There was a significant increase in going‐concern opinions in the U.K. during the 1990s despite a strong economy. This paper tests the impact of a new audit report standard versus an enhanced audit procedures standard in explaining this change.

We find the increased going‐concern modification rate among financially distressed firms is directly associated with the introduction of the less confrontational audit report standard: SAS No. 600. On the other hand, the going‐concern procedure standard (SAS No. 130) had no impact on our results. We interpret this finding as highlighting the importance of audit report presentation for standard setters when seeking to enhance disclosure.

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