The effects of ‘non-clean’ audit opinion on financial returns of firms listed at the Nairobi securities exchange

Abstract

The ‘non-clean’ audit opinion refers to all categories of audit opinion that the auditor concludes that financial statement does not give true and fair view in accordance with the financial reporting framework used for the preparation and presentation of the financial statements. The ‘non-clean’ audit opinion includes: qualified opinion, adverse opinion and disclaimer of opinion. The study sought to establish the effects of ‘non-clean’ audit opinion and financial returns, evidence from firms quoted in the NSE. The study adopted a descriptive cross-sectional research design. The population of this study was all the 61 companies listed at NSE. The sample size was 10 companies listed at NSE which had ‘non-clean’ audit opinion in the last 2009-2013 years. Secondary data was collected for this study. The study revealed that that there exists a negative relationship between ‘nonclean’ audit opinion and financial returns, this is an indication that ‘non-clean’ audit opinion can be used to enhance corporate control and safe guard shareholders’ interests.