Auditors’ Propensity and Accuracy in Issuing Going-Concern Modified Audit Opinions for Charities

This paper identifies factors contributing to the auditor's propensity to issue going-concern modified audit opinions (hereafter, GCOs) for charities and examines their association with subsequent revocation of their charitable status. We find that about 4 percent of charities receive GCOs and these are more likely for those which are smaller, in greater financial distress, received a prior year GCO, and are also affected by dependence on the various types of funding received. After controlling for these factors, Big 4 auditors are less likely to issue GCOs than other audit firms, but there are no differences in their association with subsequent revocation.