Abstract

The purpose of the study is to investigate the effects of the Procomp scandal (2004) on subsequent issuances of qualified audit opinions on the basis of going concern. To ensure the results reflect effects of the scandal on issuances of going concern opinions, this study includes several moderating variables reported in the literature. The empirical results indicate that non-Big 4 firms have issued more going concern audit opinions after the Procomp scandal than before the scandal while there was no significant difference in audit opinions issued by the Big 4 firms before and after the Procomp scandal. The Procomp scandal appears to have no effect on issuing going concern opinions by Big 4 firms, possibly a result of having a more consistent audit quality or having confidence on their audit practices and quality. The results also indicate that clients' assets have a negative relationship with the possibility of issuing going concern opinions after the scandal, compared to a positive relationship before the scandal, and when clients had net negative operating cash flows, more going concern audit opinions were issued by auditors.