An Analysis of Auditors' Going-Concern Reporting Accuracy in Private Firms

What is it about?

The accuracy of audit reports is often viewed as a signal for audit quality. Prior research shows that in the context of going-concern reporting in audit markets dominated by public firms, some auditors are more accurate than others. This study is the first that investigates going-concern reporting accuracy in an audit market dominated by private firms. Our main analysis is based on a sample of 1,375 Belgian firms that ceased to exist within one year from the financial statement date. Our results show that the frequency of Type II misclassifications does not vary across auditor types (Big 4 vs. non-Big 4, audit firm and partner industry specialists vs. non-specialists, more experienced vs. less experienced, and female vs. male auditors). Overall, these results cast doubt on the existence of quality differences among auditors in audit markets dominated by private firms.

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