Going Concern Opinions, Institutional Ownership, and CEO Compensation

Auditors issue going concern opinions when they have substantial doubts about a client’s ability to continue as a going concern for one year beyond the financial statement date. Abundant anecdotal evidence shows that  companies that received these opinions went through restructurings, with managers and employees losing their jobs or seeing their pay cut. For example, after Ernst & Young sent Texas utility Dynegy Holdings, Inc. a going concern opinion in 2011, a majority of the company’s directors said they wouldn’t consider being re-elected,  and the CEO and CFO said they might leave the company. After Clearwire Corp. received a going … Read more