Audit researchers have a longstanding interest in understanding whether issuing a going concern report to financially stressed clients protects auditors from litigation. An endogeneity issue arises, in that litigation risk affects the going concern decision and the going concern decision impacts...

As a result of gradual shifts in the market for audit services, we expect financially stressed public companies to be increasingly audited by regional firms, who, in turn, will be increasingly likely to issue going concern reports to their financially stressed public companies. Our expectations...