Consequences of Expanded Audit Reports: Evidence from the United Kingdom’s Alternative Investment Market

51 Pages Posted: 18 Mar 2021 Last revised: 14 Mar 2024

See all articles by Elizabeth F. Gutierrez

Elizabeth F. Gutierrez

Universidad de Chile

Miguel Minutti-Meza

University of Miami - Department of Accounting

Kay Tatum

University of Miami - Department of Accounting

Maria Vulcheva

Florida International University

Date Written: January 10, 2024

Abstract

The United Kingdom mandated expanded audit reports in two waves, starting in 2013 and 2017, respectively. The second wave included small emerging companies listed on the Alternative Investment Market (AIM), a growth market subject to light regulation and private monitoring. In this study, we first present descriptive evidence about the expanded reports of AIM companies. Next, we document that, on average, expanded reports of AIM companies have negligible incremental information content for investors or consequences for the quality and cost of audits. Finally, we find some evidence that cross-sectional variation in expanded report disclosures is associated with variation in investors’ reaction to annual reports and audit fees, but variation in external monitoring and company size does not play an incremental role. This study is among the first to examine the role of expanded reports in a growth market, as well as the incremental effect of variations in external monitoring and company size for the consequences of expanded reports.

Keywords: AIM; audit report; key audit matters; market reaction; audit quality; audit fees; auditing standards.

Suggested Citation

Gutierrez, Elizabeth F. and Minutti-Meza, Miguel and Tatum, Kay and Vulcheva, Maria, Consequences of Expanded Audit Reports: Evidence from the United Kingdom’s Alternative Investment Market (January 10, 2024). Available at SSRN: https://ssrn.com/abstract=3805879 or http://dx.doi.org/10.2139/ssrn.3805879

Elizabeth F. Gutierrez

Universidad de Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Miguel Minutti-Meza (Contact Author)

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States
305-284-6287 (Phone)

Kay Tatum

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States

Maria Vulcheva

Florida International University ( email )

11200 SW 8 Street RB244B
Miami, FL 33199
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
374
Abstract Views
1,355
Rank
145,844
PlumX Metrics