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The purpose of this book is to provide a coherent overview of the insolvency systems found around the world. Its intended audience includes academics, judges, lawyers, and policymakers. Its focus is on businesses rather than natural persons. The authors hope to give the reader a sense of some of the principal approaches to managing the general default of a business debtor. The authors will discuss the nature of the costs and benefits arising from the various policy choices legislators have made. In the process, they will emphasize the close interrelationship among various elements of an insolvency regime so that these elements can be viewed as part of an overall system and not just as a series of policy decisions about particular rules, such as the method of initiation of an insolvency case or the balance struck in setting the boundaries of an avoidance power. The organization of the book reflects our view of insolvency laws as complete systems, including not only the 'insolvency' or 'bankruptcy' code of a jurisdiction but also closely related laws and the institutional framework in which those laws are applied. The book takes a systematic approach to a variety of topics related to credit and insolvency regulation. The functional analysis starts with the study of debt enforcement, continues with an examination of general corporate insolvency legislation, corporate rehabilitation proceedings, informal workouts, employee rights, judicial and administrative institutions, and the considerations key to cross-border insolvency proceedings.

Purpose The literature has revealed auditors' going concern risk disclosures are examined in research as a homogenous risk class. This is despite the various going concern modifications auditors are entitled to give pertaining to this issue. A fivelevel risk class is established in this paper derived from Australian Auditing Standard pronouncements to examine the appropriateness of auditors' going concern reporting relating specifically to the likelihood of firm failure. Designmethodologyapproach Time is necessary to reveal the appropriateness of going concern reporting therefore a longitudinal research methodology was adopted. The research focuses on all Australian listed companies within the building industry in 1989 and follows all of the reporting of going concern by auditors and directors through until 2007. The building industry was selected because of its volatility, which increased the possibility of going concern reporting allowing a more indepth focus in the research. All auditors' going concern modifications were examined along with all indications of going concern problems identified by directors. To properly investigate the appropriateness of auditors' reporting, all sampled audit reports were examined using Altman's Zscore model which were matched with a risk class model using the relevant requirements to report in order to determine the appropriateness of the auditors' and directors' opinions. Findings The level of under reporting of going concern risk by auditors 75 per cent implies they are more affected by the agency relationship found in literature than directors who are found to have an incidence of underreporting of 57 per cent. Research limitationsimplications Literature classifies auditors along with directors as part of the agency problem. Altman's Zscore bankruptcy prediction model is used because of its enduring nature, reliability and ability to be externally calculated to independently compare the going concern reporting performance of auditors and directors as part of the contribution to this research area. Originalityvalue The paper for the first time examines going concern reporting at a multirisk level rather than the binomial level used in research previously. The approach is developed in this paper using auditing pronouncements. These risk levels are linked with an independent measure being the Altman Zscore to determine the appropriateness of auditors' and directors' reporting of going concern issues.

Purpose The purpose of this paper is to conduct an experiment to examine whether investors view the goingconcern opinion as providing information that is useful in valuing companies' stocks. Prior research on this issue using archival data has produced mixed results. Designmethodologyapproach An experiment is conducted with financial analysts in which the auditor's opinion and the opinion of industry specialists proxy for market expectations are manipulated. Participants estimated the stock price of a fictional company both before and after the issuance of an auditor's opinion. Findings The results strongly support the hypothesis that investors perceive the goingconcern opinion as relevant for valuing a company's common stock. Furthermore, the participants viewed the goingconcern opinion as relevant even when the report confirmed prior market expectations. Practical implications Using a controlled setting, the paper finds that investors believe that the auditor's goingconcern opinion contains useful information. This suggests that auditors' judgment regarding client viability is valued by investors. Auditing standards that require an assessment of client viability should remain in place. Originalityvalue This is the first study that uses an experimental approach to examine whether investors view the auditor's goingconcern opinion as relevant to pricing stocks. The use of an experiment is intended to overcome methodological limitations inherent in studies that use archival data.

This paper seeks to explore in depth the ways in which the rhetoric of the standard setter responds to comments received during development of a standard. Previous research has explored the use of rhetorical strategies in accounting standards to construct and persuade as to what is \"good\" and to silence potential criticisms and alternative proposals. The exploration is extended to the development of an auditing standard and is strengthened by relating the opinions of lobbyists to the rhetoric used in the response. The analysis shows that, in a situation where the standard setter's position changed significantly during the exposure of proposals to comment, rhetorical strategies in the exposure draft or standard were adapted to match the changing direction of persuasion, with silencing of potential counter-argument evidenced in the surrounding explanatory material. The research demonstrates that those using standards should be aware of the normative nature of these documents and the subjectivity inherent in the nature of the text.

Purpose - The purpose of this paper is to conduct an experiment to examine whether investors view the going-concern opinion as providing information that is useful in valuing companies' stocks. Prior research on this issue using archival data has produced mixed results.Design methodology approach - An experiment is conducted with financial analysts in which the auditor's opinion and the opinion of industry specialists (proxy for market expectations) are manipulated. Participants estimated the stock price of a fictional company both before and after the issuance of an auditor's opinion.Findings - The results strongly support the hypothesis that investors perceive the going-concern opinion as relevant for valuing a company's common stock. Furthermore, the participants viewed the going-concern opinion as relevant even when the report confirmed prior market expectations.Practical implications - Using a controlled setting, the paper finds that investors believe that the auditor's going-concern opinion contains useful information. This suggests that auditors' judgment regarding client viability is valued by investors. Auditing standards that require an assessment of client viability should remain in place.Originality value - This is the first study that uses an experimental approach to examine whether investors view the auditor's going-concern opinion as relevant to pricing stocks. The use of an experiment is intended to overcome methodological limitations inherent in studies that use archival data.

Going concern is a fundamental concept in accounting and auditing and the assessment of a firm's going concern status is not an easy task. Several going concern prediction models based on statistical methods to assist auditors have been suggested in the literature. This study explores and compares the usefulness of neural networks, decision trees and logistic regression in predicting a firm's going concern status. The sample data comprise financial ratios for 165 going concerns and 165 matched non-going concerns. The classification results indicate the potential usefulness of data mining techniques in a going concern prediction context. Further, the decision tree going concern prediction model outperforms the logistic regression and neural network models. Data mining techniques such as neural networks and decision trees are powerful for analysing complex non-linear and interaction relationships, and hence can supplement and complement traditional statistical methods in constructing going concern prediction models.

Purpose - This study aims to examine the industry reaction as determined by stock returns when firms in the electric services industry announced receipt of Going concern audit opinions from 1984 through 1991.Design methodology approach - The study utilizes standard event study methodology to test for significant excess performance.Findings - From 1984 to 1991, going concern opinion (GCO) announcements produce a contagion response in the industry on the announcement date more than half the time. Also, over the event window of the announcement date plus the five days following, six of the seven announcements were accompanied by significant negative industry reaction. Regression analysis suggests non-announcing a firm's leverage and earnings correlation with the announcing firm significantly impact abnormal returns, as does the exchange on which the announcer's equity is traded, the size of the announcing firm and whether nuclear plant problems were mentioned in the announcement.Research limitations implications - The findings suggest that audit opinions provide new information for investors in the electric services industry. Also, GCO announcements in this industry normally result in contagion among rival firms.Originality value - This paper provides insights into investor reactions to news contained in Going concern audit opinions in the electric services industry.

Purpose - The purpose of this paper is to examine whether insider trading surrounding a first-time going concern audit opinion is associated with a firm's future bankruptcy status.Design methodology approach - Hypotheses are developed predicting that insiders of firms receiving going concern opinions (GCOs) trade in a manner consistent with private assessments of the firms' bankruptcy risk. Hypothesis testing involves univariate and logistic regression analysis of 363 firms receiving GCOs between 1996 and 2001.Findings - As predicted, results indicate that changes in top executives' net selling (i.e. sales less purchases) immediately before and after the GCO are positively associated with the likelihood of bankruptcy over the following two years. Supplemental analysis reveals this finding is a function of insiders within the bankrupt sample reporting fewer purchase transactions surrounding the GCO event.Practical implications - The results of the study have the potential to influence external stakeholders' assessments of GCOs and insider trading disclosures.Originality value - This study extends prior research examining the link between GCOs and clients' subsequent bankruptcy status by highlighting the potential for insider trading activity to serve as an, ex ante, identifier of Type I audit reporting errors. This study contributes to the insider trading literature by identifying the GCO as a specific type of price-relevant information that potentially underlies insider trades. Consideration of the study's findings should include the possibility of model misspecification and measurement error in the variables of interest. Furthermore, the study's inability to isolate the specific factor(s) underlying the documented changes in insider trading is highlighted.

Purpose - The purpose of this paper is to examine when auditors' decision behavior is rigid and adaptive in the going-concern judgment. Because rigid behavior has been found to produce inappropriate outcomes, understanding when decision behavior is rigid or adaptive can lead to improved decision making.Design methodology approach - An experiment is conducted using cases based on real companies to produce information search traces as dependent measures that are studied in the ill-structured and structured parts of the going-concern task.Findings - Auditors are adaptive in ill-structured tasks and rigid in structured tasks as predicted by theory. Evidence of flawed decision making commonly found in studies of fixation and related concepts was not found.Research limitations implications - The findings suggest the importance of explicitly accounting for task structure when studying decision behavior in situated contexts. Future research could assess whether task structure similarly impacts behavior in non-auditing contexts.Practical implications - Researchers and practitioners have long been concerned about inappropriate rigid behavior. This paper helps practitioners better understand when rigid or adaptive behavior is likely to occur to improve decision making.Originality value - Taking a novel approach to reconcile two well established but conflicting bodies of literature by focusing on \"when\" not \"whether\" people are rigid or adaptive, this paper resolves a long-standing paradox. The implication for the literature is that reframing the question and directly measuring behavior demonstrates that individuals are neither rigid nor adaptive, but can be both as they follow behavior that is consistent with the demands of the task when the demands are defined in terms of task structure.

Purpose - The literature has revealed auditors' going concern risk disclosures are examined in research as a homogenous risk class. This is despite the various going concern modifications auditors are entitled to give pertaining to this issue. A five-level risk class is established in this paper derived from Australian Auditing Standard pronouncements to examine the appropriateness of auditors' going concern reporting relating specifically to the likelihood of firm failure.Design methodology approach - Time is necessary to reveal the appropriateness of going concern reporting therefore a longitudinal research methodology was adopted. The research focuses on all Australian listed companies within the building industry in 1989 and follows all of the reporting of going concern by auditors and directors through until 2007. The building industry was selected because of its volatility, which increased the possibility of going concern reporting allowing a more in-depth focus in the research. All auditors' going concern modifications were examined along with all indications of going concern problems identified by directors. To properly investigate the appropriateness of auditors' reporting, all sampled audit reports were examined using Altman's Z-score model which were matched with a risk class model using the relevant requirements to report in order to determine the appropriateness of the auditors' and directors' opinions.Findings - The level of under reporting of going concern risk by auditors (75 per cent) implies they are more affected by the agency relationship found in literature than directors who are found to have an incidence of underreporting of 57 per cent.Research limitations implications - Literature classifies auditors along with directors as part of the agency problem. Altman's Z-score bankruptcy prediction model is used because of its enduring nature, reliability and ability to be externally calculated to independently compare the going concern reporting performance of auditors and directors as part of the contribution to this research area.Originality value - The paper for the first time examines going concern reporting at a multi-risk level rather than the binomial level used in research previously. The approach is developed in this paper using auditing pronouncements. These risk levels are linked with an independent measure being the Altman Z-score to determine the appropriateness of auditors' and directors' reporting of going concern issues.