Download or read book How Does the Audit Report's Structure Affect Nonprofessional Investors' Attention to Its Content? written by Brian Matthew- Goodson and published by . This book was released on 2015 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study experimentally examines whether and how two potential changes to the audit report's structure affect the extent to which nonprofessional investors attend to the report's content when evaluating a potential investment, and whether the potential effects differ across levels of investor sophistication. Specifically, I examine the impact of descriptive paragraph headings and the relative location of the opinion paragraph on judgments of financial statement reliability and investment decisions. Results indicate that when the audit report includes descriptive paragraph headings, less sophisticated investors perceive the report to be more readable, which, in turn, leads them to attribute higher levels of reliability to the financial statements and increases their likelihood to invest. I also find that perceptions of processing ease are more important to less sophisticated investors than the degree to which the audit report's actual content is processed. More sophisticated investors appear to be insulated from this heuristic bias. In a second experiment, I examine whether the audit report's structure affects investors' ability to identify departures from the standard unqualified opinion. Specifically, when the audit opinion is adverse, the relative location of the opinion paragraph moderates the effect of headings across levels of investor sophistication. Overall, the results of this study suggest that the audit report's structure significantly influences the extent to which nonprofessional investors' attend to the report's content, and that the audit report's content informs judgments of financial statement reliability and investment decisions..