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An International Meeting of American Accounting
Association
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Going-concern Audit Opinions and the Provision of Nonaudit Services: Implications for Auditor Independence of Bankrupt Firms |
Joseph H. Callaghan
Oakland University
Mohinder Parkash
Oakland University
Rajeev Singhal
Oakland University
Abstract: We examine the relationship between the propensity of auditors to render going-concern opinions and the extent of auditor-provided nonaudit fees for firms subsequently filing for bankruptcy. If auditor independence were impaired by the economic bonding implicit in the contract for nonaudit services, then issuance of a going-concern opinion would be less likely. We find no evidence of such a relationship. Specifically we do not observe any association between going-concern opinions being rendered and nonaudit fees, ratio of nonaudit to total fees, total audit fees or total fees for our sample firms. Further, our results are robust with respect to (i) controlling for fee expectations; (ii) controlling for endogeneity of going-concern opinion, audit fees and nonaudit fees; and (iii) client importance for audit firm at either national and branch office levels.