Accurately assessing the ability of a financially distressed company to stay in business through the next year is a difficult task at best. Notwithstanding this difficulty, auditors have seemingly been saddled with a large portion of this responsibility for the companies that they audit. Current...

The purpose of this paper is to examine whether institutional investors: 1) anticipate a distressed firm's receipt of a first-time going concern modified audit opinion, and 2) react to a first-time going concern modified opinion by engaging in abnormal net selling of firm shares. Using a...