An investigation of recent changes in going concern reporting decisions among Big N and non-Big N auditors

  • Linda A. Myers
  • Jaime Schmidt
  • Michael Wilkins
Original Research


Corporate accounting failures and regulatory proceedings that led to the enactment of the Sarbanes–Oxley Act of 2002 increased the scrutiny of auditors. We investigate whether these events resulted in a change in auditor behavior with respect to going concern reporting. Generally speaking, we find that non-Big N auditors became more conservative while Big N auditors became more accurate. Specifically, non-Big N auditors issued more going concern opinions to both failing and non-failing clients post-2001, reducing their Type II misclassifications at the expense of increased Type I misclassifications. However, Big N auditors decreased their Type I misclassifications with no corresponding increase in Type II misclassifications. Thus, our findings suggest that increased auditor scrutiny resulted in performance improvements in the area of going concern reporting primarily for larger auditors. For smaller auditors, improved going concern accuracy for subsequently bankrupt clients came at the cost of more going concern opinions being issued to subsequently non-failing clients.


Going concern Bankruptcy Type I and Type II misclassifications Audit quality Auditor size Auditor conservatism 

JEL Classification

M42 M48 



We thank Chris Hines, Janet McDonald, and Genevieve Scalan for helpful research assistance, and Tom Omer and workshop participants at Texas A&M University for helpful comments and suggestions. Linda Myers and Michael Wilkins gratefully acknowledge financial support from the Garrison/Wilson Chair at the University of Arkansas and from the Jesse H. Jones Chair at Trinity University, respectively.


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Linda A. Myers
    • 1
  • Jaime Schmidt
    • 2
  • Michael Wilkins
    • 3
  1. 1.Sam M. Walton College of BusinessUniversity of ArkansasFayettevilleUSA
  2. 2.McCombs School of BusinessUniversity of Texas at AustinAustinUSA
  3. 3.Department of Business AdministrationTrinity UniversitySan AntonioUSA

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