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An Empirical Investigation of Determinants of Audit Reports in the UK

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  • Jennifer C. Ireland

Abstract

Prior studies of audit reporting in the UK only analyse either very small, private companies, or large listed companies. In addition, these studies focus on narrowly defined types of modified audit reports, respectively the ‘small company’ audit qualification, and going‐concern related modifications. In contrast, this paper employs a multinomial logit model to analyse the determinants of both going‐concern and non going‐concern related audit modifications, including modifications for disagreements and limitations on scope. Furthermore, this paper analyses reports over a wide range of both private and public (listed and non‐listed) companies. The determinants of audit reports are shown to differ between different types of audit modification. In addition, subsidiary companies hiring large auditors are significantly less likely to receive non going‐concern related modifications, whereas non‐subsidiary companies hiring large auditors are significantly more likely to receive going‐concern related modifications.

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  • Jennifer C. Ireland, 2003. "An Empirical Investigation of Determinants of Audit Reports in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 975-1016, September.
    • Handle: RePEc:bla:jbfnac:v:30:y:2003:i:7-8:p:975-1016
    DOI: 10.1111/1468-5957.05417
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    1. Pasiouras, Fotios & Gaganis, Chrysovalantis & Zopounidis, Constantin, 2010. "Multicriteria classification models for the identification of targets and acquirers in the Asian banking sector," European Journal of Operational Research, Elsevier, vol. 204(2), pages 328-335, July.
    2. Maria Tsipouridou & Charalambos Spathis, 2014. "Audit opinion and earnings management: Evidence from Greece," Accounting Forum, Taylor & Francis Journals, vol. 38(1), pages 38-54, March.
    3. Musa Success Jibrin & Success Ejura Blessing & Iyaji Danjuma, 2014. "The Role of Auditors in the Recent Nigerian Banking Crisis," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(3), pages 231-251, March.
    4. Wan-Hussin, Wan Nordin, 2009. "The impact of family-firm structure and board composition on corporate transparency: Evidence based on segment disclosures in Malaysia," The International Journal of Accounting, Elsevier, vol. 44(4), pages 313-333, December.
    5. Agustín J. Sánchez-Medina & Félix Blázquez-Santana & Jesús B. Alonso, 2019. "Do Auditors Reflect the True Image of the Company Contrary to the Clients’ Interests? An Artificial Intelligence Approach," Journal of Business Ethics, Springer, vol. 155(2), pages 529-545, March.
    6. Chrysovalantis Gaganis & Fotios Pasiouras & Charalambos Spathis & Constantin Zopounidis, 2007. "A comparison of nearest neighbours, discriminant and logit models for auditing decisions," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 15(1‐2), pages 23-40, January.
    7. Dusica STEVCEVSKA SRBINOSKA, 2022. "Audit modifications in emerging markets: The Macedonian Stock Exchange," Romanian Journal of Economics, Institute of National Economy, vol. 55(2(64)), pages 43-69, December.
    8. Persakis, Anthony & Iatridis, George Emmanuel, 2016. "Audit quality, investor protection and earnings management during the financial crisis of 2008: An international perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 73-101.
    9. Chrysovalantis Gaganis, 2009. "Classification techniques for the identification of falsified financial statements: a comparative analysis," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 16(3), pages 207-229, July.
    10. Arber H. Hoti & Hysen Ismajli & Skender Ahmeti & Arben Dermaku, 2012. "Effects of Audit Opinion on Stock Prices: The case of Croatia and Slovenia," EuroEconomica, Danubius University of Galati, issue 2(31), pages 75-87, May.
    11. Pasiouras, Fotios & Gaganis, Chrysovalantis & Zopounidis, Constantin, 2007. "Multicriteria decision support methodologies for auditing decisions: The case of qualified audit reports in the UK," European Journal of Operational Research, Elsevier, vol. 180(3), pages 1317-1330, August.
    12. Yihan Guo & Deborah Delaney & Ammad Ahmed, 2020. "Is an Auditor's Propensity to Issue Going Concern Opinions a Valid Measure of Audit Quality?," Australian Accounting Review, CPA Australia, vol. 30(2), pages 144-153, June.
    13. Santiago Lago-Peñas & Mercedes Mareque Álvarez-Santullano & Elena Rivo-López & Mónica Villanueva-Villar, 2017. "Determining factors for audit opinion in private family and non-family firms. Evidence from Spain," Working Papers. Collection C: Family business 1701, Universidade de Vigo, GEN - Governance and Economics research Network.
    14. Michael Doumpos & Chrysovalantis Gaganis & Fotios Pasiouras, 2005. "Explaining qualifications in audit reports using a support vector machine methodology," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 13(4), pages 197-215, December.
    15. David Abad & Juan P. Sánchez-Ballesta & José Yagüe, 2017. "Audit opinions and information asymmetry in the stock market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(2), pages 565-595, June.
    16. Carrera, Nieves & Mareque, Mercedes, 2023. "Does gender affect qualifying decisions? Evidence from public sector audits," Journal of Business Research, Elsevier, vol. 154(C).
    17. Pasiouras, Fotios & Tanna, Sailesh & Zopounidis, Constantin, 2007. "The identification of acquisition targets in the EU banking industry: An application of multicriteria approaches," International Review of Financial Analysis, Elsevier, vol. 16(3), pages 262-281.
    18. Ahmed A. Diab & Samir I. Abdelazim & Aref M. Eissa & Eid Mahmoud Abozaid & Mona Mohamed Elshaabany, 2021. "The Impact of Client Size and Financial Performance on Audit Opinion: Evidence from a Developing Market," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 10, January.
    19. Chrysovalantis Gaganis & Fotios Pasiouras & Charalambos Spathis, 2013. "Regulations and Audit Opinions: Evidence from EU Banking Institutions," Computational Economics, Springer;Society for Computational Economics, vol. 41(3), pages 387-405, March.
    20. Geiger, Marshall A. & Basioudis, Ilias G. & DeLange, Paul, 2022. "The effect of non-audit fees and industry specialization on the prevalence and accuracy of auditor’s going-concern reporting decisions," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    21. Hassan, Omaima A.G. & Skinner, Frank S., 2016. "Analyst coverage: Does the listing location really matter?," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 227-236.
    22. González-Díaz, Belén & García-Fernández, Roberto & López-Díaz, Antonio, 2015. "Auditor tenure and audit quality in Spanish state-owned foundations," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 18(2), pages 115-126.

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