Type Of Audit Opinion Research Articles

Non-financial information farsightedness and capital market information efficiency

Non-financial information disclosed by firms is an important channel for investors and analysts to understand the operating conditions of firms and a major source of information other than financial data. This study examines the impact of disclosure of forward-looking non-financial information content by listed companies on the information efficiency of the capital market. Using data from A-share listed companies in China’s Shanghai and Shenzhen markets from 2007 to 2022, it is found that forward-looking non-financial information content has a positive impact on improving capital market information efficiency, while analysts’ attention plays a moderating role. The mechanism study finds that non-financial information disclosure with forward-looking content affects the accuracy of analysts’ earnings forecasts, the type of audit opinion, and the degree of financialisation of firms, which in turn have different impacts on the information efficiency of the capital market. The heterogeneity test finds that disclosure of non-financial information with forward-looking content will more significantly improve the information efficiency of the capital market if the listed company receives a high level of media attention, as well as listed companies with higher quality of internal control. This study explores the forward-looking characteristics of non-financial information in depth, enriches the study of information efficiency in the capital market, and provides theoretical suggestions for the content and direction of corporate non-financial information disclosure.

Does enterprise digital transformation affect audit opinion type?—Based on business evidence of Chinese listed companies

AbstractUtilizing text analysis through machine learning techniques, this study investigates the influence of enterprise digital transformation on audit opinions within China's A‐share listed companies spanning from 2011 to 2020. The findings underscore that enterprise digital transformation has the potential to bolster standard unqualified audit opinions through the enhancement of internal control quality and information transparency. Additionally, factors such as marketization level, property rights nature, and industry classification are found to be pivotal in shaping this relationship. These research outcomes not only extend the theoretical horizons of audit opinion studies but also offer valuable insights and recommendations for auditors to optimize the efficacy of audit opinions.

DAMPAK TATA KELOLA PERUSAHAAN DAN KUALITAS AUDIT TERHADAP PENGUNGKAPAN COVID-19 DI INDONESIA TAHUN 2020-2021

The purpose of this study is to examine the effect of corporate governance and audit quality on COVID-19 disclosure. The dependent variable used in this study is COVID-19 disclosure, while the independent variable used in this study consists of board size, board independence, board diversity, audit committee size, audit committee independence, audit office size, and audit opinion type. The population in this study consists of all companies registered in the Indonesian Stock Exchange during the years 2020-2021. The sampling method used is purposive sampling. The total number of samples in this study is 1,116 companies. Data analysis was performed by the descriptive statistic analysis and hypothesis test with multiple linear regression analysis. The result of this study shows that board independence and audit committee size have significantly positive effect on COVID-19 related information disclosure. Whereas board size, board diversity, audit committee independence, audit office size, and audit opinion type do not affect COVID-19 related information disclosure.

Does the disclosure of key audit matters improve the audit quality for sustainable development: Empirical evidence from China.

In this paper, taking the 14837 annual audit reports of 4159 listed companies in Shanghai and Shenzhen Stock Exchanges from 2017 to 2020 as samples, and taking the information entropy value of KAM disclosures and the type of audit opinion as the agent indexes of the explanatory variable and the interpreted variable respectively, whether the disclosure of KAMs could improve audit quality had been empirically tested and analyzed. The results shown that: (1) The regression coefficient of information entropy value of KAMs disclosure was 0.1785, which shown a significant positive correlation, and was established at the level of 1% significance, that was to say, KAMs disclosure can improve audit quality. (2) The marginal effect coefficient was only 0.0081, which meant that there was some information redundancy in the KAMs disclosure and the enhancement effect on audit quality was weak. (3) In the robustness test, the interpreted variable was respectively replaced by audit cost (taking the natural logarithm of audit cost) and manipulated accrual profit (taking the absolute value of manipulated accrual profit), the regression coefficients of information entropy of KAMs were 0.0852 and 0.0017 respectively, which shown a significant positive correlation and were consistent with the results of the main regression test. (4) Further research shown that whether the industry in which the audited company was located and whether the audit institution was one of the international Big Four would affect the disclosure of KAMs, and then affect the audit quality in the same direction. The implementation effect of the new audit reporting standards was supported by these test evidences.

(Non)Going Concern vs. Gain or Loss and Influence on Audit Opinion

In today's unstable environment, one of the overarching principles for financial reporting of major importance to users of financial statements is going concern. The management of companies is responsible for disclosing information about whether the entity is a going concern or not. In addition, financial auditors must also obtain sufficient and reliable evidence to support their audit opinion on the appropriateness of management's use of the going concern principle in the preparation of financial statements. This study considers the following directions: it first investigates the extent to which financial auditors confirm management's use of the going concern principle in the preparation of the annual financial statements; it then tests the asymmetric relationship between going concern and earnings reporting and between going concern and loss reporting; finally, it seeks to identify the extent to which going concern issues at company level identified by the auditor, loss reporting and negative equity influence the type of audit opinion issued. The sample is represented by companies listed on the regulated market of the BSE in the period 2016-2021 and highlights that the accuracy of the use of the going concern principle in the preparation of financial statements by management is often refuted by financial auditors, that there are business areas in which there are entities for which going concern problems have been reported in one period, but rather gains are reported in the immediately following period, and for other business areas, there are entities for which no going concern problems have been reported and they report losses in subsequent periods. Also, the processing carried out showed that the type of audit opinion depends mainly on the sign of equity and the existence of going concern issues.

Одитни мнения в публичния сектор – същност и видове

In order to reach the statement of an audit opinion, it is necessary to perform various activities that serve as a guarantor, so that the audited organization carries out its activities in accordance with the legal and by-law requirements and the general framework for financial reporting. The main purpose of the article is to clarify the nature and types of audit opinions expressed by the National Audit Office of Bulgaria for the period 2005–2020. The main conclusion reached is that public sector organizations should improve their internal control environment, which would help accounting.

Ethics in Reporting of the Other Comprehensive Income: The Case of Listed European Companies in Emerging Countries

The concept of “value relevance” was identified in many studies as a significant quality parameter that provides usefulness to investors and other stakeholders regarding the financial and non-financial information to assess the companies’ value. Based on empirical results in the case of the audit-listed companies in emerging countries, the purpose of this study is to analyze the value relevance of the “other comprehensive income” in the context of the business ethics correlated with the type of audit opinion disclosed to the users, with the focus on the investors’ behavior and the impact on the share price.

Research on Influencing Factors of Key Audit Matters Disclosure in China

Taking companies listed in both A-shares market and H-shares market from 2016 to 2018 in China as samples, this paper uses literature and empirical research method to study the impact of the characteristics of key audit matters (namely, KAM) on disclosure from both auditors and audited companies. The results show that the number of key audit matters is more related to the characteristics of audited companies rather than auditors, indicating that the size, leverage, and IPO period of the audited companies generate a significant positive correlation with the number of disclosed key audit matters. At the same time, the profitability and net operating cash flow are obliviously negative with the number. While for an accounting firm, there is only a significant correlation between the type of audit opinion, showing that the number of key audit matters disclosed with modified auditing opinion is less than those disclosed with unmodified opinion. Based on this conclusion, this paper explores the relationship between types of key audit matters disclosed and the characteristics of firms and audited entities. The results show that the auditee level factors still have a greater impact on the type of key audit matters to make a contribution to the accounting standard construction in China.

Corporate governance and audit report timeliness: Evidence from Kuwait

The purpose of this study is to empirically investigate the impact of corporate governance mechanisms, among other variables, on audit report lag (ARL) for a sample of 97 companies listed on the Kuwait Stock Market (KSE) in 2020. Audit report lag is measured as the number of days between the date of the financial year end and the date of the audit report. The descriptive statistics indicate that there is considerable variation in the ARL between the sample companies, ranging from 13 to 121 days, with an average of 69 days. A multivariate regression model was employed to examine the association between ARL and corporate governance proxies, namely: board size, board meetings, board financial expertise, non-executive directors, and institutional ownership. The results indicate that companies whose boards have considerable financial expertise are associated with lower audit delay. For other (control) variables, the results indicate that profitability, company size, type of audit opinion, and industry type are found to have a significant impact on the timeliness of financial reporting. More profitable and larger companies were found to issue their audited financial reports faster. Moreover, financial institutions show a shorter lag in releasing their annual report than other sectors, and companies which seek qualified opinions have longer ARLs. Finally, in order to improve the timeliness of annual reports of companies listed on the market, the study suggests the adoption of eXtensible Business Reporting Language (XBRL). There is convincing evidence to suggest that the use of XBRL results in timelier stock market filing and shorter ARL.

Influence of Gender Differences on the Quality of Financial Audit Engagements for Listed Companies

Gender differences can be explained by the level of development of a state, by the perception of employers, but also by the attitude of men and women towards the labor market. In recent years, more and more women are working in the accounting and auditing profession, but not necessarily in top-management. The quality of engagements in the field of accounting and auditing can be influenced by the characteristics that women can have compared to men, to be more conservativ, attentive, rigorous, with a great capacity for work, practicality and sociability. This study aims to what extent the existence of gender differences influences the quality of audit engagements in Romania, performed at the level of companies listed on the Bucharest Stock Exchange – Regulated Market. As a variable, the quality of the audit is determined by using a model for estimating discretionary accruals, taking into account the type of audit opinion. The results show that the probability of expression a modified opinion is significantly influenced by the detection of accounting distortions in the conditions of gender differences.

Internal Control Weaknesses, financial restatements, and audit opinion:evidence from Brazilian market

Objective: To analyze associations between Internal Control Weaknesses (ICWs), audit opinion, and Financial Restatements (FR) of companies listed in Brasil, Bolsa e Balcao B3, composing the IBrX 100. Method: This is a descriptive, archival, quantitative study. Data were obtained from Brazilian Security and Exchange Commission’s (CVM) website in the 2010-2018 period. Analysis was performed using descriptive statistics, test for differences of average/medians/proportions, Chi-square test, and analysis of correlations. Results: 23.27% of the observations presented at least one ICW; 35.58% of restatements were found on average, though only 2.73% were required by CVM. Additionally, 1.11% of the audit reports presented a qualified opinion. No association was found between ICW disclosure, financial restatements, and type of audit opinion. However, an association was found between ICW disclosure and emphasis paragraphs, suggesting the latter can signal weaknesses arising from weaknesses, though did not result in the auditors issuing a modified opinion. Contributions: This study provides an opportunity to discuss the role of regulators in investigating opinions issued by auditors and the misreporting of financial restatements.

A novel two-stage hybrid default prediction model with k-means clustering and support vector domain description

Default prediction identifies the probability of a firm to default by establishing a prediction model. It reveals the functional relation between the features’ data at time t-m and default status at t. If the prediction of a defaulting company is wrong, it will mislead banks into making loans to a “defaulter,” causing huge losses; if the prediction of a non-defaulting company is wrong, it will result in a potential churn in high-quality customers. To support the lending decisions of banks and non-banking financial institutions, this study proposes a two-stage default prediction model that integrates k-means clustering for partitioning the sample and support vector domain description (SVDD) for predicting default (credit scoring). It also uses attributes’ data at time t-m (m = 1, 2, 3, 4, 5) and the default status at t to train the proposed model so that it can warn of default m years ahead. The results show that the predictive accuracy of the proposed two-stage default prediction model is better than that of single-stage models using only k-means clustering or support vector domain description, and the proposed model could achieve a five-year default prediction ability (AUC > 0.85). Further, the study implies that “retained earnings/total assets”, “financial expenses/gross revenue”, and “type of audit opinion” are three key features in default forecasting for Chinese listed enterprises. This study contributes to the field of multi-stage credit scoring research by demonstrating that a combination of different methods is worth considering to improve the performance of default prediction models.

Do goodwill impairments affect audit opinions? Evidence from China

There has been a steady growth of goodwill impairments in the Chinese stock market since the adoption of the impairment approach in accounting. The influence of goodwill impairments on a firm’s financial position and profitability give reason to doubt its current and future performance. We examine whether auditors, as a crucial external monitor, identify the information risks of goodwill impairments and express their concerns about financial reporting quality in their audit opinions. Using a sample of firms listed on China’s A-share market from 2007 to 2017, we test the association between goodwill impairments and the type of audit opinion received in the same financial period. Our findings are as follows. First, the probability of receiving a modified opinion increases with the amount of goodwill impairments. Second, the positive association between goodwill impairments and modified audit opinions is driven primarily by earnings management risks. Third, this positive association is more salient when auditors are industry experts and there is no auditor–client mismatch. Fourth, auditors are more sensitive to the amount of goodwill impairments than to their mere existence. Overall, we document that auditors perceive goodwill impairments as a signal of information risks and communicate their concerns to investors to avoid litigation.

The Impact of Client Size and Financial Performance on Audit Opinion: Evidence from a Developing Market

This research investigates the effect of audit client size and its financial performance on audit opinion in the Egyptian audit market. A few studies have investigated the association between these factors in the audit context, especially in African developing countries. Data are manually collected from the annual financial reports of firms registered in the Egyptian Stock Market, focusing on a sample of EGX 70 from 2012 to 2016, and binary logistic regression is used in data analysis. We found that the company size is insignificantly, positively, related to a qualified, rather than an unqualified, type of audit opinion. In contrast, the client's financial performance has a significant but negative relationship with the qualified type of audit opinion. This study provides insights for managers and investors in developing countries to understand and perceive audit opinions in these contexts.
 
 Received: 31 October 2020 / Accepted: 12 December 2020 / Published: 17 January 2021

Current Year Audit Opinion and Next Year Audit Fees: Does Family Ownership Matter?

The paper aims to investigate the association between current year audit opinion and the pricing of the next year audit mission and whether this relationship differs with different nature of ownership (family – non-family) in the Egyptian setting. Using a sample of 358 firm-year observations from the Egyptian Stock Exchange (EGX hereafter) over the period 2016-2019, ordinary least square (OLS) regression models are estimated to test the research hypotheses and conduct sensitivity and additional analyses. The author didn’t find significant association between current year audit opinion and next year audit fees. However, if the auditor issues a qualified audit opinion for a family firm, he will ask for a fee premium for the next year audit mission. Results are robust to alternative measures of next year audit fees and current year audit opinion. The paper uses the current year audit opinion as an input to the next yearaudit pricing decision. The paper responds to previous calls to investigate the relationship between audit fees and type of audit opinion and the impact of family ownership on audit fees. In addition, this study uses three alternative measures of next year audit fees and an alternative measure of current year audit opinion. Finally, this study adds evidence to the corporate governance literature in developing countries.

The nexus between reducing audit report lags and divining integrated financial report governance disclosures: should ASE directives be more conspicuous

The purpose of the study is to explore any nexus between Amman Stock Exchange (ASE) governance required disclosures based on auditors' determinants on the audit reporting lag (ARL) to construct an integrated financial report (IFR). The study's audit determinants are revealed by terms of audit meetings, number of audit members, audit opinion, and type of audit company. Meanwhile total assets and bank performance indicated any non-audit determinants affecting the disclosure of IFR. The hypothesised paradigm is tested to pursue nexuses between the endogenous and exogenous variables for the years 2014, 2015 and 2016. Multivariate analysis revealed a positive nexus between the exogenous variables in the model as a whole and ARL. However, a negative influence of the audit committee number of meetings and type of audit opinion performed on ARL. Meanwhile, audit committee meetings and type of audit company had a positive effect on the ARL, all with significant nexuses.

Accounting comparability, financial reporting quality and audit opinions: evidence from Iran

PurposeType of audit opinion is important for all stakeholders. Firm-specific characteristics have a direct impact on the type of audit opinion. The purpose of this study is to examine the association between accounting comparability (as a micro level characteristic), financial reporting quality (as a macro level characteristic) and audit opinions.Design/methodology/approachThis study uses a multivariate regression analysis to tests it hypotheses to a sample of firms listed in Tehran Stock Exchange during 2015–2019. To measure accounting comparability, the authors use De Franco et al. (2011) model, and Hutton et al. (2009) model to measure financial reporting quality. The authors use type of audit opinion, and auditor's remarks (explanatory notes) as the measure for audit opinions.FindingsThe authors find a negative association between accounting comparability, and the proxies for audit opinion. The authors also find that a negative association between financial reporting quality and audit opinions. These results suggest that higher accounting comparability, and higher financial reporting quality (proxied by earnings quality) increases auditor tendency to issue unmodified audit opinion.Originality/valueTo the authors' best knowledge, this is the first study that empirically examines the association between accounting comparability, financial reporting quality and audit opinion. This study provides empirical support for the theoretical views on the association between financial reporting quality and audit opinion. The results could be of interest of both auditors and managers, especially in emerging capital markets, who seek to improve financial reporting quality.

Влияние результатов аудита на стоимость акций российских компаний

The aim of this study is to assess the impact of audit reports issuance on the value of public corporations' shares on the Russian stock market. The practical significance and relevance are due to the increasing role of audit in the financial market and the lack of such studies in the domestic literature. The study is based on the market model and Event Study. The research evaluates the reaction of Russian stock market to publication of audit reports containing various types of audit opinions and takes into account the relation of auditor to the Big4 group. The findings show that the Russian stock market reacts to the release of audit reports very chaotically; the market reacts negatively to the opinions with reservation issued by a Big4 auditor, and also negatively responds to unmodified opinions issued by an auditor of a non- Big4 organization; the market reaction is the opposite for identical types of opinions issued by different types of auditors.

Determinants of Financial Reporting Quality in the Public Sector: Evidence from Indonesia

Most studies addressing the issue of financial reporting quality (FRQ) focus on corporations. This study investigates the determinants of FRQ in the public sector. We use the type of audit opinion as a proxy for reporting quality, with an unqualified opinion representing the best reporting quality while a disclaimer of opinion represents the worst quality. Using manually collected data from 3018 financial reports of local governments in Indonesia from 2008 to 2014, we find that a high proportion of capital expenditures in the total budget is associated with low FRQ. Further, we find that larger and wealthier local governments are associated with higher FRQ. Finally, we find that local governments under more experienced mayors have higher reporting quality. Our results are robust to different measures of FRQ. This study contributes to the reporting quality literature by providing empirical evidence on the determinants of FRQ in the public sector, which has been relatively underexplored. We conclude that certain characteristics of local governments and of mayors are associated with the types of audit opinion and that financial incentives accelerate the improvement of reporting quality.

Audit Opinions: Are They Really Different for Family Businesses?

The article poses a dual research question: What are the determining factors of the type of audit opinion in a stressed economic environment and do these factors differ between family and nonfamily firms? Our results show that auditor tenure and return on assets (ROA) raise the probability of receiving a favorable opinion. On the contrary, losses during the previous year, high financial leverage, and hiring a “Big 4” firm increase the probability of receiving an unfavorable opinion. Although the sign and the statistical significance are similar, the size of such effects differs between family and nonfamily firms. Finally, the probability of receiving a report with a favorable opinion increases as the economic situation improves.