Abstract
This research attempts to find empirical evidence of ex ante factors relating to the economic trade-offs that an auditor faces when deciding whether or not to disclose going concern uncertainties in an audit report in a non-litigious continental European setting, Belgium. The research methodology consists of univariate and logistic regression analysis. The results of the study confirm the belief that the auditor's going concern opinion decision is not only a question of competence but also of independence. A significant moderating factor appears to be recent client loss on the part of the auditor. The legal obligation for Belgian auditors to refer to the report of the Board of Directors in their own audit report seems to significantly influence their reporting behaviour. The disclosure by the Board of Directors of ‘bad news’ regarding the state of affairs of a company diminishes any conflict of interest that may exist between the Board and the auditor. However, no evidence was found to justify the fear for a ‘self-fulfilling prophecy’ effect.
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