FAR Research Paper - Bankruptcy and Auditor’s Reporting in The Netherlands
The team studied the reporting behavior of Dutch organizations subject to statutory audit in the three years prior to their bankruptcy. They found that only 12 percent of companies file timely audited financial statements or an exemption in the year prior to bankruptcy, 56 percent (64) in year two (three) before the bankruptcy. Second, management discloses discontinuity risks in just 29 percent of the pre-bankruptcy filing. And third, only 11 percent of organizations have a filed audit opinion for the fiscal year prior to bankruptcy. However, for the majority (63 percent or 39 instances out of 62) of audit opinions issued for the fiscal year before the insolvency, the auditor did not include a material uncertainty relating to going concern (GCO) in its audit opinion and therefore constitute a type-II GCO error (error of omission). They estimate the total GCO type-II (I) error rate at 0.03 (99.26) percent of audit opinions issued.
Authors
Tjibbe Bosman is part-time PhD researcher in auditing at the Amsterdam Business School of the University of Amsterdam. Furthermore, Tjibbe is the research program manager at the Foundation for Auditing Research. He holds a MSc and BSc degree in Accountancy of Nyenrode Business University. Before moving to academia, Tjibbe worked 10 years in international audit, accounting and capital market practice at a big-4 audit firm where he completed a secondment to Munich. Tjibbe is certified public accountant in the Netherlands and Germany. Tjibbe’s PhD research is about the institutional conditions that enable and drive audit quality. Tjibbe is interested in the (potential) role of self-selection between clients and auditors, the influence of audit firm culture on audit quality and the role of empowerment and delegated responsibilities in performing high quality audits.