{"id":{"repo_id":"uiuc","oai_identifier":"oai:www.ideals.illinois.edu:2142/78614"},"canonical_url":"https://search.dev.ndltd.org/etd/uiuc/oai:www.ideals.illinois.edu:2142/78614","repository":{"repo_id":"uiuc","name":"University of Illinois - Urbana-Champaign","base_url":"https://www.ideals.illinois.edu/oai-pmh"},"display":{"title":"Are voluntary internal controls-related audit report disclosures informative in IPOs?","abstract":"Initial public offering (IPO) companies are exempt from Section 404 of the Sarbanes-Oxley Act of 2002, leaving investors to assess the quality of an IPO company’s internal controls, which affect the quality of management-provided financial information, without an opinion on internal controls effectiveness from management or the external auditor. When not engaged to opine on the effectiveness of internal controls, auditing standards permit auditors to voluntarily state that their opinion does not extend to internal control effectiveness. Given auditors’ limited ability to distinguish financial reporting quality in the unqualified audit report, the costly nature of audit report modifications, and auditors’ litigation risk concerns, these voluntarily audit report disclosures are likely informative as to the quality of internal controls. Using a sample of IPOs completed on United States equity exchanges from 2005 through 2014, I predict and find that the above-mentioned voluntary internal controls-related audit report disclosure is associated with a higher likelihood of post-IPO auditor-reported internal control deficiencies, lower IPO offer prices, lower post-IPO earnings, and increased post-IPO returns-based risk. These associations are robust to addressing the endogenous nature of the auditor’s disclosure decision. Overall, my results suggest that auditor voluntary disclosures are informative. This research should be of interest to investors, regulators tasked with reforming the audit reporting model, and legislators who recently passed Title I of the Jumpstart Our Business Startups Act that exempts qualifying IPO companies from Section 404(b) reporting requirements for up to five years.","abstract_html":"Initial public offering (IPO) companies are exempt from Section 404 of the Sarbanes-Oxley Act of 2002, leaving investors to assess the quality of an IPO company’s internal controls, which affect the quality of management-provided financial information, without an opinion on internal controls effectiveness from management or the external auditor. When not engaged to opine on the effectiveness of internal controls, auditing standards permit auditors to voluntarily state that their opinion does not extend to internal control effectiveness. Given auditors’ limited ability to distinguish financial reporting quality in the unqualified audit report, the costly nature of audit report modifications, and auditors’ litigation risk concerns, these voluntarily audit report disclosures are likely informative as to the quality of internal controls. Using a sample of IPOs completed on United States equity exchanges from 2005 through 2014, I predict and find that the above-mentioned voluntary internal controls-related audit report disclosure is associated with a higher likelihood of post-IPO auditor-reported internal control deficiencies, lower IPO offer prices, lower post-IPO earnings, and increased post-IPO returns-based risk. These associations are robust to addressing the endogenous nature of the auditor’s disclosure decision. Overall, my results suggest that auditor voluntary disclosures are informative. This research should be of interest to investors, regulators tasked with reforming the audit reporting model, and legislators who recently passed Title I of the Jumpstart Our Business Startups Act that exempts qualifying IPO companies from Section 404(b) reporting requirements for up to five years.","abstract_has_math":false,"creators":["Czerney, Keith R"],"institution":"University of Illinois at Urbana-Champaign","degree_name":"Ph.D.","degree_level":"Dissertation","degree_discipline":"Accountancy","degree_department":null,"school":null,"contributors":["Thompson, Anne M","Sougiannis, Theodore","Urcan, Oktay","Chan, Louis"],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2015,"date_issued":"2015-07-22T22:33:19Z","date_published":"2015-07-22T22:33:19Z","updated_at":"2026-07-22T22:26:12Z","subjects":["audit reports","internal controls","initial public offerings","voluntary disclosure"],"languages":["en"],"rights":["Copyright 2015 Keith Czerney"],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"http://hdl.handle.net/2142/78614","outbound_label":"Handle","outbound_source":"dc:identifier"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor","label":"Contributor","values":["Thompson, Anne M","Sougiannis, Theodore","Urcan, Oktay","Chan, Louis"]},{"key":"dc:creator","label":"Author","values":["Czerney, Keith R"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date","label":"Dc Date","values":["2015-07-22T22:33:19Z","2017-07-23T09:15:33Z","2015-05","2015-04-15","2015-5"]},{"key":"dc:type","label":"Dc Type","values":["text"]},{"key":"thesis:degree_discipline","label":"Discipline","values":["Accountancy"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Dissertation"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Ph.D."]},{"key":"thesis:institution_name","label":"Thesis Institution Name","values":["University of Illinois at Urbana-Champaign"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["audit reports","internal controls","initial public offerings","voluntary disclosure"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:language","label":"Dc Language","values":["en"]},{"key":"dc:rights","label":"Dc Rights","values":["Copyright 2015 Keith Czerney"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier","label":"Identifier","values":["http://hdl.handle.net/2142/78614"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description","label":"Description","values":["Initial public offering (IPO) companies are exempt from Section 404 of the Sarbanes-Oxley Act of 2002, leaving investors to assess the quality of an IPO company’s internal controls, which affect the quality of management-provided financial information, without an opinion on internal controls effectiveness from management or the external auditor. When not engaged to opine on the effectiveness of internal controls, auditing standards permit auditors to voluntarily state that their opinion does not extend to internal control effectiveness. Given auditors’ limited ability to distinguish financial reporting quality in the unqualified audit report, the costly nature of audit report modifications, and auditors’ litigation risk concerns, these voluntarily audit report disclosures are likely informative as to the quality of internal controls. Using a sample of IPOs completed on United States equity exchanges from 2005 through 2014, I predict and find that the above-mentioned voluntary internal controls-related audit report disclosure is associated with a higher likelihood of post-IPO auditor-reported internal control deficiencies, lower IPO offer prices, lower post-IPO earnings, and increased post-IPO returns-based risk. These associations are robust to addressing the endogenous nature of the auditor’s disclosure decision. Overall, my results suggest that auditor voluntary disclosures are informative. This research should be of interest to investors, regulators tasked with reforming the audit reporting model, and legislators who recently passed Title I of the Jumpstart Our Business Startups Act that exempts qualifying IPO companies from Section 404(b) reporting requirements for up to five years.","Submission published under a 24 month embargo labeled 'U of I only', the embargo will last until 2017-05-01","The student, Keith Czerney, accepted the attached license on 2015-04-14 at 15:21.","The student, Keith Czerney, submitted this Dissertation for approval on 2015-04-14 at 15:32.","This Dissertation was approved for publication on 2015-04-15 at 11:17.","DSpace SAF Submission Ingestion Package generated from Vireo submission #7856 on 2015-07-22 at 14:17:51","Made available in DSpace on 2015-07-22T22:33:19Z (GMT). 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When not engaged to opine on the effectiveness of internal controls, auditing standards permit auditors to voluntarily state that their opinion does not extend to internal control effectiveness. Given auditors’ limited ability to distinguish financial reporting quality in the unqualified audit report, the costly nature of audit report modifications, and auditors’ litigation risk concerns, these voluntarily audit report disclosures are likely informative as to the quality of internal controls. Using a sample of IPOs completed on United States equity exchanges from 2005 through 2014, I predict and find that the above-mentioned voluntary internal controls-related audit report disclosure is associated with a higher likelihood of post-IPO auditor-reported internal control deficiencies, lower IPO offer prices, lower post-IPO earnings, and increased post-IPO returns-based risk. These associations are robust to addressing the endogenous nature of the auditor’s disclosure decision. Overall, my results suggest that auditor voluntary disclosures are informative. This research should be of interest to investors, regulators tasked with reforming the audit reporting model, and legislators who recently passed Title I of the Jumpstart Our Business Startups Act that exempts qualifying IPO companies from Section 404(b) reporting requirements for up to five years.","Submission published under a 24 month embargo labeled 'U of I only', the embargo will last until 2017-05-01","The student, Keith Czerney, accepted the attached license on 2015-04-14 at 15:21.","The student, Keith Czerney, submitted this Dissertation for approval on 2015-04-14 at 15:32.","This Dissertation was approved for publication on 2015-04-15 at 11:17.","DSpace SAF Submission Ingestion Package generated from Vireo submission #7856 on 2015-07-22 at 14:17:51","Made available in DSpace on 2015-07-22T22:33:19Z (GMT). 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