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Lookup NU author(s): Professor Jim Haslam
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This study investigates the associations between audit committee characteristics and the likelihood of auditors' going-concern decisions among UK failed firms. Specifically, we examine whether the threat posed by auditor-provided non-audit services (NAS) to auditors' reporting decisions is mediated by audit committee characteristics. We find that failed firms with higher proportions of independent non-executive directors (NEDs) and financial experts on the audit committee are more likely to receive auditor going-concern modifications prior to failure, but that there is no significant relationship between NAS fees and the likelihood of receiving a going-concern modification. The evidence further suggests that the association between NAS and auditors' reporting decisions is subject to audit committee characteristics. Where the audit committee is more independent and includes a greater proportion of financial experts, auditors providing the client with NAS are less likely to issue a standard unmodified going-concern report prior to failure. Overall, the findings provide support for corporate governance regulators' concerns about the monitoring benefits of audit committee independence and the presence of financial expertise on the audit committee for auditors' reporting decisions. (C) 2015 Elsevier Ltd. All rights reserved.
Author(s): Wu CYH, Hsu HH, Haslam J
Publication type: Article
Publication status: Published
Journal: British Accounting Review
Year: 2016
Volume: 48
Issue: 2
Pages: 240-256
Print publication date: 01/06/2016
Online publication date: 21/03/2015
Acceptance date: 02/03/2015
ISSN (print): 0890-8389
Publisher: Elsevier
URL: http://dx.doi.org/10.1016/j.bar.2015.03.001
DOI: 10.1016/j.bar.2015.03.001
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