Do Auditors Care about Annual Reports'Forward-looking Text Information?
Previous research has concentrated on historical information and auditor judgments,whereas this paper examines the impact of forward-looking text information in annual reports on audit pricing.The research finds that forward-looking text information is significantly negatively associated with audit pricing.The mechanism test finds that forward-looking text information can convey the firm's going concern signal,reduce the auditor's perception of going concern risk,and thus reduce audit pricing.The heterogeneity test shows that when the tone is more positive with more disclosure on the future business plan,the negative association between them is stronger.Furthermore,the negative association between them is only significant in samples with higher future earnings response,more future analyst attention,and for auditors with less industry experience and more business.Further research shows that forward-looking text information can significantly reduce the likelihood of audit opinions on going concern uncertainty.This paper provides a new theoretical reference for understanding the auditor's decision-making and can make an incremental contribution to the existing research on factors influencing audit pricing.
forward-looking text informationaudit pricinggoing concernaudit opinion