dp0609 - FEP - Universidade do Porto

companies are deeply interested in ensuring that their financial statements will
not be modified by auditors so as to maintain a good reputation in the capital
markets in terms of the quality of its financial reporting.
Generally speaking, the above results are consistent with firms
characterized by financial or growth difficulties being more engaged in
adopting aggressive accounting options attempting to convey a more
favourable image of their financial position or performance. The auditors,
however, given most likely the larger litigation risks they face in those clients,
try to insulate themselves from such risks by issuing modified audit opinions.
6. Robustness checks
In this section we analyze the possibility that some other factors may
account for the results presented earlier as well as their robustness to
different variable definitions. Table 11 reports the results obtained for a
number of different specifications.
6.1. Qualified opinions
In model 1 we redefined the dependent variable as follows:
QOPIN = 1, if a firm has been issued a qualified opinion (i.e.,
qualifications only), and 0 otherwise.
The reasoning for this redefinition relates to the fact that information
users may lend greater importance to an opinion which has been qualified by
the auditor as the result of one or more qualifications rather than mere
emphases. In agreement with such perspective, CMVM, the exchange
commission, seems to consider the existence of qualifications a particularly
important issue since that in its analysis of audit reports for listed companies it
only took in consideration the existence of qualified opinions, ignoring thus all
emphases 14 .
Of the 91 observations in our sample 29 (32%) corresponded to
qualified opinions redefined as explained above. The regression results,
however, are still globally significant, albeit with a lower pseudo-R 2 (0.39). The
existence of an executive committee (proxy for board diligence) and the
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