Audit committee characteristics and auditor dismissals following "new" going-concern reports

  • Carcello J
  • Neal T
  • 147

    Readers

    Mendeley users who have this article in their library.
  • 235

    Citations

    Citations of this article.

Abstract

One important role of audit committees is to protect external auditors from dismissal following the issuance of an unfavorable report. We examine auditor dismissals following new going-concern reports that Big 6 firms issued between 1988 and 1999. Our findings suggest that audit committees with greater independence, greater governance expertise, and lower stockholdings are more effective in shielding auditors from dismissal after the issuance of new going-concern reports. In addition, we find that the relation between audit committee independence and auditor protection from dismissal has grown stronger over time. Finally, independent audit committee members experience a significant increase in turnover rate after auditor dismissals. These findings, coupled with those from Carcello and Neal (2000), suggest that when affiliated directors dominate the audit committee, management often can (1) pressure its auditor to issue an unmodified report despite going-concern issues, and (2) dismiss its auditor if the auditor refuses to issue an unmodified report.

Author-supplied keywords

  • Audit committee characteristics
  • Auditor dismissals
  • Going-concern reports

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • Joseph V. Carcello

  • Terry L. Neal

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free