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Determinants and market valuation of the decision to audit or review: Evidence from Taiwan

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  • Lin, Hsiao-Lun
  • Yen, Ai-Ru

Abstract

Using observations of public companies in Taiwan between 2008 and 2012, this study examines the determinants of demand for different assurance services from the perspectives of agency cost, information need, and quality of corporate governance. Our results indicate that the demand for audit assurance is higher in the presence of higher agency costs between controlling and non-controlling shareholders and higher agency costs of debts. We also find that companies with stronger capital need are more likely to have their interim financial statements audited. The quality of corporate governance is found to have a positive effect on the decision to choose audit assurance. Finally, our empirical results demonstrate audited information is more value relevant than reviewed information. This suggests that firms can potentially enjoy benefits from audited information as the market will rely more on their financial information in making investment-related decisions.

Suggested Citation

  • Lin, Hsiao-Lun & Yen, Ai-Ru, 2017. "Determinants and market valuation of the decision to audit or review: Evidence from Taiwan," Journal of Contemporary Accounting and Economics, Elsevier, vol. 13(3), pages 209-224.
    • Handle: RePEc:eee:jocaae:v:13:y:2017:i:3:p:209-224
    DOI: 10.1016/j.jcae.2017.09.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Motivation; Audit; Review; Interim reports;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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