The Impact of Religion on the Going Concern Reporting Decisions of Local Audit Offices

We extend research on the effects of local audit office characteristics on audit quality by investigating whether audit offices in highly religious U.S. Metropolitan Statistical Areas (MSAs) exhibit going concern decisions that reflect heightened professional skepticism relative to audit offices in...

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Bibliographic Details
Published in:Journal of business ethics 2018-06, Vol.149 (4), p.811-831
Main Authors: Omer, Thomas C., Sharp, Nathan Y., Wang, Dechun
Format: Article
Language:English
Subjects:
Auditors opinions
Audits
Business and Management
Business Ethics
Clients
Decision making
Education
Ethics
Financial reporting
Going concerns
Management
Metropolitan statistical areas
Philosophy
Quality
Quality of Life Research
Religion
Religiosity
Risk
Studies
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Summary:We extend research on the effects of local audit office characteristics on audit quality by investigating whether audit offices in highly religious U.S. Metropolitan Statistical Areas (MSAs) exhibit going concern decisions that reflect heightened professional skepticism relative to audit offices in less religious MSAs. Prior research links religiosity to risk aversion and ethical development and suggests audit practice offices in more religious MSAs are more likely to issue going concern opinions because they will assess the effects of mitigating factors in a more skeptical manner. Our results indicate that audit practice offices located in highly religious MSAs are more likely to issue going concern audit opinions, consistent with a more skeptical assessment of mitigating factors. Additional tests provide direct evidence consistent with the argument that these audit offices are more risk averse in issuing going concern opinions. Our findings are relevant to auditors, audit clients, researchers, and regulators.
ISSN:0167-4544
1573-0697
DOI:10.1007/s10551-016-3045-6