Estimados Académicos FEN,

Los invitamos al Seminario Interno FEN que dictará la académica Elizabeth Gutierrez.

Título: Do audit findings have informational value for investors? Evidence from insider trading in the era of the expanded audit report in the United Kingdom

Autores: Elizabeth Gutierrez, Adriana Korczak, Maria Vulcheva

Resumen: By using information from the expanded audit report in the United Kingdom, we test what part of the audit process and conclusions are of value to insiders. First, we establish that the introduction of the expanded audit report format increases both the probability and the magnitude of purchase transactions. However, it does not affect the timing of sale transactions or the profits realized by insiders. These findings suggest that insiders may find the information included in the extended audit report useful for their decision to buy into their firm shares. Focusing on the content of the audit report, we document a non-linear relationship between risks of material misstatements and both the overall probability of purchase transactions and the magnitude of net purchases. Our results also suggest that materiality levels affect the timing of insider trading by increasing the average probability of sale transaction after the filing of the financial statements. Finally, the profitability of insider trading is greater in firms with higher materiality levels.