ increased conservatism did not result in longer audit delays.

    Citation:

    Geiger, M. A., K.
    Raghunandan, and D. V. Rama.  2005.  Recent Changes in the Association between Bankruptcies and Prior Audit Opinions.  Auditing:
    A Journal of Practice and Theory
    24 (1): 21-35.

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