The relevance of financial information and contents of the new audit report for lending decisions of commercial banks

Trpeska, Marina; Atanasovski, Atanasko; Lazarevska, Zorica Bozinovska

doi:10.24818/jamis.2017.04002

Cited by 21 publications

(16 citation statements)

References 16 publications

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“…Previous archival research exhibited heterogeneous results. Some studies supported the additional information value of KAMs and found that information asymmetry significantly decreased and abnormal trade volume profoundly increased following the implementation of the KAMs disclosures (Almulla and Bradbury, 2018;Reid et al, 2015;Smith, 2017;Trpeska et al, 2017;Porump et al, 2018). Experimental research focuses on the impact of KAMs on individuals' behavior.…”

Section: ⅱ Theory and Hypothesesmentioning

confidence: 96%

“…Velte and Issa (2019) reviewed 49 empirical studies on KAMs based on five major streams, including shareholders, debtholders, external auditors, boards of directors, and other stakeholders. Most studies focused on the effect of KAMs on investors' decision and reaction (Christensen et al, 2014;Kachelmeier et al, 2017;Rapley et al, 2018;Almulla and Bradbury, 2018;Trpeska et al, 2017;Porump et al, 2018;Bedard et al, 2018;Gutierrez et al, 2018). Although regulators require auditors to disclose KAMs in the audit report, the adequacy of the description of a KAM is a matter of professional judgment (IAASB, 2015).…”

Section: ⅰ Introductionmentioning

confidence: 99%

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The Interactive Effect of Key Audit Matters' Form and Content on Investors' Information Processing and Decision Making: Evidence from an Eye-Tracking Study.

Xu¹

2020

Preprint

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Using an eye-tracking and electrodermal device, this study investigates how readability and familarity of the Key Audit Matters (KAMs) jointly affect investors' attention and assessment of risk associated with KAMs. We predict and find that only when investors are familiar with the information discussed in the KAM, readability will affect their visual attention to the KAMs. When investors are unfamiliar with KAMs, professional skepticism becomes the main driver of their attention allocation. Furthermore, we distinguish dedicated visual attention and absent-minded visual attention, arguing that the positive correlation only exist between dedicated visual attention on the information and the relative importance of each information in decision-making. Consistent with this argument, we prove that Why (How) Paragraph plays a more important role in risk assessment when investors are unfamiliar (familiar) with the KAM. Our results should be of interest to regulators and auditors as they consider what and how to communicate KAMs in the audit report.

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Section: ⅱ Theory and Hypothesesmentioning

confidence: 96%

Section: ⅰ Introductionmentioning

confidence: 99%

The Interactive Effect of Key Audit Matters' Form and Content on Investors' Information Processing and Decision Making: Evidence from an Eye-Tracking Study.

Xu¹

2020

Preprint

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“…; Bédard et al,2019;Bava & di Trana,2019; (Bundy,2019Akande et al,2020Casterella et al,2020;Dhaliwal et al,2020;Maffei et al,2020 (Guillamon,2003;Pucheta et al,2004;carcello et al,2009;Omri et al,2011;Kabajeh et al .2012;Feldmann&Read,2013;Christensen et al,,2014;Gyau et al ,2016;Chen Trpeska et al ,2017;Sirois et al, ck, 2016;et (Pucheta et al,2004;carcello et al, 2009;Bhimani et al,2009;Omri et al, 2011;Kabajeh et al, (Noghondari and Foong, 2013;Sormunen,2014;Miazee et al,2014;Mishra& Metilda,2015;Boolaky & Quick,2016;Trpeska et al,2017;Almilia and Wulanditya,2017;Samad,2017;Näsman, 2019 Sig. (2-tailed) .…”

Section: ‫ملخص‬ ‫البحث‬mentioning

confidence: 99%

أثر التعدیلات فى شکل ومحتوى تقریر مراقب الحسابات وفقاً لمعیار المراجعة الدولی رقم (570) المعدل لسنة 2015 بشأن الإستمراریة على قراری الإستثمار ومنح الإئتمان: دراسة تجریبیة

الرحيم¹,

محمـد²

2020

مجلة الاسکندریة للبحوث المحاسبیة

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The IAASB Board issued the revised International Standards on Auditing (ISA 570) for the year 2015 as an amendment to the same standard that was previously issued in 2008. These changes came in response to the request of many stakeholders in general, investors and creditors in particular. The procedures in the standard included amendments regarding the procedures that the auditor performs in the context of his judgment on the sound application of management by the basis of going concern, and modifications related to his findings and their impact on his report. As a result of the modifications in the form and content of the International Standard for Auditing on Going Concern, the informational content, which will be included in the auditor's report, will differ with regard to his judgment on the appropriateness of management's application of the Going Concern basis of accounting, and therefore it is expected that these amendments will affect the decisions to invest in stocks and give credit to companies, Compared to his Egyptian counterpart now in force. The study found that the amendments in the form and content of the auditor's report on Going Concern, according to ISA 570 amended for the year 2015, have a significant impact on investment and credit granting decisions in Egypt as the revised standard provides an increase in the auditor's responsibilities needed by stakeholders in general and investors and creditors in particular .The study also found that there is a significant effect of qualifying both investors and creditors on the relationship under study in light of the modified standard on Going Concern, while there is no effect of the investor's experience on his decision to invest, whether in light of the modified or current standard on Going Concern, contrary to the results with a significant effect of experience Credit granters have a decision to grant credit under the revised International Standard on Going Concern. Finally, the study found that there is no significant effect of the two variables of scientific qualification and experience together on investment and granting credit decisions considering the modified or current standard regarding Going Concern.

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“…This prior research is not specifically focused on going concern related key audit matters and shows mixed results (e.g. Bé dard, Coram, Espahbodi, & Mock, 2016;Boolaky & Quick, 2016;Bozinovska Lazarevska & Serafimoska Trpeska, 2016;Christensen, Glover, & Wolfe, 2014;Cordoş & Fülöp, 2015b;Evers, Van Buuren, & Van Nieuw Amerongen, 2019;Gold & Heilmann, 2019;Masdor & Shamsuddin, 2018;Sirois, Bé dard, & Bera, 2018;Trpeska, Atanasovski, & Bozinovska Lazarevska, 2017). According to a review study by Masdor and Shamsuddin (2018), going concern issues are not in the top 4 of reported key audit matters.…”

Section: /A26 + or --Yes/nomentioning

confidence: 99%

“…Therefore, we consider the introduction of this heading mainly as a cosmetic adjustment. Based on a survey study, Trpeska, Atanasovski, and Bozinovska Lazarevska (2017) find that loan officers consider information about a material uncertainty related to going concern as highly important, however with a rating similar to the rating given to the emphasis of matter paragraph as included in the previous auditor"s report format.…”

Section: /A26 + or --Yes/nomentioning

confidence: 99%

Company Management’s and Auditor’s Reporting on Going Concern: Discussion of the Current International Regulatory Framework

Woudenberg

Dijk

Kamerling

2019

ijafr

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In this study, we discuss if the current (international) regulatory framework regarding accounting and auditing provides an adequate basis for both company management and the auditor to report (accurately and informatively) on going concern.Overall findings indicate that from a theoretical perspective the changes made in the design of the framework since the last global economic crisis contribute to more accurate and informative reporting on going concern. This starts with an increased focus on substantiated reporting on long-term value creation and continuity in the U.K. and Dutch corporate governance codes. Furthermore, the current Dutch and U.S. accounting standards increasingly pay attention to reporting on going concern. Also several changes in the Dutch, international and (partly) U.S. auditing standards could have a positive impact, such as the requirement to state the responsibilities of both company management and the auditor in each auditor’s report, and the introduction of key audit matters offering the possibility to report on going concern risks and the audit procedures performed.There is, however, still room for improvement. It seems that various standard setters have determined their own route and pace, which may have kept them from implementing more progressive proposals such as a conclusion and a statement on going concern in each auditor’s report. As a result, the exception-based reporting model is still largely retained. Further progress can be made by implementing a so-called holistic approach to ensure that the responsibilities of company management and the auditor are aligned, and by striving for more international convergence.

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The relevance of financial information and contents of the new audit report for lending decisions of commercial banks

Cited by 21 publications

References 16 publications

The Interactive Effect of Key Audit Matters' Form and Content on Investors' Information Processing and Decision Making: Evidence from an Eye-Tracking Study.

The Interactive Effect of Key Audit Matters' Form and Content on Investors' Information Processing and Decision Making: Evidence from an Eye-Tracking Study.

Company Management’s and Auditor’s Reporting on Going Concern: Discussion of the Current International Regulatory Framework

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