The Effect of Enforcement on Auditor Conservatism.

2020 ◽  
Author(s):  
Mareike Peters-Olbrich
Keyword(s):  
Auditor Conservatism

The effect of financial crisis on auditor conservatism: US evidence

2015 ◽  
Vol 28 (2) ◽  
pp. 160-171 ◽  
Author(s):  
Joseph Beams ◽  
Yun-Chia Yan
Keyword(s):  
Financial Crisis ◽  
Design Methodology ◽  
Environmental Changes ◽  
Accounting Firms ◽  
Content Type ◽  
Going Concern ◽  
Big 4 ◽  
Distressed Firms ◽  
Recent Financial Crisis ◽  
Auditor Conservatism

Purpose – This paper aims to examine the effect that the recent financial crisis had on auditor conservatism in the form of increased going-concern opinions. Design/methodology/approach – This study uses a sample of US’ distressed firms from 2005 to 2011 to test the change in going-concern opinions issued. This paper uses a logistic regression model to control for other predictors of going-concern opinions to determine when the financial crisis led to an increase in auditor conservatism. Findings – The authors find that auditors became more conservative in the form of issuing higher levels of going-concern opinions even after controlling for other predictors of going-concern opinions. This increased conservatism was present in both Big 4 and non-Big 4 accounting firms. The increased conservatism quickly returned to normal levels when the financial crisis eased. Originality/value – These findings add to the literature on the effects of environmental changes on audit opinions. Additionally, this study finds a difference in the timing of the reaction by large and small accounting firms, but, overall, it finds consistency in that both increased conservatism during the crisis and quickly returned to normal afterward.

Estimation risk and auditor conservatism

2016 ◽  
Vol 22 (1) ◽  
pp. 185-216 ◽  
Author(s):  
Clive S. Lennox ◽  
Asad Kausar
Keyword(s):  
Estimation Risk ◽  
Auditor Conservatism

Auditor Conservatism after Enron

2010 ◽  
Vol 29 (1) ◽  
pp. 267-278 ◽  
Author(s):  
Dorothy A. Feldmann ◽  
William J. Read
Keyword(s):  
Financial Statement ◽  
Going Concern ◽  
Corporate Scandals ◽  
Sarbanes Oxley ◽  
Audit Firms ◽  
The Media ◽  
Time Periods ◽  
Audit Opinions ◽  
Auditor Conservatism

SUMMARY: Corporate scandals and the resulting passage of the Sarbanes-Oxley Act (SOX) in 2002 significantly affected the auditing profession. The quality of financial statement audits was called into questioned and the media and regulators held audit firms responsible. Several studies found evidence of an increase in the issuance of going-concern opinions after the passage of SOX relative to earlier time periods (Geiger et al. 2005; Nogler 2008; Myers et al. 2008). Auditors, it appears, behave more conservatively when the profession is in the headlines. We replicate and extend this research to determine whether the heightened conservatism continues or whether it fades as time passes. We examine audit opinions issued 12 months or less prior to a bankruptcy filing for 565 companies from 2000–2008. Our findings indicate that while the proportion of going-concern modifications increases sharply in 2002–2003 compared to 2000–2001, it declines in the periods that follow, ultimately returning to its pre-Enron level.

Earnings management and auditor conservatism: effects of SEC enforcement actions

2001 ◽  
Vol 27 (12) ◽  
pp. 57-71 ◽  
Author(s):  
James W. Bannister ◽  
David N. Wiest
Keyword(s):  
Earnings Management ◽  
Auditor Conservatism

Auditor conservatism following audit failures

2010 ◽  
Vol 25 (7) ◽  
pp. 639-658 ◽  
Author(s):  
Stephan A. Fafatas
Keyword(s):  
Auditor Conservatism

Did SOX Influence the Association between Fee Dependence and Auditors' Propensity to Issue Going-Concern Opinions?

2013 ◽  
Vol 33 (2) ◽  
pp. 165-185 ◽  
Author(s):  
Jennifer L. Kao ◽  
Yan Li ◽  
Wenjun Zhang
Keyword(s):  
Government Regulations ◽  
Going Concern ◽  
Sarbanes Oxley ◽  
Short Run ◽  
Public Scrutiny ◽  
Jel Classifications ◽  
Auditor Conservatism

SUMMARY: Li (2009) found that the association between fee dependence (FEEDEP) and the incidence of going-concern opinions (GCO) changed from insignificant in 2001 to positive in 2003. This finding has been interpreted as evidence that auditors became more conservative after the Sarbanes-Oxley Act (SOX). However, Feldmann and Read (2010) suggested that the year following SOX was not typical due to the intense spotlight directed at the audit profession. We revisit Li (2009) by extending the post-SOX period to 2011, and find robust results of little FEEDEP-GCO association in the years after 2003. Hence, the rise in auditor conservatism identified by Li (2009) likely represented the audit profession's temporary reaction to public scrutiny surrounding the passage of SOX, rather than a sustained movement toward more conservative going-concern reporting. Our study reinforces the notion that the effect of major events and government regulations cannot be adequately assessed based on what transpires in the short run. JEL Classifications: M420.

Auditor Conservatism, Asymmetric Monitoring, and Earnings Management*

2003 ◽  
Vol 20 (2) ◽  
pp. 323-359 ◽  
Author(s):  
Jeong-Bon Kim ◽  
Richard Chung ◽  
Michael Firth
Keyword(s):  
Earnings Management ◽  
Auditor Conservatism
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