Corporate Governance Factors and Auditor Going Concern Assessments

Susan Parker (Associate Professor, Santa Clara University)
Gary F. Peters (Assistant Professor, University of Arkansas)
Howard F. Turetsky (Associate Professor Accounting and Finance Dept., BT 850, College of Business, San Jose State University, One Washington Square, San Jose, CA 95192‐0066)

Review of Accounting and Finance

ISSN: 1475-7702

Publication date: 1 March 2005


When making going concern assessments, Statement on Auditing Standards No. 59 (Auditing Standards Board 1988) directs auditors to consider the nature of management's plans and ability to mitigate periods of financial distress successfully. Corporate governance factors reflect attributes of control, oversight, and/or support of management's plans and actions intended to overcome financial distress. Correspondingly, this study investigates the impact of certain corporate governance factors on the likelihood of a going concern modification. Using survival analysis techniques, we examine a sample of 161 financially distressed firms for the time period 1988–1996. We find that auditors are twice as likely to issue a going concern modification when the CEO is replaced. We also find that going concern modifications are inversely associated with blockholder ownership. We also confirm Carcello and Neal's (2000) findings with respect to the association between an independent audit committee and an increased likelihood of modification. In a repeated events setting, we find that insider ownership and board independence are inversely associated with repeated going concern modifications. Our study concludes by proposing implications for the current financial reporting environment (including the Sarbanes‐Oxley Act of 2002) and future research avenues.



Parker, S., Peters, G.F. and Turetsky, H.F. (2005), "Corporate Governance Factors and Auditor Going Concern Assessments", Review of Accounting and Finance, Vol. 4 No. 3, pp. 5-29.

Download as .RIS



Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.