The Research On Information Content Of Auditing Opinion Has Impact On Investors And Creditors Decision-making

1. Research BackgroundInformation content is one of the core issues in the research fields of accounting. It discusses whether the disclosure of certain information would affect its users. If the information users insist or uphold the initial decision because of the disclosure of the information, so the information has content.In the real world,"information asymmetry" means all members of the transactions have different information. Accounting system which is an economic language of the judgment becomes the main method to solve the problem of "information asymmetry". However, the limitations of financial reporting and education received by people, restricting the accounting system to play its role. Therefore, people can reduce the problems caused by "information asymmetry" and other reasons by using independent CPA to audit and list the report of companies. The auditing opinion issued by the CPA in the audit report provides the information content required for decision making of the information users.2. Research Object and PurposeUsers of accounting information include investor, creditor, managers and government. The managers provide the accounting information and government cares only about the tax, so the auditing opinion do litter help to managers and government. The investor and creditor depend on the auditing opinion to make decision, they learn the details of the finance and operation of the company from the auditing report to ensure their benefits. Therefore, this paper selected investor and creditor as research objects to study the information content of auditing opinion. For the investor, auditing opinion is directly reflected in the fluctuation of the stock price. For the creditor, auditing opinion impact directly is reflected in the lending decision made by bank. In China, bank plays the most important role in credit market. At the same time, when bank makes initial loan decision, it needs to consider non-financial factors except the auditing opinion. Auditing opinion becomes the key point only when bank makes loan renewal decision. So this paper selected bank loan renewal as one of the research object.The purpose of this paper is to study the reactions of investor and creditor by auditing opinion as well as different types of auditing opinion, to prove the auditing opinion listed by the CPA is useful. And give some advices to develop China’s securities market, credit market and development of audit system based on the conclusions3. Research detailsChapter1ExordiumIn this chapter, I describe the research background and objectives, research ideas and the expected contribution. From the view of the investor and creditor, this paper studies how the auditing opinion influences their decisions. All above are described in detail in a research framework diagram, to make it clearer and easier to understand.Chapter2Literature ReviewBy collecting a large number of documents, I divided literature into3parts, including auditing opinion on the decision-making of investor and creditor have significant impact, no impact or little impact.Chapter3Theoretical Analysis and AssumptionsAt first, this chapter studies the theories of auditing opinion, information content, and different type of auditing opinion, behavior of investor and the market reaction of auditing opinion. Then, type of auditing opinion is divided into three categories by a new way. The classification based on the level of the auditing opinion. Then make some assumptions.Chapter4Research DesignSelect data of2009-2010from Shanghai Stock Exchange and Shenzhen Stock Exchange, which includes all the financial data and the vary of all the stocks of A-share listed companies. Establish research models which based on investor and bank loan renewal decision by auditing opinion. Combine graphic analysis, statistical tests, to obtain sufficient empirical data for the demonstrating of the assumptions.Chapter5Empirical AnalysisBy event study methodology, and multiple regression analysis, we finally explored that the auditing opinion issued by CPA had information content. And reaction of investor and creditor (banks) is foreseeable. The assumptions are confirmed.Chapter6Conclusions, Policy Recommendations and LimitationsFrom the analysis, we find sufficient evidence to prove the thesis of this paper. On the basis of the conclusions, we make Policy Recommendations to China’s securities market, credit market and audit system. Finally, I point out the limitations and improvement in the future.4. Main contributionsFirst, this paper based on a new perspective----the protection of creditor’ benefit. Breaking through the limitations that most of the research only focused on the stock market. This paper cares more about bank loan renewal. Deeply found different types of auditing opinion on the decision of the bank loan renewal. Improve the risk management of the bank, and protect the benefit of creditor.Second, classify the auditing opinion by a new way. Unqualified opinion with emphasis of matter paragraph is classified as a class called "defective standard views". This new method which is closer to the true reflection of market.And it also reduces the time of the auditing opinion on the user’s decision-making. Investor and creditor could make more intuitive judgment pointed to the financial information from the new classification. The new method also has a significance impact on Certified Public Accountants and related information users.