Firm Complexity and the Accuracy of Auditors’ Going Concern Opinions in Emerging Markets: Does Auditor Work Stress Matter?

Abstract

This study examines the direct and indirect effects of firm complexity on the accuracy of auditors’ going concern opinion (GCAO), and whether and how auditors’ work stress (AWS) can serve as a mediating variable in such a relationship. We analyzed a sample of 705 firm-year observations from 105 non-financial firms listed on the Egyptian Stock Exchange between 2017 and 2023. Binary logistic regression, OLS regression, and path analysis were employed to test the study hypotheses. The results suggested that firm complexity is negatively associated with GCAO accuracy but positively associated with AWS. Furthermore, a negative relationship was observed between AWS and GCAO accuracy. Finally, the analysis revealed that AWS mediates the relationship between firm complexity and GCAO accuracy. The findings remained robust across various sensitivity tests. Policymakers, audit firms, and investors can benefit from the findings, which emphasize the necessity of AWS mitigation techniques to improve GCAO accuracy and ultimately contribute to transparent financial reporting. This study provides unique evidence from a developing country on how firm complexity can indirectly impact the quality of auditors’ judgments.