Strategic Auditor Behavior and Going-Concern Decisions
This paper analyzes a game-theoretic model in which a client can potentially avoid a going-concern opinion and its self-fulfilling prophecy by switching auditors. Incumbent auditors are less willing to express a going-concern opinion the more credible the client's threat of dismissal and the stronger the self-fulfilling prophecy effect. Similarly, the client is more willing to switch auditors the more likely it is that auditors' reporting judgments will differ and the stronger the self-fulfilling prophecy effect. Further, with greater noise in the auditor's forecast of client viability, the auditor tends to express fewer going-concern opinions. Copyright Blackwell Publishers Ltd 1997.
Year of publication: |
1997-07
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Authors: | Matsumura, Ella Mae ; Subramanyam, K.R. ; Tucker, Robert R. |
Published in: |
Journal of Business Finance & Accounting. - Wiley Blackwell, ISSN 0306-686X. - Vol. 24.1997-07, 6, p. 727-758
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Publisher: |
Wiley Blackwell |
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