The Accounting Review Vol. 84 No. 5 2009
Rules Rather than Discretion in Audit Standards: Going-Concern Opinions in Belgium
Abstract
We study going-concern (GC) reporting in Belgium to examine the effects associated with a shift toward rules-based audit standards. Beginning in 2000, a major revision in Belgian GC audit standards took effect. Among its changes, auditors must ascertain whether their clients are in compliance with two "financial-juridical criteria'' for board of directors' GC disclosures. In a study of a sample of private Belgian companies, we report two major findings. First, there is a decrease in auditor Type II errors, particularly by non-Big 6/5 auditors for their clients that fail both criteria. Second, there is an increase in Type I errors, again particularly for companies that fail both criteria. We also conduct an ex post analysis of the decrease in Type II errors and the increase in Type I errors. Our findings suggest the standard engenders both favorable and un-favorable effects, the net of which depends on the priorities assigned to the affected parties (creditors, auditors, companies, and employees).
- DOI
- 10.2308/accr.2009.84.5.1395
- Volume
- 84
- Issue
- 5
- Pages
- 1395-1428
- Language
- en
- Sources
- openalex openalex bibtex:phds-export.bib crossref