A theoretical examination of the role of auditing and the relevance of audit reports

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Audit reports and stock markets

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Female Audit Partners and Extended Audit Reporting: UK Evidence

This study investigates whether audit partner gender is associated with the extent of auditor disclosure and the communication style regarding risks of material misstatements that are classified as key audit matters (KAMs). Using a sample of UK firms during the 2013–2017 period, our results suggest that female audit partners are more likely than male audit partners to disclose more KAMs with more details after controlling for both client and audit firm attributes. Furthermore, female audit partners are found to use a less optimistic tone and provide less readable audit reports, compared to their male counterparts, suggesting that behavioural variances between female and male audit partners may have significant implications on their writing style. Therefore, this study offers new insights on the role of audit partner gender in extended audit reporting. Our findings have important implications for audit firms, investors, policymakers and governments in relation to the development, implementation and enforcement of gender diversity

Investor reactions to disclosures of material internal control weaknesses

Purpose – The purpose of this paper is to examine investor reactions to material internal control weakness disclosures. In particular, the abnormal returns, the change in volatility, and the change in systematic risk are analyzed around auditors' material weakness reports. Design/methodology/approach – The sample consists of 342 firms with initial Sarbanes-Oxley Act, Section 404 weakness disclosures issued between 2005 and 2007. The paper uses three measures for investor reactions: abnormal returns and the change in volatility and systematic risk. The hypotheses of the paper are investigated using univariate analysis. Findings – The initial results imply surprisingly that the material weakness disclosure is good news to investors. However, after controlling for the preceding management's internal control disclosure, the results show that the abnormal reaction is positive only when the audit report is consistent with the preceding management report. In addition, the results show a significant change in volatility after the auditor's weakness disclosure. Research limitations/implications – These results imply that the investor reactions to auditors' material weakness disclosures depend on the content of the preceding report issued by management: there is a positive reaction if management has identified and reported the existing material weaknesses before the auditor, and a negative reaction when management has failed to identify or report the material weaknesses before the auditor. Originality/value – The findings of this paper emphasize that the value of the information contained in the auditors' material internal control weakness disclosures vary significantly depending on management disclosures.Disclosure, Internal control, Investors

Mukautetun tilintarkastuskertomuksen julkistamisen vaikutus osakkeen tuottoon

Tutkielman tarkoituksena oli tutkia mukautetun tilintarkastuskertomuksen julkistamisen vaikutusta osakkeen tuottoon. Tutkimuksen tulosten perusteella voitiin tehdä johtopäätöksiä sijoittajien kiinnostuksesta tilintarkastuskertomusta kohtaan sekä mukautetun tilintarkastuskertomuksen informaatiosisältöön. Tässä tutkimuksessa tilintarkastuskertomuksen julkistamisajankohtana tarkasteltiin sen allekirjoituspäivää. Empiirinen aineisto koostui suomalaisten pörssiyhtiöiden vuosina 1991–2002 saamasta 23 mukautetusta tilintarkastuskertomuksesta. Mukautetun tilintarkastuskertomuksen julkistamisen vaikutusta osakkeen tuottoon tutkittiin event study -menetelmällä testaamalla odotetuista tuotoista poikkeavien päivittäisten epänormaalien tuottojen tilastollista merkitsevyyttä. Empiirisen tutkimuksen perusteella mukautetun tilintarkastuskertomuksen julkistamisella on vaikutusta osakkeen tuottoon. Negatiivisia epänormaaleja tuottoja todettiin allekirjoituspäivänä ja sitä seuraavana päivänä. Tulosten perusteella sijoittajat kiinnittävät huomiota tilintarkastuskertomuksen sisältöön. Tutkimuksessa mukautetun tilintarkastuskertomuksen on osoitettu sisältävän sellaista uutta informaatiota, joka vaikuttaa negatiivisesti yhtiön osakkeen tuot-toon.fi=Kokotekstiversiota ei ole saatavissa.|en=Fulltext not available.|sv=Fulltext ej tillgänglig