Abstract
In this study I explore whether auditor incentives influence the decision to issue a going-concern disclosure to a financially distressed client. Auditor incentives have been suggested as a missing link between the literatures on financial distress prediction and going-concern assessments. While previous research has focused primarily on client financial ratios, I model the auditor's going-concern as a function not only of the client's financial condition and prospects, but also of factors associated with the auditor's loss function, including prospective audit fees, the length of the auditor-client relationship, recent auditor litigation, client losses, and the existence of previously disclosed evidence of goingconcern difficulties.
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