Does Revenue-Expense Matching Relate To Going-Concern Audit Opinion Conditional On Firm’s Financial Distress?

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Hak Woon Kim
Sooro Lee


Matching, Going-Concern Opinion, Discretionary Accruals, Earnings Management


This paper investigates how firms manage the revenue-expense relationship in the presence of a going-concern audit opinion (GCO). Using Korean data, we find that firms with GCOs both delay and accelerate recognition of current expenses for current revenues. We also find that firms in severe financial distress that receive GCOs exhibit conservative accounting, whereas GCO firms in relatively less financial trouble adopt aggressive accounting. Overall, our results imply that firms’ matching extent and behavior provide useful information regarding financial reporting and can explain the earnings management behavior of firms with GCOs.


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