EconPapers    
Economics at your fingertips  
 

The incremental information content of audit opinion

Panayiotis Tahinakis and Michalis Samarinas

Journal of Applied Accounting Research, 2016, vol. 17, issue 2, 139-169

Abstract: Purpose - – The purpose of this paper is to examine the incremental information content of audit opinion while considering opinion determinants, such as auditor and auditee size, or a firm’s financial state. Design/methodology/approach - – A market valuation model is employed using US firm data collected over 30 years. The model relates stock returns to earnings and incorporates as additional variables auditors’ opinion types, opinion determinants and their interactions with audit expression. Findings - – The findings suggest that audit opinion has a significant market impact. The estimated positive or negative information content of the audit opinion types is associated with certain opinion determinants, such as auditor and auditee size and a firm’s financial state. Research limitations/implications - – Additional firm-year observations regarding certain opinion qualifications could benefit future research. Practical implications - – This study offers useful insights by demonstrating the importance of auditing profession to the users of financial statements. It examines investors’ perception of each audit opinion type and the conditions under which this expression has the most serious effects. The results demonstrate the role of audit opinion and its cause-effect relationship with various economic events, allowing regulators not only to track the efficiency of various audit policy changes but also act preventively and amend the regulatory framework. Originality/value - – This paper empirically supports the significance of the auditing process and audit opinions by examining investor perceptions. It employs a value relevance model, in contrast to market-based research that adopts an event study methodology.

Keywords: Stock returns; Audit opinion; Auditor’s report; Market reaction (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jaarpp:v:17:y:2016:i:2:p:139-169

DOI: 10.1108/JAAR-01-2013-0011

Access Statistics for this article

Journal of Applied Accounting Research is currently edited by Associate Professor Orthodoxia Kyriacou

More articles in Journal of Applied Accounting Research from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().

 
Page updated 2025-03-19
Handle: RePEc:eme:jaarpp:v:17:y:2016:i:2:p:139-169