SYNOPSIS This study investigates whether auditors' going-concern modified opinion (GCO) decisions were less likely after the start of the recent “Global Financial Crisis” (GFC). Auditing regulators and the business press had complained that auditors did not provide adequate warning in their reports prior to many companies filing for bankruptcy during the GFC. Accordingly, we examine auditors' GCO opinions for financially stressed clients that subsequently entered into bankruptcy during the period from 2004 to 2010. We find that, after controlling for other factors related to GCOs, the propensity of auditors to issue a GCO prior to bankruptcy significantly increased after the onset of the GFC. Additional tests reveal similar results when we separately examine clients of the Big 4 and non-Big 4 firms, suggesting both sized firms significantly increased the likelihood of issuing a GCO to a subsequently bankrupt client after the start of the GFC. Our results should be of interest to regulators, investors, audit firms, academics, and standard setters as they evaluate U.S. auditor performance during the GFC, and in contemplation of changes to auditing standards as a result of the GFC.

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One of the primary objectives of both adoption of IFRS and convergence between IFRS and U.S. GAAP is to increase financial statement comparability. Using a unique setting in Germany, we compare the effectiveness of these two approaches in achieving this desired outcome. Our empirical tests show that both adoption and convergence lead to an increase in comparability after the new enforcement regulation in 2005. However, difference‐in‐differences tests show that adoption does not lead to a significant incremental increase in comparability beyond convergence. The findings of this study should be of interest to regulators and standard setters as they assess alternative methods of aligning domestic standards with IFRS.

SUMMARY We first confirm the findings of Carson (2009) that global industry-specialist auditors earn a fee premium using a larger sample and a more extended time period. We then examine the effect of regulatory quality on the association between auditor industry specialization and audit fee premiums. We find that there are larger fee premiums for global specialist auditors in countries with stricter regulatory quality, indicating greater support for the argument that high-quality auditors can act as a complement to higher regulatory quality. We compare and reconcile our findings to prior studies, and show that inferences based on national-level auditor industry specialization differ from those based on examining global-level industry specialization.