Going-concern opinions, executive tenure and gender

Abstract

Regulators in the USA and elsewhere have shown renewed interest in auditors’ judgments related to going-concern modified (GC) audit reports. Such judgments involve evaluating management’s plans, and prior research suggests that executive turnover is associated with significant organizational changes. Further, some recent studies posit that gender is associated with accounting and audit judgments. We examine audit opinions for two different samples: 2,089 financially stressed firms and 642 manufacturing firms that filed for bankruptcy. In both samples, we find that GC opinions are more likely for firms with a new CFO; however, we find no significant association between GC opinions and executives’ gender. The CFO tenure related result may arise from auditors’ professional skepticism related to a new executive. Our gender-related results differ from those of Gold et al. (2009) and suggest the need for additional research related to the role of client gender in auditing settings.