دانلود رایگان مقاله انگلیسی حسابرسی خارجی و پیش بینی ورشکستگی - اشپرینگر 2018

Abstract

In this paper, we investigate the relationship between external auditor characteristics and the likelihood of bankruptcy. We use a sample of US public companies to analyse whether auditor attributes are associated with default. We also test whether the inclusion of such attributes in bankruptcy prediction models improves their predictive ability. We fnd that frms audited by industry-expert auditors, large audit frms and long-tenured auditors are less likely to default. Firms with higher audit fees are more likely to default. Our results also show that the inclusion of auditor attributes signifcantly increases the predictive ability of bankruptcy prediction models. This paper contributes to the literature about auditing and bankruptcy prediction. Our results suggest that the auditor attributes can provide predictive signals concerning a default risk and that an external audit can play a relevant role in early warnings of fnancial distress. Our study also suggests that bankruptcy prediction models can become more efective if they are complemented with audit data. Our results are of interest to market participants, auditors, regulating authorities, banks and other fnancial institutions that are interested in credit risk assessment.

5 Discussion and conclusions

In this paper, we explore the association between auditor characteristics and the likelihood of bankruptcy. We supplement Ohlson’s (1980) bankruptcy prediction model with auditor fees, size, tenure and industry specialization. Our analyses provide evidence that auditor characteristics are predictive signals of fnancial default. Our fndings also suggest that auditor attributes can be applied to increase the predictive ability of default prediction models, which are used in academic research and in practice.

Our paper contributes in several ways to audit-related literature. Prior research about auditing and fnancial distress only focused on qualifed going concern opinions. We show that, in the years preceding a default, several auditor characteristics are associated with bankruptcy. Our fndings suggest that frms, which are audited by large auditors, are less likely to default. Big-X auditors are probably more likely to select solvent client frms who are able to pay for their services in the long term. Large auditors are also better equipped with knowledge and competences to deliver quality audits (Bratten et al. 2013). External investors and lenders perceive frms, which are audited by large auditors, as having more credible earnings and as being less risky. For this reason, such frms beneft from lower borrowing costs and also from investors who expect lower returns. They are also less likely to commit a default (Khurana and Raman 2004; Gul et al. 2013).