Work

The horse has bolted: revisiting the market reaction to going concern modifications of audit reports

Year: 2007

Type: article

Abstract: This paper examines what value is added by an audit report through an investigation of the information content for first‐time going concern modifications (GCMs). Consistent with prior research, we find no evidence of a short‐term market reaction to the public announcement of a first‐time GCM. We document a significant adverse medium‐term market reaction in the 12 months prior to a first‐time GCM announcement, but find no evidence of a persistent market underreaction in the 12 months following the announcement. These results are consistent with an audit opinion fulfilling an attestation function and confirming the deteriorating financial condition of a firm.

Source: Accounting and Finance

DOI: 10.1111/j.1467-629x.2007.00216.x

Authors: Kathleen Herbohn, Vanitha Ragunathan, Robert Garsden

Institution: The University of Queensland

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

OpenAlex ID: W2081365895

FWCI: 8.08

Cites: 24

Cited by: 62

Related to: 10