The Effects of Shared-opinion Audit Reports on Perceptions of Audit Quality

We examine how capital market investors perceive the shared-opinion audit report (SOAR). Using earnings response coefficients (ERCs) to proxy for investors' perceptions of audit quality, we observe negative earnings surprise when the SOAR is announced as compared to unqualified audit opinions. The ERCs are more adverse if the SOAR involves a larger percentage of component firms that are not audited by the group engagement partner. Moreover, we find that the negative ERCs are more pronounced in the sample of firms audited by Big 4 auditors. These results are robust to estimation across various subsamples and using an alternative measure of earnings-returns regression model