رفتن تصمیم نگرانی حسابرس و انواع I و خطاهای II: کوش قضیه، هزینه های معامله، قدرت چانه زنی و تلاش برای گمراه کردن

It is shown that, in the absence of transaction costs and in line with the Coase Theorem, the going concern decision is efficient in the sense that bias arising from either Type I or II errors is not expected. However, when transaction costs in the form of legal costs, are introduced, bias is expected. The direction of the error depends upon the auditor’s relative bargaining power. It is also shown that its relative bargaining power provides an incentive for the client company to mislead. Finally, certain empirical observations pertinent to this analysis are discussed together with the regulatory implications.

An investor needs to know whether a company in which he is interested is in immanent danger of failure.The easiest way to do this is to examine the audit report and whether in the auditor
s opinion there is substantial doubt about the company
s ability to continue as a going concern for a reasonable period of time
(SAS # 59).As the auditor is a trained professional with inside information into the commercial future of his client, the investor should be confident in the inferences he makes from the auditor
s report.Norm ally, the report would be unqualified but contain a paragraph expressing such uncertainty.Also, if the auditor concludes that the financial statements inadequately indicate the company
s inability to continue, the auditor should express either a qualified or adverse opinion in his report.A similar requirement and set of procedures exist in the UK.See ICAEW (1994).It will probably matter little to the investor as to what form such a conclusion may take in the auditor
s report and for the remainder of this paper the term adverse report
will be used to cover them all. The going concern decision has been the focus of a considerable amount of academic research over many years, primarily because it is an excellent example in which its independence may be tested.See Antle (1984), Asare (1990), Bartlett (1997), Chow and Rice (1982), Johnson et al.(1989), Jones (1996), Kida (1980), Knapp (1985), Krishnan and Stevens (1995), Lavin (1976), Lee and Stone (1995) and Pearson (1987) which are just a few paper to appear in academic journals.Mo re recently, the decision may be seen to involve even greater stakes, given the concerns, particularly in the USA, about limited liability and the provision by audit firms of non-audit consultancy services (Davis et al., 1993). Early research on the going concern decision focussed on audit quality involving (a) the possibility of incompetence (due to a lack of practical appreciation and understanding of the industry in which the client company operates) and (b) lack of independence (due to economic considerations, such as audit switching, affecting the audit firm that may arise from an adverse report).Rese arch strongly supports the hypothesis that auditors are competent at making the going concern decision (the competence hypothesis).How ever sometimes, they do not issue an adverse report when they should, perhaps because of the fear of loss of the audit and the financial consequences to the audit firm (the independence hypothesis).For evidence to support both the competence and independence hypotheses see Mutchler (1984, 1985), Campisi and Trotman (1985), Menon and Schwartz (1987), Barnes and Huan (1993), Krishnan and Krishnan (1996), Matsumura et al.(1997) and Lennox (1999a) but for evidence to reject the independence hypothesis, see Louwers (1998).The relationship between the size of the auditing firm and independence has also been raised as well as the increased difficulty the auditor faces in maintaining his objectivity in the face of the potential loss of a large client paying substantial audit and consultancy fees, i.e. there is greater economic dependence (DeAngello, 1981c; McKeown et al.1991; Carcello et al., 2000; Lennox, 1999b). 1 More recent studies have recognised the importance to the audit firm of its reputation and the importance of auditor independence as a means of protecting it.See DeFond et al.(2002) who also cite a large body of research that shows it is in the auditor
s interest to remain independent. 2 Further, Reynolds and Francis (2000) show how very large audit firms may act conservatively for larger clients (for example, by making an adverse report), suggesting that reputation–protection and fear of litigation dominate audit considerations.But, of course, all these studies were prior to Enron. The Reynolds and Francis (2000) findings also contrast with other empirical evidence, particularly in the UK, which indicate that (A) In a number of major firm collapses (for example the Robert Maxwell Group and Mirror Group Newspapers) the auditors had not made an adverse report (Type II errors), suggesting that for, perhaps economic reasons other than reputation effects, they were reluctant to do so. 3 Of course, all these examples are surpassed by the Enron case. 4 (B) In many cases where an adverse report was made, the client companies did not fail (Type I errors).See Peel (1989), Citron and Taffler (1992), Barnes and Huan (1993) and Lennox (1999a) for UK evidence.W hat is also remarkable is that there are no cases of the surviving firms suing their auditors for damages arising from the adverse report.It is the purpose of this paper to examine the inter-relationships of these and their effects.It is arranged as follows.First , these costs will be examined in the context of a simple rational economic decision-making model excluding transaction costs.It is shown how the Coase Theorem applies if efficiency
is extended to include the effects of unbiased information.That is, in the absence of transaction costs, the going concern decision is unlikely to be biased.Tr ansaction costs are then introduced in the form of legal costs.It is shown that either a Type I or II error may occur, simply depending upon the bargaining power of the auditor/client.The paper then moves on to consider the situation where there is information asymmetry offering scope for the client company to mislead and the auditor
s skills in handling this are a factor.Thi s is followed by a short discussion of the conclusions and their regulatory implications. The approach of this paper is along similar lines to that originally developed by Antle (1984) who examined auditors
incentives and possible actions using a rational economic model.It also follows (although it does not focus on auditor effort levels and extended procedures) Antle and Nalebuff (1991), Krishnan and Krishnan (1996), Boritz and Zhang (1999) and Lennox (1999a) by examining the risk of Types I and II errors and the economic trade-offs by placing the auditor
s decision in a bargaining model.Its origins are a paper by Zhang (1999) who used a bargaining model to examine the effects of auditor and client incentives.He showed that an auditor
s independence will be preserved if the firm-specific quasi-rents from an audit (the value arising from the difference between expected audit fees and costs in future engagements with the client) are zero.It is compromised if they are positive.Unfor tunately, Zhang (1999) did not examine the possibility of the client company providing misleading information and the effect that this may have. For this we may use the insights provided by Coase (1960).Coase showed that, in the absence of transaction costs, the parties to an economic transaction will continue to negotiate until there is a Pareto efficient outcome as there is no incentive to bargain further.He showed that inefficiency can arise either through explicit transaction costs or imperfect information about the gains from bargaining.The critical assumption, therefore, is that bargaining costs are zero and information is perfect. 6 Saraydar (1983) has shown that where information is not perfect and there is asymmetry of information, then there is an incentive for participants to provide misleading information (or as Saraydar calls it dissimulation).

It has been shown that, in the absence of transaction costs, the going concern decision is efficient in the sense that bias arising from either Type I or II errors is not expected.This is in line with the Coase Theorem, although the situation here is not precisely the same.When transaction costs, in the form of legal costs arising from a lawsuit against the auditor are considered, Types I and II errors are expected.(Again, this is in line with the relaxation of the standard assumptions of the Coase Theorem.) Here, the auditor
s relative bargaining power determines the direction of these errors: a Type I error where the auditor
s bargaining power is relatively high (where Ba > B a) and a Type II error when it is relatively low.An important aspect which has not been considered in the bargaining literature in auditing is the effect that this may have on the incentive for misinformation.It is shown here how the relative bargaining powers of the auditor and his client company produce an incentive for the latter to mislead and that this increases with the former
s perceived bargaining power.This analysis helps to explain the empirical evidence in the UK (and also, probably, the USA) where (a) there are many cases of lawsuits against auditors who had not issued an adverse report prior to the failure of their client company, and (b) a surprisingly large number of cases of companies having received an adverse report have survived. As yet, there is no new empirical evidence to support the principal proposition in the later sections of this paper, that increased bargaining power for the auditor will encourage the client company to provide misleading information. Nevertheless, it does raise important regulatory issues and begs for empirical evidence.For instance, the impact of mergers of large accountancy firms on their relative bargaining power and the effects of developments in GAAP, auditing processes and pricing on audit quality as they affect the degree and nature of misleading information.Taken on its own, this analysis suggests that increased auditor size per se may not be in the interests of investors generally and the efficient working of the capital markets 28 and may lead directly to earnings manipulation and the rest.It should be noted that there has been a considerable increase in concentration of the accountancy profession amongst the very large firms over recent years both in the USA (Wolk et al., 2001) and the UK (Pong, 1999).Althoug h there is no direct evidence for this, the general impression is that it has coincided with an increase in the manipulation of accounting information by large corporations.This paper suggests a mechanism by which these two phenomena may be related. The implication is that it matters little in marginal cases whether the auditor is weak or strong if the client company is determined to avoid an adverse audit report.Regul atory efforts to increase the bargaining power of the auditor (e.g. by protecting and enhancing audit firms
independence or encouraging mergers between them in order to increase their size) may be self-defeating, if this merely forces companies into greater efforts to mislead their auditors when they cannot negotiate a favourable decision.Instead (and this is being done), regulatory efforts should focus on audit quality and the ability of the auditor to see through the attempts to mislead him.Similarl y, the development and strengthening of mechanisms, such as corporate governance procedures and audit committees, will help to provide additional internal constraints on management
s undue influence on its external financial information. At first glance, the Enron/Arthur Andersen case refutes the conclusions here.(After all, much of the analysis in this paper was done before it occurred!) How could the largest firm of auditors in the world––in terms of this paper, therefore possessing huge bargaining power––be so damaged by apparently a few weak decisions on one audit client company undermining its perceived independence and the quality of its audits elsewhere? (Chaney and Philipich, 2002).It should also be remembered that the bargaining power of the top four audit firm
s is boosted where the client company is so large that it is effectively required to be audited by one of them.On the other hand, the impact of the loss of one client company to a large audit firm will, typically, be much greater than for a small or medium-sized firm because the client company will be much larger.Also , both the likelihood of occurrence and the reputational costs and effects for the audit firm of a negligence claim are much greater from a large client company than for a small one. The relevant measure of auditor size as a proxy for bargaining power may not necessarily be the total size of the firm but, especially if decisions are decentralized and taken at local level, the size of the individual practice office as Reynolds and Francis (2000) suggest.How ever, as Chaney and Philipich (2002) illustrate in the Enron case, reputational effects and the need for its protection extend, of course, to beyond the local branch level.In other words, some of the costs and benefits in this analysis may occur at the local branch level, but others, notably the reputational effects, are likely to be at the firm level.The rational choice model which is developed here may be useful for the basis for subsequent empirical work when identifying the costs and benefits involved in independence-related decisions and their incidence.The model here specifically relates to the going concern decision but it may be widened considerably to cover all similar types of decisions by the auditor where there is a conflict between his interests and those of the client company.