The going concern warning and its consequences for auditors and companies have been studied from many different angles. However, the results are conflicting. A going concern warning is issued by an auditor when there is substantial doubt on the company’s ability to continue as a going concern. Studies have shown that most companies survive despite a going concern warning. There are also signs of short-term consequences for the companies. How the consequences unfold in the long run for companies that have received a going concern warning is not well studied.
The purpose of this study is to investigate how companies are affected in the long run by the consequences that can arise due to a going concern warning. For this study, a quantitative method has been used. Legitimacy theory, Interest theory and Institutional theory, have the common factor that they all explain how organizations survive in the long run. The theories, together with scientific articles and other relevant literature, have been used to develop the hypotheses.
Companies with a going concern warning have been compared with companies that have not received a going concern warning. Empirical data have been collected for 2010-2015 and by using multiple linear regressions the hypotheses of the study have been tested.
The result of the study showed that a going concern warning did not adversely affect the company on a long-term basis. On the contrary, the study indicates that companies with a going concern warning improve compared to equivalent companies which did not receive a going concern warning.
|Date of Award
|Eva Gustavsson (Supervisor) & Sven-Olof Collin (Examiner)
- Degree of Bachelor of Science in Business and Economics
- 15 HE credits
Swedish Standard Keywords
- Business Administration (50202)
- going-concern warning
- degree of severity
- key performance indicators