Abstract
We investigate whether going concern conclusions in the interim (half-yearly) review (IGCC) provide investors with a timely source of useful information. Using the Australian setting, with mandatory interim assurance and disclosure, we find a strong negative market reaction surrounding the release of an IGCC. Additionally we show that auditors can signal both good and bad news regarding the firm in their interim review conclusion via changes in their judgement from the prior annual report audit opinion. Furthermore, despite containing different levels of assurance, there is no significant difference between the market reaction to IGCCs and going concern opinions received in the annual report audit (AGCO). The market reaction to the AGCO is also related to the prior interim review conclusion. Last, IGCCs are significant predictors of the following AGCO, beyond the previous annual report audit opinion. Overall, we conclude that going concern conclusions in interim financial statements provide an early warning to investors.
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