The global financial crisis and its impact on auditors' behaviour in Australia

The study examines the impact of the Global Financial Crisis (GFC) on changes in auditor reporting behaviour in Australia, in particular, whether auditors change their likelihood of issuing a going concern opinion and change their audit effort in response to a challenging audit environment. Using non-financial Australian listed companies over the period 20052009, I test whether the propensity of going concern modifications issued by auditors, audit report lag and audit fees vary in the financial crisis period (2007-2009) compared with the pre-financial crisis period (2005-2006). I find an increase in the propensity to issue going concern opinions by auditors during the period 2008•2009 compared with the period 20052006; that Big N auditors respond to the GFC earlier than non-Big N auditors; and that all Big auditors increase their propensity to issue going concern opinions in response to the GFC, though the degree of increase varies between Big N auditors. However, variation between Big N auditors in propensity to issue going concern opinions is sensitive to model specification and definition of the GFC period. I also find evidence of increased audit fees but no evidence of longer audit report lags during the crisis period relative to the pre-crisis period. Overall, I provide evidence on to what ex tent auditors exercise their professional scepticism regarding particular issues and how much resources they invest in conducting audit engagements during the GFC. My findings are of interest to regulators, auditors and financial information users because it assists auditors and regulators to assess the appropriateness of the strategies implemented and it also informs financial information users of the extent to which audit opinions are informative during the financial crisis. Also, the study informs the policy and law makers as to the impact of shareholder actions on auditor opinion issuance