The Impact of Managerial Overconfidence and Ability on Auditor Going-Concern Decisions and Auditor Termination
AuthorKim, Hyo Jung
MetadataShow full item record
PublisherThe University of Arizona.
RightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
AbstractI examine the influence of managerial overconfidence and ability on 1) auditors' decision to issue a going concern opinion and 2) auditor dismissal rates after issuing a going concern opinion. When there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, auditing standards prescribe that auditors obtain and evaluate information about client management's remedy plans. I find that clients with overconfident managers are more likely to receive a going concern opinion. I also show that managerial ability mitigates the positive association between managerial overconfidence and the likelihood of a going concern opinion. Additionally, I examine how these managerial attributes influence auditor retention decisions, and find that auditors are more likely to be dismissed after issuance of a going concern opinion when the client company has overconfident management. Finally, I find that the association between managerial overconfidence and auditor dismissal is stronger when management is more powerful than the company's audit committee.
Degree ProgramGraduate College