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Harmonisation of Audit Practice: Empirical Evidence from Going‐Concern Reporting in the N ordic Countries
Author(s) -
Sormunen Nina,
Jeppesen Kim K.,
Sundgren Stefan,
Svanström Tobias
Publication year - 2013
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/ijau.12007
Subject(s) - accounting , audit , going concern , sanctions , bankruptcy , business , quality audit , sample (material) , auditor's report , quality (philosophy) , audit substantive test , empirical evidence , variance (accounting) , test (biology) , external auditor , actuarial science , internal audit , finance , political science , law , paleontology , philosophy , chemistry , chromatography , epistemology , biology
The study uses a sample of 2,941 bankrupt firms from D enmark, F inland, N orway and S weden in the period 2007 to 2011, and investigates the harmonisation of audit behaviour in terms of going‐concern reporting. Even though the N ordic countries have similar legal systems and, for all practical purposes, identical audit requirements regarding going‐concern reporting, the study findings show significant differences in going‐concern reporting before bankruptcy between the N ordic countries. One key result is that D anish and N orwegian companies get a going‐concern opinion prior to bankruptcy more frequently than companies in S weden and F inland. Although, this is an interesting finding, it should be interpreted with caution, particularly as it has not been possible to empirically test the reasons behind this variation. Potential reasons are discussed, such as differences in when the going‐concern standard was introduced and implemented in each country. Alternatively, the formal requirement for becoming an authorised or approved auditor, the demand for continuing education and the risk of disciplinary sanctions could all drive national variance in reporting quality in favour of a higher quality in D enmark and N orway compared to S weden and F inland. Finally, the study findings also indicate that differences in audit reporting behaviour are moderated by international audit firm networks.