Corporate Ownership & Control / Volume 12, Issue 3, Spring 2015 19 GOING-CONCERN OPINIONS, EXECUTIVE TENURE AND GENDER Angie Abdel Zaher* Abstract Regulators in the USA and elsewhere have shown renewed interest in auditors’ judgments related to going-concern modified (GC) audit reports. Such judgments involve evaluating management’s plans, and prior research suggests that executive turnover is associated with significant organizational changes. Further, some recent studies posit that gender is associated with accounting and audit judgments. We examine audit opinions for two different samples: 2,089 financially stressed firms and 642 manufacturing firms that filed for bankruptcy. In both samples, we find that GC opinions are more likely for firms with a new CFO; however, we find no significant association between GC opinions and executives’ gender. The CFO tenure related result may arise from auditors’ professional skepticism related to a new executive. Our gender-related results differ from those of Gold et al. (2009) and suggest the need for additional research related to the role of client gender in auditing settings. Keywords: Executive Gender, Going Concern, Audit Opinion, Audit Quality, Executive Tenure JEL Code: A30, C12, G33, H32, M12, M42 *School of Business, The American University in Cairo, 420 Fifth Ave, Third Floor, New York, NY 10018 Tel: 786-469-8525 1 Introduction The objective of this research note is to examine the association between going-concern modified audit (GC) opinions and (a) the appointment of new executives, and (b) executive gender. Motivation for this study comes from (a) the renewed focus of regulators about GC opinions, and recent research that shows the impact of executive tenure and gender on a variety of contexts, including those related to accounting and auditing. Auditors’ judgments about assessing the continued viability of their audit clients, and the related reporting of such assessments, have long been contentious issues (Carson et al. 2013). Audit reporting for going concern uncertainties has received renewed attention in the U.S. and elsewhere (PCAOB 2009, 2011a; FASB 2008, 2011, 2012; IAASB 2009, 2012; FRC 2013). Professional standards require auditors to evaluate management’s plans related to going concern uncertainties during the opinion formulation process. Prior studies show that management’s plans related to mitigating going-concern related problems influence auditors’ GC opinion decisions (Behn et al. 2001; Bruynseels and Willekens 2006). There is extensive research in the management and strategy areas indicating that significant organizational change is associated with the arrival of new executives. Hence, it is likely that the appointment of new executives will influence auditors’ judgments related to the success of management’s plans related to the going-concern uncertainty and, thus, the audit opinion. Yet, there is little published research related to how executive turnover influences auditors’ evaluations of going- concern related uncertainties. The first objective of this research note is to fill this void, and provide empirical evidence about the association between executive turnover and auditor’s GC opinion decisions. Further, an emerging stream of research shows that gender is associated with a variety of judgments in finance, accounting and auditing. Gold et al. (2009) show that auditors are persuaded more by a male than female client to change their initial judgments; this suggests that auditors may be more likely to issue GC opinions for firms with female executives. However, Huang and Kisgen (2013) find that male executives exhibit greater overconfidence in corporate decision making than female executives, in the context of acquisitions and issuance of debt. Francis et al. (2013) show that banks recognize the role of female CFOs in reducing default risk, and grant more favorable contract terms for firms with female CFOs. Together, such evidence suggests that auditors may be less likely to issue GC opinions to firms with female executives. Ultimately, it is an empirical question if the executive gender-based differences documented in other