The Effect of Audit Reports on Share Returns: Evidence from the Mongolian Stock Exchange

This paper investigates the effects of an auditor’s opinion in the share prices (share return) at the Mongolian Stock Exchange. The study used the 2012 and 2013 data from stock companies with unqualified auditor opinions. A.C. MacKinlay’s market model (1997) applied the measurements of the effect of auditor’s opinion to the share returns. Changes in stock prices and stock returns were collected and analyzed from 10 workdays before and after the audit reports were announced. As the result of calculations and statistical analysis, the raised hypothesis was rejected. The paper concludes that no content from an audit report on stock market of Mongolia. The result proves that confidence in audits is weak for investors. The limitation of our sample is for only unqualified opinions because of insufficient data of other types of audit opinions.