Do modified audit opinions for Shanghai listed firms convey heterogeneous information?

Pei, Donglin; Hamill, Philip

doi:10.1016/j.intaccaudtax.2013.02.004

Cited by 14 publications

(13 citation statements)

References 24 publications

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“…These studies (Baskin, 1972;Firth, 1978;Chow and Rice, 1982;Dodd et al, 1984;Dopuch et al, 1986;Loudder et al, 1992;Herbohn et al, 2007) are primarily conducted in the UK, USA and Australian contexts. However, other papers have analyzed the situations in France (Soltani, 2000), Spain (Pucheta Martínez et al, 2004), China (Chen et al, 2000;Czernkowski et al, 2010;Pei and Hamill, 2013), Jordan (Al-Thuneibat et al, 2008) and Taiwan (Hsu et al, 2011). Overall, these studies report mixed results, as corroborated by previous meta-analyses on stock price reactions to qualified opinions (Craswell, 1985;Ittonen, 2012).…”

Section: Stock Market Reaction To Auditor Opinionsmentioning

confidence: 87%

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Stock market reaction to auditor opinions – Italian evidence

Ianniello

Galloppo

2015

Managerial Auditing Journal

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Purpose – The purpose of this paper is to examine investor reactions to auditor opinions containing qualifications or an emphasis of matter paragraph related to going concern uncertainty or financial distress. In particular, abnormal returns are analyzed around audit report dates. Design/methodology/approach – The event study methodology, focusing on a short event window, was used to determine whether there is an immediate market reaction to the audit report announcement, as might be expected assuming efficient stock markets. Findings – Overall, this analysis shows that the audit reports investigated have information content for investment decisions. In particular, the qualifications expressed in the audit report have a negative effect on stock prices. It is also shown that an unqualified opinion with an emphasis of matter paragraph regarding going concern uncertainty or financial distress has a positive effect on stock prices. These results also elucidate the distinction between different types of opinions in the Italian context. Research limitations/implications – This paper has attempted to limit the possible concurrent effects on stock prices using a short window event study methodology. However, the possibility that some other event may have occurred during this event window cannot be excluded. Among the policy implications coming from this research, it is argued that the authorities should regulate the public disclosure of audit reports, so that the information becomes available to the audited company and the other stakeholders on the same day, which, in theory, would be the day that the audit process concludes with the signing of the audit report. Originality/value – The findings of this paper show the relevance of audit reports, distinguishing the different impacts based on the types of audit opinions issued in a specific jurisdiction (qualified and unqualified with an emphasis of matter paragraph).

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Section: Stock Market Reaction To Auditor Opinionsmentioning

confidence: 87%

“…As common in the literature (Pucheta Martínez et al, 2004;Pei and Hamill, 2013), this hypothesis can be further disentangled to investigate the relevance of different types of opinions, so we formulate in its alternative form the following:…”

Section: Stock Market Reaction To Auditor Opinionsmentioning

confidence: 99%

Stock market reaction to auditor opinions – Italian evidence

Ianniello

Galloppo

2015

Managerial Auditing Journal

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“…An investor's ability to predict future profits is the ability of an investor to make speculations on the profits he will get in the future [30] . An investor can predict the profit he will get by observing the profit information about the investment he has made.…”

Section: Resultsmentioning

confidence: 99%

Examining Community Trust to the Audit Board of the Republic of Indonesia

Widyartati¹,

Prabowo²

2020

Proceedings of the 3rd International Conference on Banking, Accounting, Management and Economics (ICOBAME 2020)

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The second term of Audit Results Summary Report (IHPS) of Audit Board of the Republic of Indonesia or Badan Pemeriksa Keuangan (BPK) concluded that the implementation of commercial bank supervision by OJK for 2017-2019 has met the criteria with exceptions. The exception occurred in the incomplete supervision for several banks. This study aims to determine whether the negative opinion of the BPK has been responded by investors. The research was conducted by comparing the volatility of banks that are excepted by the BPK with the banks that are not excepted by the BPK. The sample of banks that are excepted by the BPK was represented by 4 banks and the banks that are not excepted by the BPK were represented by 31 Banks. The test was carried out using a nonparametric independence t test. The test results show that there is a significant difference between the volatility of banks that are excepted by the BPK and banks that are not excepted by the BPK. The existence of this significant difference provides empirical evidence that investors respond to the negative opinion of BPK. This response shows that the BPK's opinion is trusted and is considered to provide adequate information for investors.

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“…Affecting the debt characteristics of the business, there are still three types of modified opinions. In unqualified opinions with an explanatory paragraph, although it does not change the conclusion that financial statement is fair, this explanatory paragraph may lead to adverse market reactions (Pei & Hamill, 2013), and there will likely be mistakes in the future (Czerney et al, 2014). For the qualified opinion, the auditor indicates that the financial statements stating financial ability of the firm, business results, cash flow, which are free from material misstatements, "except for" specific transactions or balances, or circumstance, the financial statements present fairly "except for" some area in Financial Statement.…”

Section: Theoretical and Hypothetical Basismentioning

confidence: 99%

The impact of audit opinion on cost of debt: Evidence from Vietnam

Khương

Hương

Chau

et al. 2021

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We consider whether the category of audit opinion an enterprise receives is pertained to the cost of debt of Vietnam corporations and how does it impact them. Proceeding from the data collected from 80 listed companies in the Vietnam stock exchange in the period of 2007 - 2017, we used a quantitative method to demonstrate the negative impact of modified audit opinion on the cost of debt. When companies receive a modified opinion, they have to pay higher interest rates and have a shorter maturity. From the results, this paper suggests some implications for the financial statement disclosure of listed firms and regulators in order to contribute to the transparency of the financial reports.

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Do modified audit opinions for Shanghai listed firms convey heterogeneous information?

Cited by 14 publications

References 24 publications

Stock market reaction to auditor opinions – Italian evidence

Stock market reaction to auditor opinions – Italian evidence

Examining Community Trust to the Audit Board of the Republic of Indonesia

The impact of audit opinion on cost of debt: Evidence from Vietnam

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