The Impact of Disclosing COVID-19 Pandemic Situation in Auditor Reports with Auditor Conservatism on Market Reaction
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Abstract
This study examines the relationship between auditor characteristics and the disclosure of COVID-19 pandemic in the auditor’s report, along with auditor conservatism. It also investigates the correlation of disclosing the COVID-19 pandemic in the auditor’s report that affects market reactions. Data were collected from 716 companies from the financial statements of listed companies on the Stock Exchange of Thailand and companies listed on the MAI from 2018 to 2020. The data were analyzed using two-stage least squares. The results indicate that Big4 firms are positively associated with COVID-19 situation, which is key audit matters (KAMs). There is an increasing tendency of female auditors to disclose the COVID-19 situation with auditor conservatism, which is the emphasis of the matters section in an auditor’s report. Auditor conservatism - both in terms of Key Audit Matters and emphasis on matters - is not correlated with market reaction in terms of cumulative abnormal return and abnormal trading volume. The results also indicate that investors have a high awareness of a crisis situation and may utilize alternative sources of information, along with the auditor’s report, to evaluate and make their investment decision choices.
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