AUDITORS GOING CONCERN REPORTING

Auditors’ Going Concern Reporting before Bankruptcy – A Study of
Bankrupt Companies in Finland, Sweden
Norway and Denmark
Nina Sormunen
Copenhagen Business School, Denmark
Kim K. Jeppesen
Copenhagen Business School, Denmark
Stefan Sundgren
Umeå School of Business, Sweden and the University of Vaasa, Finland
Tobias Svanström
BI Norwegian School of Management, Norway and Umeå School of Business, Sweden
The current study investigates the auditor’s going concern reporting
before bankruptcy in Nordic countries – Finland,
Sweden, Norway and Denmark – and the main purpose is to investigate
whether similarity of auditing standards in
Nordic countries indicates that the audit practice among the
coun-tries is comparable (i.e. similar). Moreover, since
the current study investigates bankruptcy compa-nies, the second
purpose is to compare and evaluate the audit
practice/quality within and between Nordic countries. The data
available for the study included financial statement
and background infor-mation for 2943 Swedish, Norwegian, Finnish and
Danish firms having filed for bankruptcy
within 365 days after the balance sheet date in 2007-2011. Based on
the findings of the current study, there are
significant differences in the going concern reporting before
bankruptcy between the Nordic countries. That is, the
Danish auditors added a paragraph related to the going-concern issue
for 48.03 % of the companies whereas the
corresponding percentages in Norway, Finland and Sweden were 25.58 %,
20.19 % and 18.10 %, respectively.
Interestingly, the current study found that the differences among the
countries were much smaller for adding a
paragraph related to other issues than qualifying the audit report for
going concern issues. That is, the Norwegian
auditors issued a standard audit report only in 24.04 % of the
bankrupt companies whereas the corresponding
percentages in Danish, Finnish and Swedish were 32.26%, 32.69% and
42.11%, respectively. The observed differences
in practices have several implications for a more general
understanding of how ISAs are implemented and interpreted
locally. According to the International Auditing and Assurance
Standard Board’s (IAASB) strategy and work program
2009-2011, the IAASB is concerned that the local implementation of the
ISA does not ensure the development of a
consistent practice and accordingly, the current study certainly
supports this concern.

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CA Ramachandran Mahadevan,M.Com.,F.C.A.,