No Title The usefulness of the audit report in investment and financing decisions

Author

Year

Antonio Durendez GomezGuillamon

2003

The effect of qualied auditors opinions on share prices: evidence from Jordan

Ali A. Al-Thuneibat, Basheer Ahmad Khamees and Nedal A. Al- 2008 Fayoumi

The inuence of the auditors Sandra Waller Shelton , O. Ray report on investors evaluations Whittington after the Sarbanes-Oxley Act

2008

Journal Publication Title

Object The importance of auditors' opinion when taking financial and investment decision

Managerial Auditing Journal

The effect of the qualied audit Managerial Auditing Journal Vol. reports on shares prices and returns 23 No. 1, 2008 pp. 84-101 in Jordan.

The qualied audit reports of the shareholding companies in Jordan during the period 2000-2005

Managerial Auditing Journal Vol. 23 No. 2, 2008 pp. 142-160

How differences in opinions on the material weaknesses identied in the auditors assessment of the nancial statements, and the auditors assessment of internal control affect investment analysts assessment of the nancial strength of the company and willingness to recommend the stock for purchase to clients

How the auditors opinion on managements assessment of internal control affects investment analysts assessment, providing additional evidence of the appropriateness of the elimination of this requirement under Auditing Standard No. 5

Hypothesis

Population Sample

H1 : credit institutions perceive that the information given by the auditor's opinion Credit institutions : risk department is "not useful" when making their ,analysts : the manager of the company financing decisions Credit institutions includes all the credit banks , saving banks , and land banks registered in spanish central bank (231 entities : 88 credit banks , 48 saving banks , 95 land banks) Analyst listed in spanish stock exchange commission (104 entities)

H2 : Analysts perceive that the information is "not useful" when making their investment decisions

Random selection of individuals

H1 : The qualied audit report has a signicant effect on share prices of the shareholding companies in Jordan.

All shareholding companies with qualied audit reports that were disclosed with the ASE on a clear date. The researchers surveyed the reports of all shareholding companies in Jordan from all sectors looking for qualied reports.

H2 : The qualied audit report has no signicant effect on share prices of the shareholding companies in Jordan.

Found that 92 of the companies had their reports qualied during the period 2000-2005

A number of companies who had their reports qualied were excluded from the sample in the study because of the following reasons. For 27 companies, the date of disclosing the reports with the ASC was not clear. Second, for 23 companies, the information about the stock prices was not available over the full test and estimation periods. Thus, the nal number of 42 companies were entered into the analysis

Data Collection Method Questionnaires were sent from 12-16 April 2000 and sent again 9-14 May 2000, the deadline 14 June.Using post and fax

Data Analysis Method

Reliability of questionnare : Cronbach's alpha method

Questionnaires were made in closed ended Begins with and exploratory study after format and using likert scale 1-5 hypothesis test

79 questionnaires from credit entities (19 banks , 26 savings banks , 34 land banks) and 33 from analysts (14 dealers , 17 brokering companies)

Hypothesis was tested with non parametric Chi square test and parametric t-test

Factor analysis,Logistic regression test

Measure the change in share prices and returns as a result of the qualied opinions effect.on the date of delivering the audit report to the ASE. If there is an abnormal The estimation period is the period used to return on that date, this means that there is estimate the parameters of the regression an information content of the qualied line to estimate the expected returns audit report. If there is no abnormal return, then there is no information content of the qualied audit report.

Determine the appropriate date that can be To determine the effect of the qualied considered the date the auditors opinion audit reports on share prices and returns, will affect the prices the researchers used a market-based study

The date of the end of the eld work, which represents the date of the auditors report is not necessarily the same date of writing the report, that is the auditor may prepare his report some days after the end of the eld work. Thus, this date will not represent a date that can reect the effect of the auditors opinion.

At the date of writing the report, the opinion is still private information

At the date of delivering the report to Amman Stock Exchange (ASE), the report will be declared to the public and therefore this date will represent the best date for investigating the effect of the qualied opinions on shares prices.

Conclusion

Credit entities consider the presentation of the audit reportt as something essential

The most relevant information when granting loan : personal knowledge , FS , audit report , good references , tax returns , private databases

The type of opinion given by the auditor influences their lending decisions (credit , saving, land , analysts) The most influence on financing decision : going concern uncertainties , asset valuation errors , non fulfilment of legal regulations , scope limitations , relationships with group and associated companies , tax uncertainties , non fulfilment of accounting standards The lack of usefulness of the audit report in lending decisions made by banks , and in investment decisions , carried out by dealers and brokering companies

There is no clear pattern of stock reactions

There is no clear or signicant effect of the qualied audit opinion on share prices and returns on the date of the announcement or during the measurement window. This conclusion may suggest that the readers of the audit report do not understand its meaning or appreciate its value.

Need for educating the users of the audit report about its role and the need for extending this study to investigate the effect of qualied audit reports on share prices and returns during other time periods and using different test periods other than the announcement date.