Anticipation and Reaction to Going Concern Modified Audit Opinions by Sophisticated Investors

The purpose of this paper is to examine whether institutional investors (i) anticipate a distressed firm\u27s receipt of a first‐time going‐concern modified audit opinion, and (ii) react to a first‐time going‐concern modified opinion by engaging in abnormal net selling of firm shares. Using a proprietary database of US institutional investor trades, we find that institutional investors are net sellers of first‐time going‐concern opinion firms beginning 6 months before the release of the report and remain net sellers through the subsequent 3 months. We also find that the severity of the reasons auditors modify their opinions is associated with increased trading activity, but only after the opinion is publicly available. Our results support the position that an auditor\u27s going‐concern modified opinion is influential in the marketplace by documenting that institutional investors anticipate this price‐relevant information and react through increased selling. The finding of increased net selling of firms with more severe reasons for report modifications provides evidence of the incremental informational value of the wording in the modified opinion

Understanding POTS: Postural Orthostatic Tachycardia Syndrome

This presentation will focus on POTS which stands for postural orthostatic tachycardia syndrome. This is a condition that affects blood flow. “POTS is a form of orthostatic intolerance, the development of symptoms that come on when standing up from a reclining position, and that may be relieved by sitting or lying back down.” There are different forms of POTS in which the body responds to the lack of blood flow differently. As such, treatments vary and can only be applicable once the form is determined. To know if one has POTS, the best test is the tilt-table test. More tests can follow to verify form and damage done by POTS. While the main symptoms are “lightheadedness, fainting, and a rapid increase in heartbeat,” many more are still encountered every day. Most patients are women aged 13-50, but this can affect anyone. This debilitating syndrome is common, but awareness is not

The horse has bolted: revisiting the market reaction to going concern modifications of audit reports

This paper examines what value is added by an audit report through an investigation of the information content for first-time going concern modifications (GCMs). Consistent with prior research, we find no evidence of a short-term market reaction to the public announcement of a first-time GCM. We document a significant adverse medium-term market reaction in the 12 months prior to a first-time GCM announcement, but find no evidence of a persistent market underreaction in the 12 months following the announcement. These results are consistent with an audit opinion fulfilling an attestation function and confirming the deteriorating financial condition of a firm. Copyright (c) The Authors Journal compilation (c) 2007 AFAANZ.