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The Auditor's Going-Concern Opinion Decision


  • Tae G. Ryu

    (Department of Accounting, Metropolitan State College of Denver, U.S.A.)

  • Chul-Young Roh

    (Department of Public Health, East Tennessee State University, U.S.A.)


In this study, we expand on several previous studies related to the materiality judgments and the auditor's propensity to issue a going-concern opinion to financially troubled but non-bankrupt companies. We test the auditor's materiality thresholds by investigating whether there is any significant difference in accuracy among audit firms, especially between Big Six (Five) and non-Big Six (Five) audit firms. Binary logit regression is used to analyze 1,332 firms that were non-bankrupt but financially stressed between 1997 and 1999. This study finds that Big Six (Five) firms had higher materiality thresholds and were less likely to issue a going-concern opinion to their clients with financial problems than non-Big Six (Five) firms. Our results are consistent with previous research findings in that the materiality threshold levels are statistically different between the two groups of auditors. The results of this study provide a basis for comparing audit performance between Big Six (Five) and non-Big Six (Five) firms.

Suggested Citation

  • Tae G. Ryu & Chul-Young Roh, 2007. "The Auditor's Going-Concern Opinion Decision," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 6(2), pages 89-101, August.
  • Handle: RePEc:ijb:journl:v:6:y:2007:i:2:p:89-101

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    References listed on IDEAS

    1. Pittman, Jeffrey A. & Fortin, Steve, 2004. "Auditor choice and the cost of debt capital for newly public firms," Journal of Accounting and Economics, Elsevier, vol. 37(1), pages 113-136, February.
    2. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    3. repec:bla:joares:v:22:y:1984:i::p:59-82 is not listed on IDEAS
    4. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
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    More about this item


    going-concern opinion; auditing; auditor's propensity;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing


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