Auditors¿ ethical dilemmas in the going concern evaluation

Résumé

We test simultaneously auditors¿ perception regarding three ethical dilemmas when evaluating the going concern status of a financially stressed firm: 1) the self-fulfilling prophecy, 2) their exposure to litigation risk, and 3) their responsibility in providing warning signals to investors. Our results suggest that that those auditors perceiving that the issuance of going concern audit report is a shield against lawsuits gave more relevance to the disconfirming evidence. Similarity, auditors perceiving higher public responsibility were also more sensitive to the disconfirming evidence. However, neither their perceptions about social responsibility nor the litigation exposure implied higher doubts about client¿s ability to continue in existence or more qualified audit reports. In contrast, the fear to provoke a self-fulfilling prophecy affected auditors¿ decision process, making more positive judgments in terms of client¿s ability to continue in existence, which, in turns, led to the issuance of less severe audit reports.