An Investigation of Framing and Firm Size on the Auditor's Going Concern Decision

Abstract

Abstract This study investigated the effects of framed information and firm size on the auditor's going concern report modification decision. Framing has been shown to affect individual decision-making in a variety of contexts. Investigations of framing effects in an audit context have reported mixed results. The findings of this study indicate that auditors are susceptible to the effect of framed information. Previous research has reported that auditors from small firms may be less conservative in audit disclosure recommendations than auditors associated with larger firms. This study evaluated the going concern decisions of auditors from three firm sizes: local/regional, a large non-Big Six firm, and a Big Six audit firm. Results indicate that differences in the report issued do exist across firm size. Possible explanations for the reported results are discussed.