Perceived audit quality, modified audit opinions and the likelihood of liquidating bankruptcy among financially weak firms
2009 (English)In: International Journal of Auditing, ISSN 1090-6738, E-ISSN 1099-1123, ISSN 1090-6738, Vol. 13, no 3, 203-221 p.Article in journal (Refereed) Published
The paper examines the relationship between audit quality,modified audit opinions and the likelihood of liquidatingbankruptcy among financially weak firms. The sample consistsof 27,999 Finnish companies. It is argued that the choice of ahigh-quality auditor signals managers’ credibility and thatcreditors would be more inclined to prefer liquidatingbankruptcy as the resolution of financial difficulties if the firmis audited by a low-quality auditor. The results show thatliquidating bankruptcy is less common among Big 4 auditedfirms. A positive association between the likelihood ofbankruptcy and different types of modified audit opinions,including opinions with remarks related to the quality andpresentation of financial statements, is also found.
Place, publisher, year, edition, pages
Wiley-Blackwell Publishing Inc., 2009. Vol. 13, no 3, 203-221 p.
Audit quality, audit opinions, financial distress, bankruptcy
IdentifiersURN: urn:nbn:se:umu:diva-120331OAI: oai:DiVA.org:umu-120331DiVA: diva2:928504