Market Reaction to the Going-Concern Modified Audit Opinions of Public Companies After the IFRS Adoption

Silva, Adolfo; Sancovschi, Moacir; Lourenço, Thaina da Silva

doi:10.2139/ssrn.3388031

Cited by 3 publications

(4 citation statements)

References 9 publications

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“…al (1984) who analyzed US companies and concluded that GC audit opinion does not have a significant impact on the abnormal return around the disclosure date. Our results are also in line with many previous studies which found no association between going concern audit opinion and abnormal return (see: in Brazil, Silva et. al., 2017;in Indonesia, Samudera, 2017;in China, Czernkowski et.…”

Section: The Results Of the Non-parametric-one Sample T-testsupporting

confidence: 94%

“…This assumption means that the company's operations will continue for the foreseeable future. When the auditor determines that there is a material uncertainty (such as a case of bankruptcy or financial distress) about going concern and the company uses the going concern basis in the appropriate form and discloses all events that prevent it from continuing in the future, the auditor include these disclosures in their opinion in a separate section (material uncertainty), if it does not disclose, the auditor expresses a qualified or Adverse opinion, but when the company inappropriate use of going concern basis, the auditor issues an adverse opinion, Disclaimer opinion issues by auditor in some cases involving several material uncertainties (ISA 570 ;Silva et. al., 2017;Yang et.…”

Section: Audit Opinion and Going Concern Modificationmentioning

confidence: 99%

“…This study seeks to investigate the market's reactions to the release of the external auditor's report which contains a GCM. Many previous studies measured the market reaction using abnormal returns calculated by the difference between actual and expected returns (Menon and Williams, 2010;Silva et. al., 2017;Brunelli et.…”

Section: Table 1 Sample Breakdownmentioning

confidence: 99%

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Going Concern Audit Opinion and Market's Reaction

Altawalbeh,

Alroud

2023

IJARAFMS

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This study aimed to investigate the market reaction to the release of the independent auditor's opinion accompanied by going concern modification (GCM) whether the type of report is unqualified or a qualified audit opinion. The study population consisted of all public shareholding companies listed on the Amman Stock Exchange (ASE) except for the financial sector while the study sample consisted of those companies whose auditor's report included a GCM for the period 2017-2021. The event study method was used to analyze the market's reactions measured by CAARs. we used a short event window of 15 days;7 days before and after the release of the audit report, in addition to day zero in which the announcement is made. The data for the study was collected manually through the financial reports and through the market bulletin published on the ASE website. The study used a non-parametric one-sample T-test to examine the hypotheses. The results revealed that there was no statistically significant effect of the going concern audit opinion on the stock prices whether accompanied by unqualified or qualified audit reports. These results can be justified based on the argument of Blay & Gregor (2001), who reported that the market may not be affected significantly by the expected going concern opinion, while the market will react significantly and negatively to unexpected modifications, It is worth noting that the Corona pandemic has permeated the current study period, and therefore the investor may have a high expectation of financial distress that may affect going concern assumption, therefore, we recommend that this study be extended in other periods.

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Section: The Results Of the Non-parametric-one Sample T-testsupporting

confidence: 94%

Section: Audit Opinion and Going Concern Modificationmentioning

confidence: 99%

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Going Concern Audit Opinion and Market's Reaction

Altawalbeh,

Alroud

2023

IJARAFMS

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“…The inconsistent findings in developing markets may be due to the determination of an event window that is not long enough to investigate market reactions around the announcement date on stock markets. For example, Czernkowski et al (2010) and Silva et al (2017) did not find a significant reaction using an event window of three days (-1, +1). Similarly, Anulasiri et al (2015) and Moradi et al (2011) used an event period of 9 and 11 days, respectively, i.e.…”

Section: Table 5 Timeline Illustration Of Different Event Dates Used ...mentioning

confidence: 95%

Market Reaction to Modified Audit Opinions: A Systematic Literature Review in Both Developed and Developing Countries

Amine El Badlaoui,

Mariam Cherqaoui,

Issam Er-Rami

2023

aamjaf

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The purpose of this paper is to review the empirical literature on value relevance of audit reports by providing current evidence on the market reaction to modified audit opinions (MAOs). This study is motivated by the argument that recent research has resolved the research designs problems raised by the pre-2010 studies that resulted in unmitigated and contradictory results. We adopt a systematic literature review based on the guidelines presented by Kitchenham et al. to review papers published between 2010 and 2020. The main findings of our review show sufficient evidence that MAOs are indeed useful to investors in making decisions in developed countries, which is evidenced by the fact that the MAOs have a negative effect on the share prices of companies. In contrast, evidence from studies conducted in developing countries shows null market reaction to MAOs, with the exception of the Chinese market, which shows a significant reaction. The methodological limitations and alternative causes behind the null market reaction to MAOs of studies conducted in developing countries are discussed in this paper.

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Value relevance of audit opinions in an emerging market: evidence from Morocco

Badlaoui

Cherqaoui

2023

JFRA

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Purpose This paper aims to determine whether audit opinions in Morocco, an emerging market, are value relevant to the stock market, through the investigation of the market reaction to the issuance of modified audit opinions (MAOs). Design/methodology/approach The event study approach is used. The data are derived from the financial reports of listed companies on the Casablanca Stock Exchange over a period of 10 years from 2010 to 2019. Findings This paper does not find evidence that the market reacts to the issuance of MAOs when grouped together. When partitioning the sample by types, there is an evidence of a stock market reaction to qualified audit opinions and the qualified audit opinions with observation paragraph when they are combined with a negative variation of earnings per share. Examination of the impact of different natures of qualifications shows no consistent results and that the market does not distinguish between natures of qualifications. Research limitations/implications These results may be due to the fact that some investors have information about the audit opinion long before it is made public, due to privileged access to audit opinions, or that investors underestimate audit opinions relative to other financial indicators. Originality/value This study contributes to the existing literature by investigating an emerging market, not previously tested, after the introduction of several regulatory reforms in Moroccan market aimed at enhancing transparency in financial reporting. It refines the market reaction models used in previous studies by using both ordinary least squares and the Scholes–Williams techniques that correct for the effect of thin trading on the market index. In addition, special attention is given to studying the market reaction to each type of MAOs and to each natures of qualifications.

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Market Reaction to the Going-Concern Modified Audit Opinions of Public Companies After the IFRS Adoption

Cited by 3 publications

References 9 publications

Going Concern Audit Opinion and Market's Reaction

Going Concern Audit Opinion and Market's Reaction

Market Reaction to Modified Audit Opinions: A Systematic Literature Review in Both Developed and Developing Countries

Value relevance of audit opinions in an emerging market: evidence from Morocco

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