Investors′ Prior Expectations of Audit Opinions

Research studies on the information content of audit opinions have produced conflicting results. One possible reason could be that these studies did not incorporate investors′ prior expectations of the audit opinions which would be issued. Attempts to model investors′ prior expectations have, however, focused on the development of audit opinion prediction models using mainly financial variables. This study attempts to empirically determine the sources of information which investors would use in forming expectations of audit opinions prior to their issuance. The results indicate that some non-financial variables which have been largely ignored by other models play an important role in the formation of investors′ expectations, while the converse is true for some financial variables which have been used in earlier models. Further, respondents in the study with different working backgrounds differed significantly in their mean ratings of importance on certain variables. Comparatively, non-accounting non-finance respondents had a tendency to favour financial variables while accounting finance respondents favoured non-financial variables.