Journal article

Greater Reliance on Major Customers and Auditor Going Concern Opinions

Dan Dhaliwal, Paul Michas, Vic Naiker, Divesh Sharma

Contemporary Accounting Research | Canadian Academic Accounting Association | Published : 2020

Abstract

In this study we predict and provide evidence that distressed firms that rely more heavily on major customers for sales have a comparatively higher incidence of receiving going concern opinions (GCOs). Moreover, we find that the effect of increased reliance on major customers is driven by firms that are more distressed. We also theorize that variations in key characteristics of the relationship between distressed firms and their largest major customer are incrementally linked to GCOs, and present evidence consistent with this. Specifically, we find that the effect of greater reliance on major customers is driven by firms that are relatively smaller than their largest major customer. Addition..

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