Modified audit opinion: is it a risk to auditor?

Abstract

This paper aimed to evaluate whether the audit report issued with modified opinion impacts the agreement between auditor and client. In addition, it was found whether the fact that once the audit firm is a big four or the audited company adopts corporate governance practices can reduce the risk of discontinuation of the contractual relationship, even with the issue of modified opinion. The empirical tests revealed that: in the brazilian capital market, there is a positive and statistically significant relationship between the modified opinion and the auditors’ changing in the following period; and the fact of an audit firm being a big four or the company adopts corporate governance practices do not reduce the risk of discontinuity between the parts. The results demonstrate a worrying picture concerning auditors’ independency when they issued a report with modified opinion.

Keywords

• Auditoria
• Relatório de auditoria
• Demissão do auditor
• Opinião Modificada