AUDIT OPINION: A STUDY OF QUALIFICATION OPINION AND PARAGRAPHS OF EMPHASIS ON THE FINANCIAL STATEMENTS OF BRAZILIAN PUBLIC FIRMS

Abstract

The economic effects of the qualified report or paragraph of emphasis may indicate problems with the operations of firm, it may consequently affect the allocation of the financial resources of the investors. The research aims to verify if the accounting and non-accounting characteristics have influence on the audit opinions’ issuance with qualification opinion and/or paragraph of emphasis, on listed companies in the Sao Paulo Stock Exchange (Bolsa de Valores de Sao Paulo Bovespa). The study is considered a quantitative research and to achieve the objective it was used the logit estimation method. The sample of this work includes 1466 reports of the independent auditors (audit opinion) about the financial reports of the Brazilian public firms within the fiscal of 2006 and 2008. The results evidence that the other audit firms issue more qualification opinions and paragraphs of emphasis than those of the Big Four, even these ones having a bigger market share (60%). The estimated model revealed that some accounting and non-accounting variables, like the market value of firm and financing, have as statistical significance to qualification opinions as to paragraph of emphasis. Finally, it was observed that the higher the market value of the business, the less chance of occurrence of these kinds of changes in the independent auditor’s opinion, however, when analyzing the financing, the relation is reversed, in other words, the higher it is, the greater the chance.