The absence of an unqualified audit report and stock returns

Abstract

The study shows, the qualified audit report to have a negative impact on stock returns. Both fundamental ratios and macroeconomic variables are included in the study as the control variables. The sampling of the data is based on companies enlisted on the NASDQ stock exchange and in the industry of publication, maintenance, and development of Software programs used for businesses, with market capitalization ranging between one and four billion dollars. Testing the variables for unit root and performing the Hausman test to choose the appropriate model, the results were obtained using the Fixed Effect Model panel regression adjusted for serial correlation. The study clarifies the difficulty of finding a company issued a qualified report. The relationship justifies why management thrives to present proper financial statements to their independent auditor.