Audit Opinions: Are They Really Different for Family Businesses?

Abstract

The article poses a dual research question: What are the determining factors of the type of audit opinion in a stressed economic environment and do these factors differ between family and nonfamily firms? Our results show that auditor tenure and return on assets (ROA) raise the probability of receiving a favorable opinion. On the contrary, losses during the previous year, high financial leverage, and hiring a “Big 4” firm increase the probability of receiving an unfavorable opinion. Although the sign and the statistical significance are similar, the size of such effects differs between family and nonfamily firms. Finally, the probability of receiving a report with a favorable opinion increases as the economic situation improves.