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The auditor’s opinion modifications around domestic and global financial crises

Banu Sultanoglu (Faculty of Business Administration, Bilkent University, Ankara, Turkey)
Can Simga Mugan (Izmir Ekonomi Universitesi, Izmir, Turkey)
Umut Sekerdag (SC Johnson, Istanbul, Turkey)
Adil Oran (Department of Business Administration, Middle East Technical University, Ankara, Turkey)

Meditari Accountancy Research

ISSN: 2049-372X

Article publication date: 31 October 2018

Issue publication date: 31 October 2018




The purpose of this study is to investigate the effect of company characteristics such as the level of financial distress, client size and type of auditor on the propensity to issue modified audit opinions and to assess comparative differences in audit opinions during two significant economic crises in Turkey.


Logistic regression model is used to test the incremental contribution of each company characteristic on issuing the type of audit opinion for crisis periods. Additionally, to understand the reasons for differences in audit opinions between two types of crisis periods, the authors adopt Francis and Krishnan’s (2002) approach in which an auditor’s propensity to issue modified opinion may be jointly based on changes in client characteristics and auditor reporting strategies in that period.


The results indicate that there is a positive relationship between financial distress and the likelihood of receiving modified opinions in both crisis periods. Additionally, client size affects audit opinions negatively in both periods significantly. Auditors show higher propensity to issue a modified opinion during the domestic than the global financial crisis period, which could be explained by the changes in client characteristics more than their reporting strategy.

Practical implications

This study provides supportive evidence that the company characteristics including the financial distress can be very useful predictors for the auditors’ decisions while issuing their opinions.


The findings of different auditor behaviors during crises periods and possible reasons are the main contributions of this study for international and domestic regulators, investors, audit firms, academics and standard setters in emerging economies.



Sultanoglu, B., Mugan, C.S., Sekerdag, U. and Oran, A. (2018), "The auditor’s opinion modifications around domestic and global financial crises", Meditari Accountancy Research, Vol. 26 No. 4, pp. 622-639.



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