Do audit opinions reflect earnings persistence?

Abstract

Purpose – The purpose of this paper is to examine the association between audit opinion and earnings persistence of listed companies in Thailand from 2004 to 2008. Design/methodology/approach – We use archival data and hand collected data in regression analysis. Content analysis was used to perform decomposition analysis of audit modifications. Findings – Firms receiving modified opinions have lower earnings persistence than firms receiving unqualified opinions, and the degree of earnings persistence varies among types of modifications. We find that firms with a qualified opinion or a disclaimer have lower earnings persistence than firms receiving an unqualified opinion with an emphasis of matter (UEM). However, we find no difference in earnings persistence between firms receiving a qualification and a disclaimer. Content analysis reveals that there is information in certain types of modified opinions with respect to earnings quality. Firms receiving a scope limitation qualification and a going concern disclaimer have lower earnings persistence than firms receiving an UEM due to going concern issues. Research limitations/implications – Audit modifications reflect different degrees of problematic issues in clients’ firms, resulting in different impacts on earnings persistence. Thus, policymakers and regulators should emphasize the importance of using auditors’ reports. Strengthened enforcement by regulators makes individual auditors more aware of reputation risk and more likely to express appropriate audit opinions. Originality/value – We examine a broader set of modified audit opinions than those used in prior research. Our study offers the opportunity to examine the association between earnings persistence and different types of modified opinions, especially a disclaimer, which has been rarely found in prior research.

Auditor Reputation, Audit Opinion, and Earnings Management: Evidence From French Banking Industry

“…Thus, audit opinion is negatively related to discretionary accruals in the case of the Romanian listed companies. Vichitsarawong and Pornupatham (2015) found that firms receiving modified opinions have lower earnings persistence than firms receiving unqualified opinions, and the degree of earnings persistence varies among types of modifications.…”

Pengaruh Moderasi Opini Audit Terhadap Persistensi Laba

“…Auditor akan mengeluarkan opini audit sebagai hasil dari proses audit yang telah dilakukan yang menunjukkan tingkat kewajaran laporan keuangan perusahaan (Tobing & Nirwana, 2004). Opini audit berperan penting bagi pengguna laporan keuangan, seperti investor, kreditor, dan para pemegang saham perusahaan karena dapat memberikan keyakinan bagi para pengguna laporan keuangan apakah informasi yang disajikan dalam laporan keuangan sudah sesuai dengan keadaan perusahaan yang sebenarnya dan standar akuntansi yang berlaku (Osesoga dan Ardianto, 2011).…”

“…Auditor akan memeriksa bukti atas informasi dalam laporan keuangan yang bertujuan untuk menentukan apakah laporan keuangan sudah tersaji sesuai dengan asersi yang telah ditentukan, yaitu keberadaan (occurence) atau keterjadian (existence), kelengkapan (completeness), hak dan kewajiban (rights and obligations), penilaian (valuation), penyajian dan pengungkapan (presentation and disclosure) (Arens, Elder, Beasley, & Hogan, 2012). Nantinya, auditor akan mengeluarkan opini atau pendapat atas kewajaran laporan keuangan sebagai hasil dari pemeriksaan yang telah dilakukan pada laporan keuangan perusahaan (Tobing & Nirwana, 2004 aspek yang bersifat material (Julianto, 2010).…”

Influência da Opinião do Auditor no Retorno das Ações das Empresas Brasileiras de Capital Aberto

“…É esperada uma relação positiva com o retorno das ações, pois se espera que as empresas tenham sido auditadas por empresas com maior expertise (Pornupatham, 2015;Robu & Robu, 2015;Banimahd et al, 2013;Arruda et al, 2012); Risco = variável representativa de dependência financeira, sendo a relação entre passivo total e ativo total. Reflete a presença de capital de terceiros, de longo prazo, na estrutura de capital da firma, esperando-se uma relação negativa com o retorno (Pornupatham, 2015;Batista, Pereira, Silva & Imoniana, 2010); ROA = representativa de desempenho, sendo a relação entre o lucro operacional e a diferença entre ativo total e lucro líquido. Espera-se que o maior desempenho impacte positivamente no retorno das ações (Robu & Robu, 2015;Ianniello & Galloppo, 2012); Tam = logaritmo do ativo total.…”

“…Espera-se que o maior desempenho impacte positivamente no retorno das ações (Robu & Robu, 2015;Ianniello & Galloppo, 2012); Tam = logaritmo do ativo total. É esperado que empresas maiores apresentem maiores retorno das ações (Pornupatham, 2015;Czernkowski et al, 2010); Mg = margem líquida, calculada pela relação entre lucro líquido e receitas de vendas. O resultado esperado com o retorno é positivo (Robu & Robu, 2015); Liqseca = liquidez seca, calculada pela relação entre a diferença de ativo circulante e itens não caixa com o passivo circulante.…”