A Multivariate Analysis of the Determinants of Auditors' Opinion on Asian Banks

Posted: 27 Jan 2007

See all articles by Chrysovalantis Gaganis

Chrysovalantis Gaganis

University of Crete - Faculty of Social Sciences - Department of Economics

Fotios Pasiouras

GSCM-Montpellier Business School

Abstract

Prior studies on the determinants of audit reports focus on non-financial sectors. In contrast, the present study examines the determinants of auditors' opinion in the banking industry, using a sample of banks drawn from 9 Asian countries over the period 1995-2004. We use logistic regression and a sample of 199 qualified financial statements and 4,403 unqualified ones. The results indicate that Asian banks that receive qualified opinions are in general smaller ones, less well capitalized, less profitable and cost efficient, and appear to have excess liquidity. More external auditing requirements and less accounting and disclosure requirements in the banking sector, also increase the probability of receiving a qualified audit opinion. Knowledge of the above mentioned characteristics could be of particular interest to bank's managers, investors, credit analysts and bank supervisors. Despite the economic importance of the banking industry, accounting researchers have done little to investigate the various relationships that exist between banks and their auditors. Furthermore, most studies focus on the US market and examine the pricing of audit services for financial institutions, the audit opinions on publicly-traded Savings & Loans institutions that subsequently failed, the effectiveness of bank audit, the loss underreporting and the auditor role of examination of banks, the impact of accounting and auditing systems on risk-shifting of safety nets in banking. The present paper extends the literature by investigating the determinants of external auditors' opinion on Asian banks.

Keywords: Asia, Auditing, Banks, Logistic regression

JEL Classification: G21, M41

Suggested Citation

Gaganis, Chrysovalantis and Pasiouras, Fotios, A Multivariate Analysis of the Determinants of Auditors' Opinion on Asian Banks. Managerial Auditing Journal, Vol. 22, No. 3, pp. 268-287, 2007, Available at SSRN: https://ssrn.com/abstract=959435

Chrysovalantis Gaganis (Contact Author)

University of Crete - Faculty of Social Sciences - Department of Economics ( email )

University Campus
Rethymno, Crete, 74100
Greece

HOME PAGE: http://economics.soc.uoc.gr/en/staff/4551/17

Fotios Pasiouras

GSCM-Montpellier Business School ( email )

2300, Avenue des Moulins
Montpellier, 34185
France

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