The ability of audit reports to predict business failures

The focus of this report is on the predictive ability of audit reports. We studied a sample of 50 failed companies for the period 1991-1992 to determine the extent and type of audit qualification they received. The study reveals that the audit reports had a low predictive ability in the going concern issue since only 38% of the companies studied had going concern qualifications. In view of this information, the report explores the factors that might have contributed to this wide disparity. The report closes with suggestions to bridge the gap.ACCOUNTANC