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Different Pathways that Suggest Whether Auditors’ Going Concern Opinions are Ethically Based

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Abstract

Several critics have reopened the continuing debate regarding the credibility of the auditing profession in part because of auditors’ reluctance to issue warning signals to investors. At the root of auditors’ lack of independence issues are conflicts of interest resulting from the structural features of auditor–client relationship. The Throughput Model (TP) is advanced to illustrate how ethical issues may be influenced by conflicts of interest. In the first stage, the TP provides an isolation of auditors’ ethical positions from six ethical different perspectives. In the second stage, previous TP theory is built upon by arguing a simultaneous analysis of how conflicts of interests may induce auditors’ behavior. We conclude that in the current low litigation risk environment, auditors’ ethical behavior (both conscious and unconscious) is clearly ‹unbalanced’ favoring the reluctance to issue warning signals. Finally, we offer a discussion of potential solutions to improve ethical issues.

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Acknowledgments

This study has been carried out with the financial support of the Spanish National R+D+I Plan through the research projects SEJ2007-62215/ECON, SEJ2004-00791ECON, SEJ 2006-14021 and a Fulbright postdoctoral grant EX2004-0294. A previous draft of this manuscript was selected as best paper at the 4th Workshop on Corporate Governance at the European Institute for Advanced Studies in Management (EIASM) in Brussels (November 15–16, 2007). We thank participants of the 30th European Accounting Annual Congress held in Lisbon 2007.

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Authors and Affiliations

  1. University of California, Riverside, CA, U.S.A.

    Waymond Rodgers

  2. Department of Management Sciences, University of Alcala, Alcala de Henares, Madrid, 28802, Spain

    Andrés Guiral & José A. Gonzalo

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  1. Waymond Rodgers
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  2. Andrés Guiral
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  3. José A. Gonzalo
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Correspondence to Waymond Rodgers.

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Rodgers, W., Guiral, A. & Gonzalo, J.A. Different Pathways that Suggest Whether Auditors’ Going Concern Opinions are Ethically Based. J Bus Ethics 86, 347–361 (2009). https://doi.org/10.1007/s10551-008-9851-8

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  • DOI: https://doi.org/10.1007/s10551-008-9851-8

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