IDEAS home Printed from https://ideas.repec.org/a/bla/acctfi/v66y2026i2p1401-1411.html

Do Auditors Start the Clock? First‐Time Going Concern Opinions and Time to Bankruptcy

Author

Listed:
  • James Routledge

Abstract

Going concern audit opinions (GCOs) alert stakeholders to substantial doubt about a firm's ability to continue operating. While prior research has examined the value of GCOs as predictors of bankruptcy, this study examines whether they influence the timing of bankruptcy. The survival analysis results for a sample of Australian public companies that entered bankruptcy administration show that the issuance of a first‐time GCO is associated with a significantly shorter time to bankruptcy. In contrast, repeat GCOs do not have a significant timing effect. The impact of first‐time GCOs is strongest when the opinion is unexpected and for audits conducted by Big 4 firms. These findings are consistent with first‐time GCOs prompting stakeholder responses that shorten the time to bankruptcy.

Suggested Citation

  • James Routledge, 2026. "Do Auditors Start the Clock? First‐Time Going Concern Opinions and Time to Bankruptcy," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 66(2), pages 1401-1411, June.
    • Handle: RePEc:bla:acctfi:v:66:y:2026:i:2:p:1401-1411
    DOI: 10.1111/acfi.70178
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/acfi.70178
    Download Restriction: no
    File URL: https://libkey.io/10.1111/acfi.70178?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. G. Meeks & J. G. Meeks, 2009. "Self‐Fulfilling Prophecies of Failure: The Endogenous Balance Sheets of Distressed Companies," Abacus, Accounting Foundation, University of Sydney, vol. 45(1), pages 22-43, March.
    2. Hui Liu & Charles P. Cullinan & Junrui Zhang, 2020. "Modified audit opinions and debt contracting: evidence from China," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 27(2), pages 218-241, March.
    3. Lennox, Clive, 2000. "Do companies successfully engage in opinion-shopping? Evidence from the UK," Journal of Accounting and Economics, Elsevier, vol. 29(3), pages 321-337, June.
    4. Nina Sormunen, 2014. "Bank officers’ perceptions and uses of qualified audit reports," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 11(3), pages 215-237, September.
    5. Zmijewski, Me, 1984. "Methodological Issues Related To The Estimation Of Financial Distress Prediction Models," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 22, pages 59-82.
    6. Nina Sormunen, 2014. "Bank officers’ perceptions and uses of qualified audit reports," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 11(3), pages 215-237, September.
    7. Elizabeth Gutierrez & Jake Krupa & Miguel Minutti-Meza & Maria Vulcheva, 2020. "Do going concern opinions provide incremental information to predict corporate defaults?," Review of Accounting Studies, Springer, vol. 25(4), pages 1344-1381, December.
    8. Zhou, Fanyin & Fu, Lijun & Li, Zhiyong & Xu, Jiawei, 2022. "The recurrence of financial distress: A survival analysis," International Journal of Forecasting, Elsevier, vol. 38(3), pages 1100-1115.
    9. Wilbur N. Moulton & Howard Thomas, 1993. "Bankruptcy as a deliberate strategy: Theoretical considerations and empirical evidence," Strategic Management Journal, Wiley Blackwell, vol. 14(2), pages 125-135, February.
    10. Sofie Balcaen & Sophie Manigart & Hubert Ooghe, 2011. "From distress to exit: determinants of the time to exit," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 407-446, August.
    11. Betz, Jennifer & Kellner, Ralf & Rösch, Daniel, 2016. "What drives the time to resolution of defaulted bank loans?," Finance Research Letters, Elsevier, vol. 18(C), pages 7-31.
    12. Goodwin, John & Routledge, James, 2021. "Determinants of the duration of the voluntary administration process: An unconditional quantile regression analysis," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James Routledge & David Morrison, 2012. "Insolvency administration as a strategic response to financial distress," Australian Journal of Management, Australian School of Business, vol. 37(3), pages 441-459, December.
    2. García Blandón, Josep & Argilés Bosch, Josep Maria, 2013. "Audit firm tenure and qualified opinions: New evidence from Spain," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 16(2), pages 118-125.
    3. Mark DeFond & Jieying Zhang & Yuping Zhao, 2025. "Do Managers Successfully Shop for Auditors Who Allow Them to Opportunistically Report Positive News? Evidence from Accounting Estimates," Management Science, INFORMS, vol. 71(11), pages 9256-9289, November.
    4. Gómez Aguilar, Nieves & Biedma López, Estíbaliz & Ruiz Barbadillo, Emiliano, 2018. "El efecto de la rotación de socio en la calidad de la auditoría," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 21(1), pages 7-18.
    5. Nathan R. Berglund, 2020. "Do Client Bankruptcies Preceded by Clean Audit Opinions Damage Auditor Reputation?," Contemporary Accounting Research, John Wiley & Sons, vol. 37(3), pages 1914-1951, September.
    6. Correia, Maria, 2025. "Accounting and corporate failure: the evolving role of accounting information in bankruptcy prediction," LSE Research Online Documents on Economics 128340, London School of Economics and Political Science, LSE Library.
    7. Jiang-Chuan Huang & Hueh-Chen Lin & Daniel Huang, 2022. "The Effect of Operating Cash Flow on the Likelihood and Duration of Survival for Marginally Distressed Firms in Taiwan," Sustainability, MDPI, vol. 14(24), pages 1-20, December.
    8. Xingqiang Du & Wei Jian & Quan Zeng & Yingying Chang, 2018. "Do Auditors Applaud Corporate Environmental Performance? Evidence from China," Journal of Business Ethics, Springer, vol. 151(4), pages 1049-1080, September.
    9. Garcia-Blandon, Josep & Argiles, Josep Ma, 2015. "Audit firm tenure and independence: A comprehensive investigation of audit qualifications in Spain," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 82-93.
    10. Stefan Sundgren & Tobias Svanström, 2017. "Is the Public Oversight of Auditors Effective? The Impact of Sanctions on Loss of Clients, Salary and Audit Reporting," European Accounting Review, Taylor & Francis Journals, vol. 26(4), pages 787-818, October.
    11. Xavier Brédart & Eric Séverin & David Veganzones, 2021. "Human resources and corporate failure prediction modeling: Evidence from Belgium," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(7), pages 1325-1341, November.
    12. Kaplan, Steven E. & Williams, David D., 2012. "The changing relationship between audit firm size and going concern reporting," Accounting, Organizations and Society, Elsevier, vol. 37(5), pages 322-341.
    13. Stephanie F. Cheng & Dushyantkumar Vyas & Regina Wittenberg-Moerman & Wuyang Zhao, 2025. "Exposure to superstar firms and financial distress," Review of Accounting Studies, Springer, vol. 30(2), pages 1355-1396, June.
    14. Wang, Yusiyu, 2019. "Regulation, protest, and spatial economics," Other publications TiSEM 809d31ac-b5a7-4e6c-b2eb-9, Tilburg University, School of Economics and Management.
    15. Daisuke TSURUTA, 2025. "Determinants of the Rehabilitation of Defaulting Small Businesses: Are real or financial factors important?," Discussion papers 25066, Research Institute of Economy, Trade and Industry (RIETI).
    16. Zhao, Qi & Xu, Weijun & Ji, Yucheng, 2023. "Predicting financial distress of Chinese listed companies using machine learning: To what extent does textual disclosure matter?," International Review of Financial Analysis, Elsevier, vol. 89(C).
    17. Pei-Gi Shu & Tsung-Kang Chen & Wen-Jye Hung, 2015. "Audit duration quality and client credit risk," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 22(2), pages 137-162, June.
    18. Emiliano Ruiz Barbadillo & Nieves Gómez Aguilar & Nieves Carrera Pena, 2006. "Evidencia empírica sobre el efecto de la duración del contrato en la calidad de la auditoría: análisis de las medidas de retención y rotación obligatoria de auditores," Investigaciones Economicas, Fundación SEPI, vol. 30(2), pages 283-316, May.
    19. Elizabeth Gutierrez & Jake Krupa & Miguel Minutti-Meza & Maria Vulcheva, 2020. "Do going concern opinions provide incremental information to predict corporate defaults?," Review of Accounting Studies, Springer, vol. 25(4), pages 1344-1381, December.
    20. Lars Schweizer & Andreas Nienhaus, 2017. "Corporate distress and turnaround: integrating the literature and directing future research," Business Research, Springer;German Academic Association for Business Research, vol. 10(1), pages 3-47, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:acctfi:v:66:y:2026:i:2:p:1401-1411. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/aaanzea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.