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- Publisher
- Wiley
- Copyright
- Copyright © 1997 Wiley Subscription Services, Inc., A Wiley Company
- ISSN
- 0306-686X
- eISSN
- 1468-5957
- DOI
- 10.1111/1468-5957.00131
- Publisher site
- See Article on Publisher Site
Abstract
This paper analyzes a game‐theoretic model in which a client can potentially avoid a going‐concern opinion and its self‐fulfilling prophecy by switching auditors. Incumbent auditors are less willing to express a going‐concern opinion the more credible the client's threat of dismissal and the stronger the self‐fulfilling prophecy effect. Similarly, the client is more willing to switch auditors the more likely it is that auditors' reporting judgments will differ and the stronger the self‐fulfilling prophecy effect. Further, with greater noise in the auditor's forecast of client viability, the auditor tends to express fewer going‐concern opinions.
Journal
Journal of Business Finance & Accounting – Wiley
Published: Jul 1, 1997