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Audit Qualification (audit + qualification)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Audit Qualifications of Income-Decreasing Accounting Choices,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2006
Frank D. Hodge
Abstract In this study we conduct an experiment to examine how qualifying an income-decreasing accounting change in years of strong financial performance affects financial report users' assessments of strategic reporting, current financial performance, and future financial performance (performance over the next three years). We find that without the qualification, users viewed the income-decreasing accounting change as relatively nonstrategic and that user assessments of current and future performance were not different. In the presence of the qualification, users believed that the accounting change was relatively strategic, and they discounted the income effect of the accounting change. We find further that their assessments of future performance were below their assessments of current performance but no different from the assessments of future performance in the absence of the qualification. Although our findings suggest that audit qualifications encourage users to be skeptical of income-decreasing accounting changes, we find no evidence that they impose negative consequences on management in terms of lower assessments of financial performance. [source]

Do Spanish Firms Change Auditor to Avoid a Qualified Audit Report?

INTERNATIONAL JOURNAL OF AUDITING, Issue 1 2003
Nieves Gómez-Aguilar
In this paper we investigate whether Spanish firms employ deliberate strategies in the choice of auditor to avoid audit qualification. For a sample of 735 during the period 1991,96 we found no increase in the probability of changing auditor following an audit qualification. We concluded that this would be too obvious and detrimental to the firm's interests. However, 135 firms do change auditor during the period examined. We found that firms that have been qualified are significantly less likely to move to higher quality auditors than are unqualified firms, when that quality is measured by the specialisation of the auditor, auditor brand name, auditor size and auditor conservatism. For the 92 qualified firms changing auditor the likelihood of a subsequent qualification is significantly related to the quality of the auditor selected. [source]

An Empirical Investigation of Determinants of Audit Reports in the UK

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2003
Article first published online: 22 AUG 200, Jennifer C. Ireland
Prior studies of audit reporting in the UK only analyse either very small, private companies, or large listed companies. In addition, these studies focus on narrowly defined types of modified audit reports, respectively the ,small company' audit qualification, and going-concern related modifications. In contrast, this paper employs a multinomial logit model to analyse the determinants of both going-concern and non going-concern related audit modifications, including modifications for disagreements and limitations on scope. Furthermore, this paper analyses reports over a wide range of both private and public (listed and non-listed) companies. The determinants of audit reports are shown to differ between different types of audit modification. In addition, subsidiary companies hiring large auditors are significantly less likely to receive non going-concern related modifications, whereas non-subsidiary companies hiring large auditors are significantly more likely to receive going-concern related modifications. [source]

Audit Qualifications of Income-Decreasing Accounting Choices,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2006
Frank D. Hodge
Abstract In this study we conduct an experiment to examine how qualifying an income-decreasing accounting change in years of strong financial performance affects financial report users' assessments of strategic reporting, current financial performance, and future financial performance (performance over the next three years). We find that without the qualification, users viewed the income-decreasing accounting change as relatively nonstrategic and that user assessments of current and future performance were not different. In the presence of the qualification, users believed that the accounting change was relatively strategic, and they discounted the income effect of the accounting change. We find further that their assessments of future performance were below their assessments of current performance but no different from the assessments of future performance in the absence of the qualification. Although our findings suggest that audit qualifications encourage users to be skeptical of income-decreasing accounting changes, we find no evidence that they impose negative consequences on management in terms of lower assessments of financial performance. [source]

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]