Examining the Effect of the Type of Audit Report on Investors' Behavior

Subject Areas : Ethics and accounting

Fatemeh Safari ¹ , Fereydun Rahnama Roodposhti ² , Hamdreza Vakilifard ³ , Ghodratollah Talebnia ⁴

1 - PhD. student, Department of Accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran.
2 - Professor, Department of Accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran
3 - Associate Professor, Department of Accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran
4 - Associate Professor, Department of Accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran

Received: 2023-08-09 Accepted : 2023-09-30 Published : 2023-12-23

Keywords: Audit report, Investor behavior, Information reporting,

Abstract :

Purpose: Auditing is an integral part of the economic information reporting process, enabling users to make informed judgments and decisions. The increasing growth and complexities of society also expand the need for auditing as a part of the reporting process. Therefore, the aim of this study is to investigate the impact of the type of audit report on investors' behavior. Method: This study was conducted on 220 experts, investment managers, regular investors, and auditors who were randomly selected in 2021. To analyze the data and test the research hypotheses, a structural equation model was employed with the assistance of SmartPLS software. Findings: Audit reports can impact stock prices for two main reasons. Firstly, the audit report may contain information that influences the estimation of future cash flow amounts and risks. Any data that could prompt a revision of these elements is linked to stock prices. Secondly, the audit report may provide essential details about the company's operational continuity (e.g., the audit report on operational continuity). The report should consistently mirror the auditor's access to internal information like projected data and management strategies, and the auditor's reporting choices disclose some confidential information. Conclusion: The type of audit report significantly influences investors' rational behavior. When making investment decisions, investors prioritize logic and rationality over emotions.

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