Rules Rather Than Discretion in Audit Standards: Going-Concenr Opinions in Belgium

A. Vanstraelen, J.A. Carcello*, M. Willenborg

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


We study going-concern (GC) reporting in Belgium to examine the effects associated with a shift toward rules-based audit standards. Beginning in 2000, a major revision in Belgian GC audit standards took effect. Among its changes, auditors must ascertain whether their clients are in compliance with two "financial-juridical criteria'' for board of directors' GC disclosures. In a study of a sample of private Belgian companies, we report two major findings. First, there is a decrease in auditor Type II errors, particularly by non-Big 6/5 auditors for their clients that fail both criteria. Second, there is an increase in Type I errors, again particularly for companies that fail both criteria. We also conduct an ex post analysis of the decrease in Type II errors and the increase in Type I errors. Our findings suggest the standard engenders both favorable and un-favorable effects, the net of which depends on the priorities assigned to the affected parties (creditors, auditors, companies, and employees).
Original languageEnglish
Pages (from-to)1395-1428
JournalAccounting Review
Issue number5
Publication statusPublished - 1 Jan 2009

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