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Auditing (A307)


going-concern modifications; Type II errors; conservatism


  1. Dorothy A. Feldmann
  2. William J. Read





    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.





    Vol 29, Nomor 01 CD, Tahun 2010


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