This study documents that the market's responsiveness to earnings announcements declines significantly after the issuance of qualified audit reports for a sample of ‘subject to’ qualifications and consistency qualifications. The results are consistent with a hypothesis that audit qualifications reduce the market's responsiveness to earnings announcements by altering the market's perception of earnings noise or the persistence of earnings, or both. Alternatively, a decline in earnings response coefficients may be observed because audit qualifications are more likely in firms that have undergone economic or structural changes and these changes, rather than the qualification per se, lead to decreased persistence or increased noise.

The frequency and magnitude of restructuring charges have drawn the attention of various groups of users of accounting information. Prior studies on restructuring charges have focused on the market's response to the announcement of the charge. In contrast, we examine the charges from the perspective of financial analysts. We provide evidence that analysts expect declining performance for restructuring firms in the short run but possible improvement over the longer term. When we examine forecast errors in the year following the charge, we find evidence that the analysts’ accuracy has declined and, despite the downward revision, analysts are still optimistically biased.