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

Abstract

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.

Internal Corporate Governance Mechanism and Credit Spreads: Evidence for the Bond Market in China

“…The coefficient (-6.7) of information disclosure indicates that the credit spreads decline 6.7% if the auditor issues a standard unqualified opinion. If the firm receives a standard unqualified audit opinion, it means that its financial statements comply with the most recent accounting standards and system and that its financial status and cash flow have been correctly reported (Khuong et al, 2021). Such companies are easily trusted by creditors, so the credit spreads reduce.…”

“…The audit opinion issued has an impact on the financial decision of creditors and bond credit spreads. If the company receives a standard unqualified audit opinion, it means that its financial statements are in accordance with the most recent accounting framework and accounting standards and that its financial position and cash flow have been accurately reflected (Khuong et al, 2021). The CPA performing the audit will adhere to the necessary standards and procedures, and the information provided will be favorable (Khuong et al, 2021).…”

“…If the company receives a standard unqualified audit opinion, it means that its financial statements are in accordance with the most recent accounting framework and accounting standards and that its financial position and cash flow have been accurately reflected (Khuong et al, 2021). The CPA performing the audit will adhere to the necessary standards and procedures, and the information provided will be favorable (Khuong et al, 2021). The company issued with such an audit opinion will increase creditors' degree of confidence, which will help them make investment decisions and lower credit spreads.…”