Audit Opinions: Are They Really Different for Family Businesses?

Mercedes Mareque,Santiago Lago-Peñas,Mónica Villanueva-Villar,Elena Rivo-López

doi:10.1177/2158244019856725

Abstract

The article poses a dual research question: What are the determining factors of the type of audit opinion in a stressed economic environment and do these factors differ between family and nonfamily...

Highlights

Audit reports are the main tool used by auditors to confirm the veracity and reliability of the information given in financial statements
What are the determining factors of the type of audit opinion in a stressed economic environment, such as the so-called “Great Recession”? Second, do these factors differ between family and nonfamily firms? To answer both questions, we focus on both financial variables and auditor’s characteristics, and we rely on a sample of 9,873 private Spanish firms, of which 5,819 are family firms and 4,054 are nonfamily firms
To distinguish between family and nonfamily firms, we used the official definition of family firms agreed in 2008 in Brussels by the Groupement Européen des Entreprises Familiales (GEEF) and in Milan by the Board of the Family Business Network (FBN), the two main international bodies representing family businesses

Summary

Introduction

Audit reports are the main tool used by auditors to confirm the veracity and reliability of the information given in financial statements. The type of audit opinion issued by an auditor indicates whether the organization is complying with accounting standards and is concerned about its financial management, but it is an important factor for preventing fraudulent activities (Bell & Zimmerman, 2007). According to agency theory, auditing plays an essential role, because it aims to reduce the agency costs arising from the separation between the owners (shareholders, creditors, and suppliers) and those in control (managers and directors). Managers will demand external audits to confer greater credibility on their accounting information (Jensen & Meckling, 1976). The recent global financial crisis has boosted the interest in audit opinions (European Commission, 2010). It is in turbulent times that auditors are most needed, because they must state the future viability of entities in their reports (Pedrosa & López-Corrales, 2018)

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