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Audit opinion impact in the investors’ perception – empirical evidence on Bucharest Stock Exchange

Author

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  • Tatiana Danescu

    (“Petru Maior” University from Tirgu Mures, Romania)

  • Ovidiu Spatacean

    (“Petru Maior” University from Tirgu Mures, Romania)

Abstract

The integrity and credibility of financial statements are sensitive aspects that significantly influence the investors’ confidence in the capital market efficiency. Recent research in the area of (re)establishing effective communication between the auditor and the investors have brought into the attention of audit practitioners the provisions of International Standard on Auditing (ISA) 701 “Communicating Key Audit Matters in the Independent Auditor’s Report.” This approach proves that investors demand more information that accompanies the audit opinion, when forming a decision to buy, hold or sell equity instruments. Our research is focused on identifying, isolating and analyzing the significant changes in financial asset trading prices, as a consequence of publishing the auditor report. Thus, the overall objective is to assess the impact of the modified opinion, expressed by the auditor in accordance with ISA 705 “Modifications to the Opinion in the Independent Auditor’s Report”, upon the prices of financial assets. Subsequently, the specific objectives aim to identify quantifiable adjustments in the financial position of the entities and to analyze its impact on trading prices. Research is focused on a sample that consists of 32 listed entities, of which 25 entities are included in the BET-XT index and seven entities are traded on the alternative trading system AeRO, selected in relation to the liquidity degree measured by the BVB market operator. Our observations upon changes in financial asset prices were focused on 2009-2017 period, while the analized audit reports addressed the reporting periods from 2008 to 2016, included.

Suggested Citation

  • Tatiana Danescu & Ovidiu Spatacean, 2018. "Audit opinion impact in the investors’ perception – empirical evidence on Bucharest Stock Exchange," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 16(149), pages 111-111, February.
    • Handle: RePEc:aud:audfin:v:16:y:2018:i:149:p:111
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    References listed on IDEAS

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    1. S. P. Kothari & Susan Shu & Peter D. Wysocki, 2009. "Do Managers Withhold Bad News?," Journal of Accounting Research, Wiley Blackwell, vol. 47(1), pages 241-276, March.
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    Cited by:

    1. Nicolás Gambetta & Laura Sierra‐García & María Antonia García‐Benau & Josefina Novejarque‐Civera, 2023. "The Informative Value of Key Audit Matters in the Audit Report: Understanding the Impact of the Audit Firm and KAM Type," Australian Accounting Review, CPA Australia, vol. 33(2), pages 114-134, June.
    2. HAŢEGAN Camelia-Daniela, 2020. "Key Audit Matters At The Financial Services Companies: Are There Differences?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 168-178, December.
    3. Adewumi Ayodeji Davidson & Fakunle Isaiah Omotayo & Bamidele Matthew Mayor & Akomolehin Israel Akinwale, 2024. "Impact of Auditor’s Independence on Earnings Management of Listed Deposit Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(1), pages 1658-1670, January.
    4. Sierra-García, Laura & Gambetta, Nicolás & García-Benau, María A. & Orta-Pérez, Manuel, 2019. "Understanding the determinants of the magnitude of entity-level risk and account-level risk key audit matters: The case of the United Kingdom," The British Accounting Review, Elsevier, vol. 51(3), pages 227-240.
    5. Nicolás Gambetta & Laura Sierra García & María Antonia García Benau & Josefina Novejarque Civera, 2022. "The informative value of Key Audit Matters in the audit report," Documentos de Investigación 129, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.

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    More about this item

    Keywords

    Audit opinion; misstatement; audit adjustments; financial statements’ reliability; investors’ perception;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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