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Article
The shareholder wealth effects of auditor changes and auditor opinions: Does a difference exist in a pre-sox versus post-SOX environment?
Faculty Publications
  • Ron Stunda
  • Carl J. Pacini
SelectedWorks Author Profiles:
Carl J. Pacini
Document Type
Article
Publication Date
2013
Date Issued
January 2013
Date Available
April 2014
Disciplines
Abstract
In 2002, Congress enacted the Sarbanes-Oxley Act (SOX) in response to various fraud scandals. SOX implementation may have led to a rise in auditor switches, a shift in the risks and increase in the costs associated with auditing, a rise in auditor conservatism in the issuance of unqualified audit reports and a shift in investor reactions to qualified audit reports. We examine investor reaction to auditor switches for both unqualified and qualified opinion firms in an unexpected earnings disclosure context in both pre- and post-SOX environments. We find no difference exists in investor reaction for unqualified opinion firms with or without auditor switches in pre- and post-SOX environments. Investors demonstrate significant negative share price responses to qualified opinions in a post-SOX environment (with or without an auditor change). The results indicate that investors ' perceptions of a qualified opinion changed after SOX took effect. Investors place more value on an unqualified opinion in a post-SOX environment. This may be due to shifts in auditor thresholds and litigation risks.
Comments
Abstract only. Full-text article is available only through licensed access provided by the publisher. Published in Academy of Accounting & Financial Studies Journal, 17(4), 29-40. Members of the USF System may access the full-text of the article through the authenticated link provided.
Language
en_US
Publisher
Allied Academies
Creative Commons License
Creative Commons Attribution-Noncommercial-No Derivative Works 4.0
Citation Information
Stunda, R., & Pacini, C. (2013). The shareholder wealth effects of auditor changes and auditor opinions: Does a difference exist in a pre-sox versus post-SOX environment? Academy of Accounting & Financial Studies Journal, 17(4), 29-40.