Does placement of the auditor's report in Malaysian companies' annual reports matter?
This study attempts to investigate whether a management decision to locate the auditor's report in the financial statements is explained by information signaling theory.The location of the auditor's report in the financial statements is explained by information signaling theory.The locatio...
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| Main Authors: | , , |
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| Format: | Conference or Workshop Item |
| Language: | English |
| Published: |
2005
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| Subjects: | |
| Online Access: | http://repo.uum.edu.my/11805/1/Shamsul.pdf http://repo.uum.edu.my/11805/ |
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| Summary: | This study attempts to investigate whether a management decision to locate the auditor's report in the financial statements is explained by information signaling theory.The location of the auditor's report in the financial statements is explained by information signaling theory.The location of the auditor's report is being the focus of this study because a decision on the location of the auditor's report in the financial statements is the management's discretion.The auditor's report is important because it tells readers of the annual report whether the firm has kept all the records properly and that the financial statements are prepared in accordance with the approved accounting standards.We posit that a firm that conveys good news is more likely to place its auditor's report at the beginning of the financial statements than at the end, and vice-versa.Based on 698 listed firms listed on the Bursa Malaysia as on December 31,2003, our evidence shows that information signaling theory does not support our prediction on the management decision to place the auditor's report.We find that about eighty percent of the firms in our study located their auditor's reports at the beginning of the financial statements.Therefore, it appears that it is the tendency of firms in Malaysia to place their auditor's reports at the beginning rather than at the end.Therefore, this signifies the importance of the auditor's report in the financial reporting framework.We reveal that none of the profitability measure, namely ROA, EPS and Tobin's q, is associated with the location of the auditor's report.Therefore, information signaling theory is not supported in explaining the location of the auditor's report. |
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