Do Reviews by External Auditors Improve the Information Content of Interim Financial Statements?

Kajüter, Peter; Klassmann, Florian; Nienhaus, Martin

doi:10.1016/j.intacc.2016.01.003

Cited by 16 publications

(10 citation statements)

References 50 publications

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“…When the* company receives 3a: 8g oing-concernV Tau ditN 9opinion +, cost of equity also increases because the 5 going-concernP +audit opinion describes the risks for the company& such that investors want a high rate of return to continue their investment. The results also satisfy the signaling theory that is, firms can signal investors through audit practices [4].…”

Section: A Conclusionsupporting

confidence: 72%

“…Firms can signal investors through audit practices [4]. Investors have an expectation that audited financial statements have better quality information than unaudited financial statements so that investors would more believe to the information obtained from the audited financial statements than to the unaudited financial statements.…”

Section: A Signaling Theorymentioning

confidence: 99%

“…Investors have expectations that audited financial statements have better information than unaudited financial statements. We referred to the signaling theory in this study because an audit opinion is a statement from an independent external party; thus, it will be an alert to investors to make a decision based on what has been shown in the audited financial statements [4].…”

Section: A Signaling Theorymentioning

confidence: 99%

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Impact of Going-Concern Audit Opinion On Cost of Equity with Institutional Ownership as Moderation

Yulfa¹,

Fitriany²

2019

Proceedings of the 3rd Asia-Pacific Research in Social Sciences and Humanities Universitas Indonesia Conference (APRISH 2018)

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This study aims to examine whether goingconcern audit opinion and 2i nstitutional3 ownership' measured by the? percentage of institutional ownership affect the cost of equity, and whether institutional ownership moderates the impact of going-concern audit opinion on cost of equity. From regression using a 1.428 annual report from 2011-2016, with a capital asset pricing model method to measure the cost of equity, this study found a positive relationship between goingconcern audit opinion and the cost of equity, that is, if the company receives a 3goi ng-concern? 1 audit^H opinion{ , Vt he-cost CofB equity will increase. 4Goi ng-concern> "audit; _opi nion+ reflects risks to 3t he4 company, thereby increasing the company's cost of equity. This research also finds that institutional ownership has a negative impact on cost of equity; thus, the higher the percentage of institutional ownership in a firm, the lower the company's cost of equity. In moderation testing, this study finds that institutional ownership weakens the positive impact of Jgoing-concern4 Laudit opinion? on cost Nof] equity. MT his; can be Ldue3 2t o1 institutional investors monitoring the company's performance; thus, the company can improve its performance in order to minimize the possibility of getting a going-concern audit opinion.

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Section: A Conclusionsupporting

confidence: 72%

Section: A Signaling Theorymentioning

confidence: 99%

Section: A Signaling Theorymentioning

confidence: 99%

See 1 more Smart Citation

Impact of Going-Concern Audit Opinion On Cost of Equity with Institutional Ownership as Moderation

Yulfa¹,

Fitriany²

2019

Proceedings of the 3rd Asia-Pacific Research in Social Sciences and Humanities Universitas Indonesia Conference (APRISH 2018)

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“…The underlying argument in these papers is that the assurance provided by external auditors increases the reliability and credibility of the information presented by firms (Knechel et al, 2013). The assurance provided by external auditors is perceived as a quality signal by investors (Kajuter et al, 2016). Minnis (2011) argues that auditing improves the quality of information disclosure in by enhancing the predictive ability of reported net income.…”

Section: Information Disclosure Practices and External Auditmentioning

confidence: 99%

Political uncertainty and the choice of external audit: international evidence from private firms

Farooq

Satt

Fadel

2020

IJMF

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PurposeThis paper documents the impact of political uncertainty on the decision of private firms to use external auditors to verify their financial statements.Design/methodology/approachThe authors use the data from 141 countries and the pooled logistic regression to test our arguments. The data is provided by the World Bank's Enterprise Surveys and is collected during the period between 2006 and 2019.FindingsThe results show that firms with high exposure to political uncertainty are more likely to use external auditors to verify their financial statements. The results are robust across various sub-samples and hold when we use alternate proxy for political uncertainty. The results are also robust after controlling for potential endogeneity concerns. The authors also find that the effect of political uncertainty on the choice of external audit is more pronounced for firms that are headquartered in countries with weak institutional environment. The authors document significant role of democracy, rule of law and accountability in determining the relationship between political uncertainty and the choice of external audit.Originality/valueThe authors believe that theirs is one of the initial attempts (if not the first) to investigate the effect of political uncertainty on the choice of external audit among the private firms in developing countries.

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“…However, while cyber-security incidents represent an obvious threat for breached firms, they also carry risks for external auditors (CAQ, 2014;Joe et al, 2015). External auditors provide objective and independent assurance with respect to the quality of a firm's financial reporting and are responsible for auditing financial statements and internal controls over financial reporting (ICFR) (Christopher, Sarens, & Leung, 2009;Stefaniak, Houston, & Cornell, 2012;CAQ, 2014;Kajüter, Klassmann, & Nienhaus, 2016;Frino, Palumbo, & Rosati, 2017). As such, they provide assurance to external stakeholders about the quality and reliability of the information reported in the financial statements of their clients.…”

Section: Background and Hypothesesmentioning

confidence: 99%

Audit Firm Assessments of Cyber-Security Risk: Evidence from Audit Fees and SEC Comment Letters

Rosati

Gogolin²,

Lynn³

2019

Int. J. Acc.

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This study investigates the impact of cyber-security incidents on audit fees. Using a sample of 5,687 firms, we find that (i) breached firms are charged 12% higher audit fees, and (ii) firms operating in the same industry of a breached firm are charged 5% higher fees. Finally, using a difference-in-difference regression on a propensity score matched sample, we provide evidence suggesting that auditors do not revise their audit risk assessment following a breach. Overall, these results suggest that the increase in audit fees in the year of a breach is only temporary, and that auditors include cyber-security risk in their audit risk assessment even before an incident occurs. Higher cyber-security risk is ultimately reflected in higher audit fees paid by auditees.

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Do Reviews by External Auditors Improve the Information Content of Interim Financial Statements?

Cited by 16 publications

References 50 publications

Impact of Going-Concern Audit Opinion On Cost of Equity with Institutional Ownership as Moderation

Impact of Going-Concern Audit Opinion On Cost of Equity with Institutional Ownership as Moderation

Political uncertainty and the choice of external audit: international evidence from private firms

Audit Firm Assessments of Cyber-Security Risk: Evidence from Audit Fees and SEC Comment Letters

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