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Audit Opinions (audit + opinion)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

An Emerging Market's Reaction to Initial Modified Audit Opinions: Evidence from the Shanghai Stock Exchange,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2000
CHARLES J. P. CHEN
Abstract This study investigates the valuation effect of modified audit opinions (MAOs) on the emerging Chinese stock market. Here, the term MAO refers to both qualified opinions and unqualified opinions with explanatory notes. The latter can be considered an alternative form of a qualified opinion in China. The institutional setting in China enables us to find compelling evidence in support of the monitoring role of independent auditing as an institution. First, we find a significantly negative association between MAOs and cumulative abnormal returns after controlling for effects of other concurrent announcements. Further, results from a by-year analysis suggest that investors did not reach negative consensus about MAOs' valuation effect until the second year, exhibiting the learning process of a market without prior exposure to MAOs. Second, we do not observe significant differences between market reaction to non-GAAP- and GAAP-violation-related MAOs. Third, no significant difference is found between market reaction to qualified opinions and market reaction to unqualified opinions with explanatory notes. [source]

Perceived Audit Quality, Modified Audit Opinions and the Likelihood of Liquidating Bankruptcy among Financially Weak Firms

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2009
Stefan Sundgren
The paper examines the relationship between audit quality, modified audit opinions and the likelihood of liquidating bankruptcy among financially weak firms. The sample consists of 27,999 Finnish companies. It is argued that the choice of a high-quality auditor signals managers' credibility and that creditors would be more inclined to prefer liquidating bankruptcy as the resolution of financial difficulties if the firm is audited by a low-quality auditor. The results show that liquidating bankruptcy is less common among Big 4 audited firms. A positive association between the likelihood of bankruptcy and different types of modified audit opinions, including opinions with remarks related to the quality and presentation of financial statements, is also found. [source]

Auditor,Provided Consultancy Services and their Associations with Audit Fees and Audit Opinions

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2002
Michael Firth
This study examines the relationships between non,audit services fees (consultancy fees) paid to auditors and (1) audit fees, and (2) the occurrence of qualified audit opinions. The positive association between consultancy fees and audit fees is shown to be due to certain company specific events that generate a demand for consultancy services as well as requiring additional audit effort. Identified company specific events are mergers and acquisitions, new share issues, new accounting and information systems, new CEOs, and corporate restructurings. When these events are absent, there is no statistically significant relationship between audit fees and consultancy fees after controlling for company size. Companies that have relatively high consultancy fees are more likely to receive a clean audit opinion. This may be due to the non,audit work clearing up problem areas at the client company or it may be due to high consultancy fees impairing auditor independence. With the available data it is not possible to distinguish between these two reasons. [source]

A comparison of nearest neighbours, discriminant and logit models for auditing decisions

INTELLIGENT SYSTEMS IN ACCOUNTING, FINANCE & MANAGEMENT, Issue 1-2 2007
Chrysovalantis Gaganis
This study investigates the efficiency of k -nearest neighbours (k -NN) in developing models for estimating auditors' opinions, as opposed to models developed with discriminant and logit analyses. The sample consists of 5276 financial statements, out of which 980 received a qualified audit opinion, obtained from 1455 private and public UK companies operating in the manufacturing and trade sectors. We develop two industry-specific models and a general one using data from the period 1998,2001, which are then tested over the period 2002,2003. In each case, two versions of the models are developed. The first includes only financial variables. The second includes both financial and non-financial variables. The results indicate that the inclusion of credit rating in the models results in a considerable increase both in terms of goodness of fit and classification accuracies. The comparison of the methods reveals that the k -NN models can be more efficient, in terms of average classification accuracy, than the discriminant and logit models. Finally, the results are mixed concerning the development of industry-specific models, as opposed to general models. Copyright © 2007 John Wiley & Sons, Ltd. [source]

Do Different Audit Report Formats Affect Shareholders' and Auditors' Perceptions?

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2008
Kar-Ming Chong
This study investigates the impact of three different audit report formats on shareholders' and auditors' perceptions. The formats are derived from the Guidance Note Report to Australian Standard AUS702 which aims to improve communications between auditors and shareholders. Formats include an expanded report, a ,plain language' expanded report with the audit opinion at the end, and a ,plain language' expanded report with the audit opinion at the start. A questionnaire research instrument was mailed to shareholders and auditors. In general, the audit report formats did not reduce the expectations gap between shareholders and auditors. A greater number of significant differences between shareholders' and auditors' perceptions were evident for the expanded format (vis-à-vis the AUS 702 short format), while fewer significant differences existed for the ,plain language' expanded report with the audit opinion at the start. [source]

Auditor,Provided Consultancy Services and their Associations with Audit Fees and Audit Opinions

Compliance with the Disclosure Requirements of Germany's New Market: IAS Versus US GAAP

JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2003
Martin Glaum
This research examines compliance with both International Accounting Standards (IAS) and United States Generally Accepted Accounting Principles (US GAAP) for companies listed on Germany's New Market. Based on a sample of 100 firms that apply IAS and 100 that apply US GAAP, we investigate the extent to which companies comply with IAS and US GAAP disclosure requirements in their year,2000 financial statements. Compliance levels range from 100% to 41.6%, with an average of 83.7%. The average compliance level is significantly lower for companies that apply IAS as compared to companies applying US GAAP. This study provides the first systematic evidence regarding the enforcement of US GAAP outside the US, and accordingly not subject to Securities Exchange Commission (SEC) review. The results unveil a considerable extent of non,compliance. The overall level of compliance with IAS and US GAAP disclosures is positively related to firms being audited by Big 5 auditing firms and to cross,listings on US exchanges. Compliance is also associated with references to the use of International Standards of Auditing (ISA) or US GAAS in the audit opinion. The findings add to the growing concerns regarding the lack of effective supervision in the German capital market. [source]

An Emerging Market's Reaction to Initial Modified Audit Opinions: Evidence from the Shanghai Stock Exchange,

Perceived Audit Quality, Modified Audit Opinions and the Likelihood of Liquidating Bankruptcy among Financially Weak Firms

Some Empirical Evidence to Support the Relationship Between Audit Reports and Stock Prices , The French Case

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2000
Bahram Soltani
Acting as an independent intermediary, the auditor facilitates market transactions by providing an ,opinion' on financial statements which should help to reduce the information asymmetry between the company and its potential investors. Whether audit qualifications have informational value to investors is a question that needs further investigation, as previous empirical studies on this issue yield mixed results. Moreover, a majority of the research papers in this area have been conducted in Anglo-Saxon countries, in contrast to continental European countries where very little attention has been paid to the auditors' role in stock markets. The present study is based on a large sample of qualified opinions (543 for the period 1986,1995), using different expected event dates and market models. The results of the study demonstrate the significant negative abnormal returns around the announcement dates of audit opinions. The empirical part of this study was carried out in the French market which has some significant differences from the UK and the USA markets. The author believes that the differences, in the area of reporting, level of disclosure, and accounting and auditing practices, can play an important role in the research field of event studies. [source]

Do Analysts and Auditors Use Information in Accruals?

JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2001
Mark T. Bradshaw
Existing research indicates that firms with high accruals are more likely to experience future earnings problems, but that investors' expectations, as reflected in stock prices, do not appear to anticipate these problems. In this paper, we directly examine the published opinions of two types of professional investor intermediaries to see if they provide investors with information concerning the future earnings problems experienced by firms with high accruals. First, we examine the earnings forecasts of sell-side analysts. We show that analysts' earnings forecasts do not incorporate the predictable future earnings declines associated with high accruals. Second, we examine the behavior of independent auditors. We find no evidence that auditors signal the future earnings problems associated with high accruals through either their audit opinions or through auditor changes. Overall, our evidence indicates that analysts and auditors do not alert investors to the future earnings problems associated with high accruals, thus corroborating previous findings that investors do not appear to anticipate these problems. [source]