The Reaction of Relatively Investors to Audit Assurance

Abstract: The current experimental study addressed the issue of whether providing audit assurance on information released by a firm can reduce the uncertainty associated with the reliability of such information. The purpose of the current study is to examine how relatively unsophisticated investors respond to independent audit assurance on firm-released news announcements. This study contributes to extant understanding of how investors respond to auditor assurance, as it is the only study of this nature, to our knowledge, involving participants who possess a considerably low level of knowledge in the areas of accounting, auditing and investing (i.e., graduate liberal arts majors); yet, unsophisticated investors of this profile reflect a growing proportion of the individual investing community. Additionally, consideration needs to be given to the cost/benefit of contracting for audit assurances. The research indicates that there appear to be clear benefits from providing such assurances