A Theoretic And Empirical Study On Information Content Of Auditing Opinion

Accounting information of public corporation is one of the most important information in capital market, which should be true and fair. With the deployment of the capital market in China, the public more and more realize the uses of the certified public accountants because of their independence on corporation and investors. Also, as the final result of auditing work, the auditing opinion are put more and more highly place.Information content means whether the economic decision of the relative interests can be affected if certain information goes to public. That is whether the information is useful. This paper studies on that for relative interests, like investors, creditors and so on, whether the auditing opinions disclosed by CPA has information contents; whether they can affect the economic decision of the relative interests; whatever the reflection of capital market to the auditing opinions. The reliance and attention to auditing work from capital market give us the rational inclusion that auditing work is valuable, so as the final results of auditing work, the auditing opinions also should have information contents. However, that is the focus this paper study that whether this inclusion has the evidences in theoretic and empirical.In the second chapter, this paper summarizes and analyzes the results of the previous studies form three fields: the impact of the auditing opinion to investors, the impact of the auditing opinion to creditors and the accounting firm change. The study on information content of audit opinions has done a lot in previous, but this is mostly before 2005, and the results are not uniform. In recent years, a series of measures promote the continuous development of our country's capital market, such as the promulgation of new auditing standards, the implementation of Full Circulation Reform. So it is necessary to focus on the changes of the information content of auditing opinion on the new period. Also, the studies about impact of auditing opinion on the creditors are few in China, mostly, which are use the multi-regression method, seeking the relationship between the auditing opinion and certain variable of lending decisions. In this paper, questionnaire is used to inquiry the comprehensive ideas and needs of the creditors to auditing opinion.The most analysis about information content of audit opinions are focus on the separation of ownership and management-induced signal theory and control mechanisms. In the third chapter, this paper focus on auditing system and new-institutional economics, applying to the summary presentation theory in the auditing system, which recognize the auditing opinion as a condensed summary of information and summary presentation. This chapter explains why auditing opinion should have the information content in theory to deepen the understanding of CPA auditing form the new height, improve the audit system and the better to put theory into practice, which has theoretical innovation. As the summary presentation, auditing opinion can transfer signal. So, this paper has five basic hypotheses: (1) Within the short event window, there is significantly negative market reaction to"reserve opinion"; (2) Within the short event window, there is significant difference between"clean company"and"modified company"in terms of market reaction; (3) Within the short event window, there is significant difference among modified companies in terms of market reaction; (4) The audit report is very important information taken firstly during an analysis of a file of Credit; (5) A qualified audit report influences negatively the decision of the bankers concerning the process of granting of credit.The forth chapter design the analysis methods, explaining the abnormal retain, multi-regression and questionnaire, structuring the CAR and multi-regression model, designing the questionnaire. After screening, this study picks up 235 corporations that are disclosed reservation in Shanghai and Shenzhen A-share market 2006-2008 and select the control corporations.In the fifth chapter, this paper computes the average abnormal retain and cumulative abnormal retain to see whether there is difference in market reaction among different years and opinion types. Meantime we make one sample T test on cumulative abnormal retain. Also, this study computes the paired samples'average abnormal retain and cumulative abnormal retain, and make the two-paired sample T test to see whether the standard opinion has information content, to exclude the influence factors except auditing opinion. Next, this study design multi-regression model to supplement the CAR model, reflecting the information content of auditing opinion more precisely to evident or reject the results from CAR model. The multi-regression model introduces several various and explores their coefficient and p value, to control the influence factors except auditing opinion. Finally, this paper use questionnaire to analysis the factors influencing the creditors, and make chi-square test to see the independence of results.Through research, this study makes the inclusion as follow: (1) Within the short event window, there is significantly negative market reaction to"reserve opinion"; (2) Within the short event window, there is significant difference between"clean company"and"modified company"in terms of market reaction; (3) Within the short event window, there is significant difference among modified companies in terms of market reaction; (4) The audit report is not very important information taken firstly during an analysis of a file of Credit; (5) A qualified audit report influences negatively the decision of the bankers concerning the process of granting of credit. That is, hypotheses 1,2,3,5 are found and hypothesis 4 is not found.There are many shortages about data and methodology in this paper. In future, we can select data from more years, select more samples, analysis more about the multi-regression model to design the model more precisely.