Auditor behavior and the institutional environment: the (new) role of an "emphasis of a matter" paragraph

Fabio Moraes da Costa () and Bruno Funchal ()
Additional contact information
Fabio Moraes da Costa: FUCAPE Business School

No 24, Fucape Working Papers from Fucape Business School

Abstract: his paper investigates the existence of unqualified opinions with an emphasis of a matter paragraph disclosing uncertainties. We show that depending on institutional characteristics, auditors may be either conservative or aggressive, but there are economies where auditors become moderate. We define a moderate auditor as one that issues an emphasis of a matter paragraph instead of a qualified opinion when there is inconclusive evidence on the client?s condition or even to disguise conclusive evidence about a bad financial condition. We theoretically explain when the type of behavior ? conservative, aggressive or moderate ? will take place. In addition, we show that greater client pressure on auditors increases audit quality. Finally, the existence of an emphasis of a matter paragraph always induces investment in the economy, despite being suboptimal. This paper contributes to the existing literature by demonstrating the determinants and consequences of this new type of attestation.

Keywords: Auditing; Investment; Micro Finance Institutions. (search for similar items in EconPapers)
Pages: 25
Date: 2010-12
References: Add references at CitEc
Citations:

Published in Fucape Working Papers Dezembro 2010

Downloads: (external link)
http://www.fucape.br/_public/workingpapers/24-2010.pdf Primeira Versão, 2010 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.fucape.br/_public/workingpapers/24-2010.pdf [301 Moved Permanently]--> https://www.fucape.br/_public/workingpapers/24-2010.pdf [301 Moved Permanently]--> https://fucape.br/_public/workingpapers/24-2010.pdf)

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:bbz:fcpwps:24

Access Statistics for this paper

More papers in Fucape Working Papers from Fucape Business School Fucape Business School Brazilian Business Review Av. Fernando Ferrari, 1358, Boa Vista CEP 29075-505 Vitória-ES. Contact information at EDIRC.
Bibliographic data for series maintained by Adriana Gasparino ( this e-mail address is bad, please contact ).