Characteristics of Organisations Using an Audit for Interim Financial Statements

Abstract

This study examines the characteristics of companies that choose to have a full audit of their interim financial statements, as distinct from a review. A cross‐section of 252 firms that had submitted interim financial reports to the Australian Stock Exchange were selected from the Business Review Weekly (BRW) list of top 1,000 companies. A direct logistic regression analysis was undertaken to assess whether voluntarily adopting an audit was related to size (assets), leverage, minority interest, profitability, industry, and whether the company had used a Big‐6 audit firm. The results indicate that the level of leverage is a significant predictor of companies adopting a review, whereas use of a Big‐6 audit firm was associated with conducting an audit. In addition, there is some evidence companies in the financial services industry were positively associated with conducting an audit.

Impact of stakeholder characteristics on voluntary dissemination of interim information and communication of its level of assurance

“…Of 238 entities, 89 mail some information to shareholders. We also find that nearly all entities have their half-yearly financial information reviewed rather than audited, confirming an earlier finding of Baines et al (2000) of a strong preference for review. In fact, the current study finds that the incidence of audit is very rare, occurring in only 2 of the 238 entities.…”

“…Panel A of Table 1 confirms that only 2 of the 238 entities (less than 1 per cent) in the sample voluntarily selected an audit of their interim information, whereas © The Authors Journal compilation © 2007 AFAANZ Baines et al (2000), in their study of the determinants of the adoption of audit versus review in the context of Australian interim reporting in 1996, report 19 (7.5 per cent) entities adopting an audit over a review. The difference in the reported proportions of entities adopting audit over review might be attributable to sample composition differences (exclusion of 'Real Estate' (Property Trusts) and 'Mining' entities in the current study) or a rationalization of the assurance market to the cheaper alternative resulting from this market maturing since the time of their study.…”