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

66 Pages Posted: 18 Mar 2021 Last revised: 2 Sep 2022

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: August 30, 2022

Abstract

The United Kingdom mandated the adoption of expanded audit reports in two waves, starting in 2013 and 2017, respectively. The second wave included small companies listed on the Alternative Investment Market (AIM), a growth market subject to light regulation and private monitoring. First, we present descriptive evidence about the expanded reports of AIM companies. Next, we document that, on average, expanded reports have negligible incremental information content for investors, or consequences for the quality and cost of audits, in the AIM. However, we find some evidence that cross-sectional variation in expanded report disclosures is associated with changes in investors’ reaction to annual reports, audit fees, and the probability of market exits for AIM companies. Our study extends the literature on expanded reports and is among the first to examine the role of audit opinions in the AIM.

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 (August 30, 2022). 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

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