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- Title
Rules Rather than Discretion in Audit Standards: Going-Concern Opinions in Belgium.
- Authors
Carcello, Joseph V.; Vanstraelen, Ann; Willenborg, Michael
- 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).
- Subjects
BELGIUM; AUDITING standards; GOING concern (Accounting); AUDITORS; MATHEMATICAL models; BANKRUPTCY
- Publication
Accounting Review, 2009, Vol 84, Issue 5, p1395
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/accr.2009.84.5.1395