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    Does industry specialist assurance of non-financial...
    research summary posted July 30, 2015 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.01 Use of Specialists e.g., financial instruments, actuaries, valuation 
    Does industry specialist assurance of non-financial information matter to investors?
    Practical Implications:

    This study examines the value of non-financial specialist assurance in the capital markets setting. While similar to existing audit literature, this study offers new research by examining a setting in which disclosure of non-financial information is mandatory. To the extent the findings are generalizable to other non-financial assurance settings, they suggest caution in adopting a mandatory approach owing to cost/benefit considerations.


    Ferguson, A., and G. Pündrich. 2015. Does Industry Specialist Assurance of Non-Financial Information Matter to Investors? AUDITING: A Journal of Practice & Theory 34 (2):121-146.

    disclosure, event study, extractive industries, information asymmetry, non-financial assurance
    Purpose of the Study:

    The information environment of Mining Development Stage Entities in Australia (MDSEs) is characterized by the reality that the utility of nonfinancial technical information supersedes financial statement information in firm valuation. Previous studies have highlighted the value of non-financial information in settings where disclosure and assurance of non-financial information is voluntary. This study examines the value of assurance of non-financial information where the assurance of public resource disclosures is mandatory. The authors seek to prove the hypothesis that reserve disclosures assured by specialist mining consulting firms have larger market reactions than disclosures assured by non-specialist mining consulting firms.

    Design/Method/ Approach:

    To ensure accurate classification and measurement of reserve changes, the authors developed a hand-collected proprietary database of project-level reserve disclosure data. After removing problematic data, a sample was collected of 1,467 reserve disclosures, released by 404 MDSEs over the period 1996 to 2012. Data collection consists of reserve figures, the length and tone of the announcement, firm-level financial information, and commodity and security price data. Using the reserve data, the authors specified a multivariate model controlling for deposit properties, firm-level economic properties, and announcement disclosure characteristics.


    Overall, the study found weak evidence of specialist assurance being positively related to market reactions around reserve disclosures. The specific findings were as follows:

    • The specialist is more valuable to the market when the scope of deposit is more uncertain.
    • When the deposit scope is known with more certainty (as is the case with mining reserves) the specialist assurer is of no consequence.
    • Switching to larger mining consulting firms results in stronger market reactions.

    Ultimately, the study provides evidence demonstrating that changes in share prices around non-financial disclosures are driven by specialist assurers. This finding is supportive of the insurance hypothesis in that specialist assurance does not matter in the absence of litigation risk.

    Audit Team Composition
    Use of Specialists (e.g. financial instruments – actuaries - valuation)