Title
Rules rather than discretion in audit standards: going-concern opinions in BelgiumRules rather than discretion in audit standards: going-concern opinions in Belgium
Author
Faculty/Department
Faculty of Applied Economics
Research group
Accountancy and Finance
Publication type
article
Publication
Menasha, Wis.,
Subject
Economics
Source (journal)
The accounting review. - Menasha, Wis.
Volume/pages
84(2009):5, p. 1395-1428
ISSN
0001-4826
ISI
000270298300003
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
We study going-concern (GC) reporting in Belgium to examine the effects associated with a shift toward rules-based audit standards. Beginning in 2000, a major revision in Belgian GC audit standards took effect. Among its changes, auditors must ascertain whether their clients are in compliance with two ''financial-juridical criteria'' for board of directors' GC disclosures. In a study of a sample of private Belgian companies, we report two major findings. First, there is a decrease in auditor Type II errors, particularly by non-Big 6/5 auditors for their clients that fail both criteria. Second, there is an increase in Type I errors, again particularly for companies that fail both criteria. We also conduct an ex post analysis of the decrease in Type II errors and the increase in Type I errors. Our findings suggest the standard engenders both favorable and unfavorable effects, the net of which depends on the priorities assigned to the affected parties (creditors, auditors, companies, and employees).
E-info
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