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Purpose – The purpose of this paper is to examine investor reactions to auditor opinions containing qualifications or an emphasis of matter paragraph related to going concern uncertainty or financial distress. In particular, abnormal returns are analyzed around audit report dates. Design/methodology/approach – The event study methodology, focusing on a short event window, was used to determine whether there is an immediate market reaction to the audit report announcement, as might be expected assuming efficient stock markets. Findings – Overall, this analysis shows that the audit reports investigated have information content for investment decisions. In particular, the qualifications expressed in the audit report have a negative effect on stock prices. It is also shown that an unqualified opinion with an emphasis of matter paragraph regarding going concern uncertainty or financial distress has a positive effect on stock prices. These results also elucidate the distinction between different types of opinions in the Italian context. Research limitations/implications – This paper has attempted to limit the possible concurrent effects on stock prices using a short window event study methodology. However, the possibility that some other event may have occurred during this event window cannot be excluded. Among the policy implications coming from this research, it is argued that the authorities should regulate the public disclosure of audit reports, so that the information becomes available to the audited company and the other stakeholders on the same day, which, in theory, would be the day that the audit process concludes with the signing of the audit report. Originality/value – The findings of this paper show the relevance of audit reports, distinguishing the different impacts based on the types of audit opinions issued in a specific jurisdiction (qualified and unqualified with an emphasis of matter paragraph).

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ABSTRACT. Following the consequences of the global financial crises, transparency and efficiency conditions of a local economic system have become important remedies for restoring of financial markets. This study provides measure of transparency and efficiency with correlation to liquidity and volatility and is taking into account the stock price reaction of emerging financial stock markets of Eastern Europe area and Turkey. We find that observed countries don't fully answer the expected sign of transparency, liquidity and risk measure, which meets the innovation from previous works (Berglöf, Pajuste, 2005). It raises doubts concerning functioning of legal basement in these countries and affects the decisions about investments. In line with previous research (Ivanov, Lomev and Bogdanova, 2012) our findings show that these countries don't prove to have certain transparency expectations, which could result in a limited access to market information and in a decrease of market efficiency.