Accountancy: Faculty Publications
Are auditors insulated to positive client news? Evidence from audit fees and going-concern opinions
Document Type
Article
Publication Date
9-1-2025
Publication Title
Accounting and Finance
DOI
10.1111/acfi.13407
Abstract
This paper investigates if and how auditors consider positive news, related to their clients, when making audit decisions. Using a large sample of US listed companies, we find that auditors charge lower audit fees and are less likely to issue going-concern opinions when there are a higher number of positive news items related to their clients. Additional analyses show that the influence of positive client news on audit decisions varies with news characteristics, client size, auditor tenure, and auditor size. We also find some evidence that auditors' reactions to positive client news varies with the topic of news, and positive client news has implications for financial reporting quality and accuracy of going-concern opinions. Collectively, these findings suggest that the media affects auditors' business risk and that auditors are not insulated to positive news.
Recommended Citation
Huang, Ting Chiao, Yi Hung Lin, Daniel Chai, Stephanie Hairston.
2025.
"Are auditors insulated to positive client news? Evidence from audit fees and going-concern opinions."
Accounting and Finance, 65 (3): 2339-2386.
doi: 10.1111/acfi.13407
https://digitalcommons.georgiasouthern.edu/account-facpubs/189
Copyright
Publisher Copyright: © 2025 The Author(s). Accounting & Finance published by John Wiley & Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand.
Comments
Publisher Copyright: © 2025 The Author(s). Accounting & Finance published by John Wiley & Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand.