Opinion shopping to avoid going concern audit opinion and subsequent audit quality

Despite regulatory concerns over opinion shopping (OS) behavior, there exists little systematic evidence on the prevalence and consequences of OS to avoid a going concern opinion (GCO). Using Lennox's (2000) framework to identify OS, we find that distressed firms successfully engage in OS to av...

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Main Authors: CHUNG, Heesun, SONU, Catherine Heyjung, ZANG, Yoonseok, CHOI, Jong-Hag
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Language:English
Published: Institutional Knowledge at Singapore Management University 2019
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Online Access:https://ink.library.smu.edu.sg/soa_research/1805
https://ink.library.smu.edu.sg/context/soa_research/article/2832/viewcontent/Opinion_shopping_av_May_2018.pdf
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spelling sg-smu-ink.soa_research-28322022-02-15T08:37:07Z Opinion shopping to avoid going concern audit opinion and subsequent audit quality CHUNG, Heesun SONU, Catherine Heyjung ZANG, Yoonseok CHOI, Jong-Hag Despite regulatory concerns over opinion shopping (OS) behavior, there exists little systematic evidence on the prevalence and consequences of OS to avoid a going concern opinion (GCO). Using Lennox's (2000) framework to identify OS, we find that distressed firms successfully engage in OS to avoid a GCO. Moreover, clients engaging in OS exhibit a higher ex post Type II error rate in audit opinions than clients that do not, and the higher Type II error rate is salient for clients switching auditors for OS but not for clients retaining auditors for OS. We continue to find this asymmetric effect of the two types of OS on audit quality measured by restatements. These results indicate that auditor switching for OS not only results in a higher likelihood of audit reporting failures but also impairs other dimensions of audit quality, while auditor retaining for OS has little adverse effect on audit quality. 2019-05-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1805 info:doi/10.2308/ajpt-52154 https://ink.library.smu.edu.sg/context/soa_research/article/2832/viewcontent/Opinion_shopping_av_May_2018.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University opinion shopping auditor switch Type II errors audit quality Accounting Corporate Finance
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic opinion shopping
auditor switch
Type II errors
audit quality
Accounting
Corporate Finance
spellingShingle opinion shopping
auditor switch
Type II errors
audit quality
Accounting
Corporate Finance
CHUNG, Heesun
SONU, Catherine Heyjung
ZANG, Yoonseok
CHOI, Jong-Hag
Opinion shopping to avoid going concern audit opinion and subsequent audit quality
description Despite regulatory concerns over opinion shopping (OS) behavior, there exists little systematic evidence on the prevalence and consequences of OS to avoid a going concern opinion (GCO). Using Lennox's (2000) framework to identify OS, we find that distressed firms successfully engage in OS to avoid a GCO. Moreover, clients engaging in OS exhibit a higher ex post Type II error rate in audit opinions than clients that do not, and the higher Type II error rate is salient for clients switching auditors for OS but not for clients retaining auditors for OS. We continue to find this asymmetric effect of the two types of OS on audit quality measured by restatements. These results indicate that auditor switching for OS not only results in a higher likelihood of audit reporting failures but also impairs other dimensions of audit quality, while auditor retaining for OS has little adverse effect on audit quality.
format text
author CHUNG, Heesun
SONU, Catherine Heyjung
ZANG, Yoonseok
CHOI, Jong-Hag
author_facet CHUNG, Heesun
SONU, Catherine Heyjung
ZANG, Yoonseok
CHOI, Jong-Hag
author_sort CHUNG, Heesun
title Opinion shopping to avoid going concern audit opinion and subsequent audit quality
title_short Opinion shopping to avoid going concern audit opinion and subsequent audit quality
title_full Opinion shopping to avoid going concern audit opinion and subsequent audit quality
title_fullStr Opinion shopping to avoid going concern audit opinion and subsequent audit quality
title_full_unstemmed Opinion shopping to avoid going concern audit opinion and subsequent audit quality
title_sort opinion shopping to avoid going concern audit opinion and subsequent audit quality
publisher Institutional Knowledge at Singapore Management University
publishDate 2019
url https://ink.library.smu.edu.sg/soa_research/1805
https://ink.library.smu.edu.sg/context/soa_research/article/2832/viewcontent/Opinion_shopping_av_May_2018.pdf
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