Are PCAOB-Identified Audit Deficiencies Associated with a Change in Reporting Decisions of Triennially Inspected Audit Firms?

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The primary issue we examine is whether PCAOB-identified audit deficiencies are associated with a change in triennially inspected audit firms' going-concern (GC) reporting decisions for their financially distressed clients. Our analysis generally indicates that firms with PCAOB deficiencies were more likely to issue a GC opinion for financially distressed clients subsequent to their PCAOB inspection than prior to their inspection. We also examine the same issue for audit firms with a PCAOB inspection report indicating no audit deficiencies. For these firms, our results provide only limited evidence of a change in the likelihood of issuing a GC opinion, with audit firms becoming more conservative (i.e., greater likelihood of issuing a GC opinion).