The Effect of Modified Auditors Opinions on Shares Prices Evidence from Amman Stock Exchange

Qasim Mohammad Zureigat

Abstract


This study aimed at investigating the impact of the modified auditors opinions (unqualified with explanatory note opinions and qualified opinions) on the shares prices of companies that have received such opinions during the period 2002 to 2007. The study sample consisted of fifty-three Jordanian public shareholding companies listed in the Amman Stock Exchange, of which thirty-six companies received qualified opinions and seventeen companies received unqualified with explanatory note opinions.
Depending on the event study methodology, the researcher found a significant effect for both modified and qualified audit opinions on shares prices. That effect was reflected by a decrease in the shares prices and negative abnormal returns around the issue date of these opinions. However, there was no effect for unqualified with explanatory note opinions alone, which can be seen by the ability of investors in the Amman Stock Exchange to assess the content of the auditors opinions and distinguish between them.
The researcher recommends the need for increased education about audit opinions concepts with linking these opinions to accounting mechanism in according to corporate governance structure and functions of audit committees

Keywords


Modified Opinion, Event Study, Abnormal Returns

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