Journal article
Policy issues concerning the choice of a disclaimer in the presence of going concern uncertainties: An empirical analysis
Managerial auditing journal, Vol.16(3)
30 Mar 2001
Abstract
The Auditing Standards Board (ASB) allows auditors to issue one of two types of reports when a client faces going concern uncertainties - a modified report with an explanatory paragraph detailing the uncertainty or, alternatively, a disclaimer of opinion. The disclaimer, in effect, states that, because of the nature of the uncertainty, the auditor is unable to express an opinion. Prior research suggests that financial statement users view the disclaimer as sending a graver signal of financial distress. From an ethical standpoint, this allows auditors to conduct an audit and protect themselves against legal liability by declining to express an opinion. From a public policy point of view, it has implications for companies since a disclaimer could drastically reduce their chances of obtaining loans. The ASB recently eliminated the option of choosing a disclaimer in the presence of general uncertainties, such as litigation, that do not threaten the survival of a company. However, the option has not been rescinded in the presence of going concern uncertainties. This study attempts to shed light on whether the disclaimer should be rescinded.
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Details
- Title
- Policy issues concerning the choice of a disclaimer in the presence of going concern uncertainties: An empirical analysis
- Creators
- Asokan AnandarajanRandall LaSalleMurugan Anandarajan
- Publication Details
- Managerial auditing journal, Vol.16(3)
- Publisher
- Emerald Group Publishing Limited
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Decision Sciences (and Management Information Systems); Bennett S. LeBow College of Business; Drexel University
- Identifiers
- 991019551797504721