Did SOX influence the association between fee dependence and auditors' propensity to issue going-concern opinions?

Li (2009) found that the association between fee dependence (FEEDEP) and the incidence of going-concern opinions (GCO) changed from insignificant in 2001 to positive in 2003. This finding has been interpreted as evidence that auditors became more conservative after the Sarbanes-Oxley Act (SOX). However, Feldmann and Read (2010) suggested that the year following SOX was not typical due to the intense spotlight directed at the audit profession. We revisit Li (2009) by extending the post-SOX period to 2011, and find robust results of little FEEDEP-GCO association in the years after 2003. Hence, the rise in auditor conservatism identified by Li (2009) likely represented the audit profession's temporary reaction to public scrutiny surrounding the passage of SOX, rather than a sustained movement toward more conservative going-concern reporting. Our study reinforces the notion that the effect of major events and government regulations cannot be adequately assessed based on what transpires in the short run.