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).
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1 September 2009
Research Article|
September 01 2009
Rules Rather than Discretion in Audit Standards: Going‐Concern Opinions in Belgium
Joseph V. Carcello;
Joseph V. Carcello
The University of Tennessee.
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Ann Vanstraelen;
Ann Vanstraelen
Maastricht University and University of Antwerp.
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Michael Willenborg
Michael Willenborg
University of Connecticut.
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Online ISSN: 1558-7967
Print ISSN: 0001-4826
American Accounting Association
2009
The Accounting Review (2009) 84 (5): 1395–1428.
Citation
Joseph V. Carcello, Ann Vanstraelen, Michael Willenborg; Rules Rather than Discretion in Audit Standards: Going‐Concern Opinions in Belgium. The Accounting Review 1 September 2009; 84 (5): 1395–1428. https://doi.org/10.2308/accr.2009.84.5.1395
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