The United Kingdom mandated expanded audit reports in two waves, starting in 2013 and 2017, respectively. Prior studies of the first wave, which included large and highly regulated companies, concluded that expanded reports have limited incremental value. We focus on the second wave, which included companies listed on the Alternative Investment Market (AIM). The AIM is characterized by emerging companies that are smaller, riskier, and subject to lighter regulatory requirements and to private monitoring. We examine whether investors and other stakeholders benefit from expanded reports in this setting. We document that AIM companies have shorter expanded reports and fewer key audit matters. Next, we demonstrate that these reports have negligible incremental information value for investors or consequences for the quality and cost of audits. Finally, although we find that some variations in the expanded reports' content are associated with investor reactions to the annual report and with audit fees, variations in external monitoring and company size do not play an incremental role. By focusing on a set of companies with weaker information environments, our findings help to extend the conclusions from prior studies about the limited incremental value of expanded reports.

Investors, regulators, and academics question the usefulness of going concern opinions (GCOs). We assess whether GCOs provide incremental information, relative to other predictors of corporate default. Our measure of incremental information is the additional predictive power that GCOs give to a default model. Using data from 1996 to 2015, initially we find no difference in predictive power between GCOs alone and a default model that includes financial ratios. However, there is an imperfect overlap between GCOs and other predictors. We show that GCOs increase the predictive power of several models that include ratios, market variables, probability of default estimates, and credit ratings. Using a model that includes ratios and market variables, GCOs increase the number of predicted defaults by 4.4%, without increasing Type II errors. Our findings suggest that GCOs summarize a complex set of conditions not captured by other predictors of default.