The decision model on voluntary review of quarterly consolidated financial statements

Abstract

This paper investigates various factors affecting company decisions on voluntarily undertaking external auditor reviews of quarterly consolidated financial statements during the 2008–2012 period. Allowing for external auditor reviews to be optional is an unusual emerging market practice that was previously unique to Taiwan. Data from the relevant period is useful for researching the determinants of emerging market firms’ decisions on whether to undertake such voluntary reviews. Our empirical results indicate that firms that opted to obtain external auditor reviews of their first- and third-quarter consolidated financial statements achieved higher rankings for information transparency, stronger corporate governance, and higher audit quality than firms that did not obtain such reviews. This suggests that the voluntary review decision is a useful indicator of a firm’s stronger corporate governance and better information transparency.