Global Journal of Management and Business Research, D: Accounting and Auditing, Volume 22 Issue 2

The disclosure, for example, in the press of the reservations expressed by the auditor before the publication of the annual reports is rare, even in the United States. The study by [15] concerning this subject is carried out on 114 cases of “subject to” reservations published in the Wall Street Journal. In France, this phenomenon is almost non-existent. The publication of reserves, like other types of accounting information, is observed in the BALO simply after the publication of annual and consolidated reports. b) Quantification of shareholder reaction The shareholder’s reaction to the publication of audit reports cannot be equated with observed profitability, insofar as other information published simultaneously is likely to affect prices. The methodology of the event study consists of a modeling of “normal” profitability, the “abnormal” part or attributable to the event studied being evaluated by difference with the observed profitability [3]. Simulations by [8; 9] have shown that other simpler variants than the CAPM can be, under certain conditions, as efficient as the most sophisticated models. These results were confirmed by the studies of [16; 26, 27]. In the event of missing data, the missing prices are replaced by the uniform distribution method justified by [24]. The study window or event period is set at thirty sessions on either side of the announcement date. Different approaches are used to define the norm: the naive system, which consists of equating the standards with the profitability of the market (which is equivalent to assuming that the beta of the security is equal to one), and the market model. In the latter case, several approaches have been used to estimate the beta coefficient: ordinary least squares (OLS), the estimator of [13], that of [36], and finally that of [20]. The index used is weighted by market capitalization. The results obtained using an equally weighted index are not significant. It could be linked to the fact that a substantial number of reservations expressed by auditors relate to large companies. Therefore, when estimating the market model and that of Dimson with an equal-weighted index, the importance of the capitalization of these companies is not reflected. c) Testing the significance of shareholder reaction The average return in excess at a given session t is formulated by relation 1. = 1 ∑ , ∀ = −30, ……… , +30 =1 (1) With the average abnormal return of the sample considered over the interval t; , the abnormal return of security i over the interval t and N the number of observations. The cumulative average abnormal return at date t ( ) is defined by relation 2. = ∑ =−30 (2) A Student's test makes it possible to decide on the significant nature of a return; thus, for a given session t, relation 3 gives the Student's tests applied to the average of the excess returns, and relation 4, that applied to the cumulative return mean. = (3) = � . (4) The variance of the average abnormal return is estimated over a period preceding the study window and using two methods. The first assumes the independence of the excess average returns from one security to another: the standard deviation calculated on the time series MAR t is expressed according to relationship 5. = � 1 179 ∑ ( − ) 2 −30=−211 (5) With ������� 1 180 ∑ −31−210 The second method: =� 1 2 ∑ 2 =1 (6) With 2 = 1 179 ∑ ( − ) 2 −31=−211 et = 1 180 ∑ −31=−211 (7) The Student statistic as calculated assumes that: 2 = ( + 30 + 1) 2 from the assumption of serial independence. For a significance level set at 5%, the statistic follows a Student law with N-1 degrees of freedom where N is the number of securities in the sample. V. T he R eaction of S hareholders to the P ublication of A udit R eports In a first step, the behavior of share prices is studied around the dates on which the auditors issue reservations on the financial statements. The sign and the significance of the abnormal returns of the shares of the companies for which the auditor was unable to express an opinion are also examined, either because of the seriousness of the reservations observed in the financial statements, or because of the absence of sufficient means to carry out the verifications necessary for its mission. Most of the studies carried out in the United States use the information contained in the “National Automated Accounting Research System” (NAARS) database to collect data concerning reservations Informational Performance of Audit Reports Content: Case of French Companies Listed on the Stock Exchange during the Decade 2010-2020 6 Global Journal of Management and Business Research Volume XXII Issue II Version I Year 2022 ( )D © 2022 Global Journals