Business Administration, Management, and Operations Commons^™

A Note On Going-Concern Modified Audit Reports And Subsequent Bankruptcies Before And After Sas No. 59, Marshall A. Geiger, Kannan Raghunandan, Dasaratha V. Rama

Accounting Faculty Publications

Several papers have examined the proportion of bankrupt companies which did not have a prior going-concern modified report (a type II reporting error) before and after Statement on Auditing Standards No. 59 became effective. This paper contributes to the debate by examining the subsequent viability status for companies that received a first-time going-concern modified audit report (type I reporting errors) before and after SAS No. 59. The results indicate that 13.6 (10.1) percent and 24.3 (20.2) percent of companies receiving a first-time going concern modified audit report in the post-SAS No. 59 (pre-SAS No. 59) period entered bankruptcy within one …