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This study investigates the effects of client’sfinancial risk, time to bankruptcy, and auditor’s cognitive style on issuing aGoing Concern Opinion (GCO) for failing companies. Empirical tests are based onfinancial data from 328 bankrupt firms and peer review data from 172 auditors.Cognitive style on an intuitive-analyticdimension is approximated by the degree of auditor’s compliance with the ISAstandards for analytic procedures in peer review. Empirical findings supportresearch hypotheses and show that seriousness of the financial risk and timedistance to bankruptcy are important determinants of GC judgment accuracy. Theyalso show that the performance of the cognitive style of the auditor is relatedto the fit between the cognitive style and the characteristics of the GCsituation. The results indicate that an auditor’s individual characteristics, i.e. cognitive style, affect his/herdecision making when issuing GCO. This study is the first approach thatsystematically investigates the relationship between financial risk, distanceto bankruptcy, and cognitive style on GC judgment in an archival research.

Why Does an Auditor Not Issue a Going Concern Opinion for a Failing Company? Impact of Financial Risk, Time to Bankruptcy, and Cognitive Style