Recent research suggests that insiders of distressed firms, fearing legal jeopardy, pressure auditors not to issue going concern opinions (GCOs) for periods in which they undertake abnormally large sales of their shares. We propose and evaluate an alternative explanation that managers anticipate GCOs and time their trades to avoid insider sales in the GCO year (hereafter, the timing hypothesis). Consistent with the timing hypothesis, we find that insider sales increase two to four years prior to the issuance of a GCO and then decline in the year of GCO. Additional analysis suggests that insiders' anticipatory trading is enabled, at least in part, by early communication between auditors and their most important clients regarding the likelihood of a GCO. These early communications appear to reduce the likelihood of dismissal when auditors do eventually issue a GCO.

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