The purpose of this study is to investigate the impact of corporate strategic change (CSC) on the probability of an auditor’s going-concern opinion (GCOP) and the moderating role of COVID-19 on companies listed on the Tehran Stock Exchange.
Information about 193 companies from 2014 to 2023 is examined. Considering that the dependent variable was binary, binary logistic regression analysis was used.
The results of this study showed that CSC decreased the probability of a GCOP. Moreover, COVID-19 strengthened the adverse effects of CSC on the probability of an auditor’s opinion of going concern. The results also confirmed that CSC is exogenous in econometric models, indicating no omitted-variable bias or reverse causality.
Audit failures in the past few years have highlighted a severe lack of early warning mechanisms and GCOPs. Although the existing models offer no recourse, the International Auditing and Assurance Standards Board’s (IAASB) direction in revising the International Standard on Auditing 570 shows that strategic cues can be powerful managerial signals, moving audit frameworks into managerial behavior. Moreover, signals under crisis and external shocks (e.g. COVID-19) can amplify the interpretive power of strategic behavior. This study empirically validates IAASB’s direction of IAASB. Through incorporating CSC and COVID-19, audit models can become more sensitive to proactive turnaround behaviors, thereby reducing systemic audit blind spots.
