Financial Performance and Audit Quality: Comparative Study of Investor Reaction

Abstract

The aim of the company to register its shares in the stock exchange is to get additional funds from investors so that the business continues to grow. The company's financial performance is a factor that is highly considered by investors, but what if the information is not quality based on the audit results from the auditor? This study aims to determine investor reactions to financial performance information and audit quality. The uniqueness of this research is the 2x2 method between financial performance and quality audit so that this study can produce information about how 1) investor reaction to high financial performance with high audit quality, 2) investor reaction to high financial performance but low audit quality, 3) investor reaction to low financial performance with high audit quality, 4) investor reaction to low financial performance with low audit quality. The results showed that investors only react to high financial performance but low audit quality with negative react, it shows that investors are concerned about audit procedures in assessing the company's financial performance. High company performance but has a low audit quality makes investors pay more attention to the company because the good value is actually considered to be detrimental to investors because of its doubtful quality.