Does the Audit Going Concern Opinion Really Matter? The Case of Egypt.

Abstract

The auditor’s going concern opinion (GCO) is an opinion given by an auditor about a firm’s financial health. This opinion serves as an early warning system for the financial distress of client’s firm. The current research aimed to study the impact of the auditor’s going concern opinion (GCO) on stock prices in the Egyptian business environment. On a sample of 132 firms listed on the Egyptian Stock Exchange for the period 2016-2022 with a total of 759 firm-year-observations. In addition to the possible effect of two moderating variables associated with the main independent variables. Which is the expectation of GCO and perceived audit quality (AQ). We added the independent and moderating variables to the modified Ohlsen regression model to test for the value relevance of the GCO, and the effects of the moderating variables on the mentioned above relation. We found no evidence of a significant impact of the auditor’s GCO on the stock prices of companies listed on the Egyptian Stock Exchange, regardless of whether this opinion is expected or not. On the other hand, for the effect of perceived audit quality, we found a significant negative effect of GCO on stock prices for companies being audited by big 4 audit firms, which could be interpreted because of the reputation effect for such firms. Keywords: Going Concern Opinion – Financial Health – Audit Quality – Egypt.