Can Audit Opinion Be Influenced By Media Viewpoint

Based on the perspective of journalism and communication, this paper combines cognitive biases of behavioral finance with the agenda setting theory to discuss whether audit opinion decision making can be influenced by media viewpoint. Carroll and McCombs(2003) advocate that agenda-setting theory exerts "agenda setting function" mechanism mainly from three aspects. Firstly, it is the "cognitive mode"-media coverage of an issue will affect the public perception of the issue. Secondly, it is the "significant mode"-an issue emphasized will arouse public’s special attention to it. Thirdly, it is the "priority order mode"-the priority that media reported about a series of issues affect the public’s judgment towards the importance of these issues. The mechanism through which media viewpoint influences audit opinion mainly reflects in the following two aspects. Firstly, the auditor realizes the problems of audit client due to the media coverage of an event. Secondly, auditor will judge the audit risk according to the extent of positive or negative view. Finally, the information possession and risk assessment influence audit opinion through Mutchler, Hopwood and McKeown(1997) strategic hypothesis and behavior finance "cognitive hypothesis", and ultimately reflected in the adjustment among audit opinion type.Empirical study results show that the more negative media viewpoint that the new rendered, the greater probability that the CPA issues a modified opinion after controlling for various potential factors that affect the audit opinion type. And then performing research about the influence of media viewpoint involved in corporate general condition, operational management, financial management, corporate governance, performance on capital market and law litigation on audit opinion, respectively. Research shows that the more negative media viewpoint involved in these aspects of listed enterprises except the general condition view that the news expressed, the greater probability that the CPA issued a modified opinion for the enterprises. Further study found that the longer auditing tenure that the auditors owns, the more confidently that media viewpoint influence the audit opinion due to the more attention that the CPA pay to the information about the auditing client that the media disclose. And this conclusion also applies to the conditions that the CPA reputation is higher or the information transparency of the company is lower. The above researches verified the role in audit governance that the media plays. In addition, this paper also studied the impact that media viewpoint of the current year on the audit opinion improving situation in the following year. The result shows the more negative media viewpoint that news expressed in current year, the probability that the auditor improve the audit opinion in the following year, which verified the role in corporate governance that media plays.This paper shows that auditor’s auditing decisions can be influenced by media viewpoint significantly besides the general variables that the traditional research mentioned such as firm characteristics and audit risk. In other words, auditor will take the attitude and tune that media conveys into consideration when making audit decision, which enrich the research of media field from the perspective of audit, and support the viewpoint that media exert enormous influence in today’s society.