Auditors’ Propensity and Accuracy in Issuing Going-Concern Modified Audit Opinions for Charities

41 Pages Posted: 5 Nov 2020

See all articles by Yitang (Jenny) Yang

Yitang (Jenny) Yang

UNSW Australia Business School, School of Accounting

Roger Simnett

UNSW Australia Business School, School of Accounting

Elizabeth Carson

University of New South Wales

Date Written: September 16, 2020

Abstract

This paper identifies the factors which impact auditors’ propensity to issue going concern modified audit opinions (GCOs) and examines their accuracy in issuing such opinions for charities by comparing with two outcomes, cancellation of ABN status and the revoking of operating status on the ACNC database. We find that GCOs are more likely for charities which are smaller, in greater financial distress, received a prior year GCO, had smaller proportion of donation income and had economic dependence on subsequent funding. Big 4 auditors are less likely to issue GCOs, but they do not show significant differences in GCO reporting mis-classification.

Keywords: Going Concern; Charity; Audit Quality; Auditor Reporting

JEL Classification: M42

Suggested Citation

Yang, Yitang and Simnett, Roger and Carson, Elizabeth, Auditors’ Propensity and Accuracy in Issuing Going-Concern Modified Audit Opinions for Charities (September 16, 2020). Available at SSRN: https://ssrn.com/abstract=3693509 or http://dx.doi.org/10.2139/ssrn.3693509

Yitang Yang (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Roger Simnett

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia
+61 2 9385 5825 (Phone)
+61 2 9385 5925 (Fax)

Elizabeth Carson

University of New South Wales ( email )

Sydney, NSW 2052
Australia
+612 9385 5822 (Phone)
+612 9385 5925 (Fax)

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