Research On The Information Content Of Auditing Opinion

Recently, research of information content becomes more and more popular. It is the core problem in positive research area in Accounting and Finance.It discusses whether there is a statistically significant effect on the decision-makers as soon as the information set exposes to the public. If there is a significant effect, we conclude the information set has information content. Otherwise, there is no information content. Since Ball & Brown'research (1968) on the information content of accounting data appears, similar researches have exploded, such as information content of asset restruction, choice of accounting policy, change of accounting firms, dividend policy and auditing opinion etc. There are a lot of researches on the information content of auditing opinion in the auditing academic circle, especially in America. How about information content of auditing opinion in the annual report of listed company in China? It is the subject of this dissertation. As we known, more and more modified opinions have been disclosed which provide good chance for us to research on the information content of auditing opinion. This dissertation designs to find the above quesetion's answer and do some suggestions for our security market and CPA profession. Five parts in this dissertation are as follows: We begin with the demonstration about the close relationship between Certified Public Accountant (thereafter we call CPA) and security market. After that, Question arises what is a role CPA plays in China's market. We show it from two aspects. First, we take a view on CPA'service framework according to current information disclosure system of listed company. Secondly, we describe and analyze the quality of auditing opinion information disclosure in listed company's annual report. Till now, CPA'importance in our market presents to us very clearly. Then, the following questions is coming up: Has CPA done good job as"watch dog "in China's security market? How to use positive data to test information content of auditing opinion? Are there some researches on the information content of auditing opinion home and abroad? Fortunately, we find some. In the second part, five relative research subjects illustrate one by one. They are the followings: research on the relationship between auditing opinion and shares price, research on the relationship between auditing opinion and loan decision, research on the prediction of auditing opinion type, research on the relationship between auditing opinion and company bankruptcy (or sue), research on the understanding of auditing opinion. So large and thoughtful scenic there is. We are surprised that so many perspectives can be chosen to observe the information content of auditing opinion and so many positive techniques used. How to design the positive research process in this dissertation? We choose the subject of "relationship between auditing opinion and shares price "to test whether share market reacts significantly due to the auditing opinion disclosed in the annual report. Why do we choose this subject? Just for the convenience and objectivity of research data needed. The research object is the modified opinions disclosed in the annual report of the listed company. The research period is from 1995 to 1999.Three hypothesis are constructed: H1, within the short event window, there is significantly negative market reaction; H2, within the short event window, there is significant difference between"clean company"and"modified company"in terms of market reaction; H3, within the short event window, there is significant difference among modified companies in terms of market reaction. Then, positive research methods are introduced. There are two methods: market study and questionnaire study. In the process of market study, we have paired-sample statistical test and multiple regression analysis. Questionaire study is to provide subsidiary evidence for the conclusion obtained in the market study phase. Lastly, describsions are made to show the process in details to get final sample for research. With hard work, we get positive data under different methods and analyze it. Firstly, data of paired-sample test show that no significantly negative reaction and no significant reaction difference among a variety of auditing opinion type is observed. Then, we come to the regression data that tells that auditing opinion type is not significantly independent variable. How about questionnaire's data? It suggests there is no significant effect of auditing opinion on the decision-making of stock investors. Take all the research data into together, we come to a conclusion that there is no enough evidence to support our auditing opinion has information content. It is a great pity. But note we should be careful to accept this remark. As to the shortcomings in the research, we give some reference advice to subsequent researchers. In the end, according to the nonsatisfied conclusion, we give some advice to improve the information content of auditing opinion disclosed in the annual report. The first thing to do is to strengthen the regulation of security market. Only with security market in good order, auditing opinion can become relevent decision information to the investors. If the market is in chaos, no investor will waste time on reading and analyzing auditing opinion opem tothe public. Then, there is no help to improve the information content of auditing opinion even if high quality of auditing opinion spreads the market. The second thing to do is to strengthen the regulation of CPA profession. With the efficient and effective regulation, we will have high quality of auditing opinion information product. Then, good news comes to the market auditing opinion has information content in the near future.