"Serba Dinamik had been in dispute with KPMG after KPMG highlighted last month some discrepancies in the company's accounts involving transactions worth about RM4.54 billion, to the company's independent directors. The issues raised were based on the financial accounts for the financial year ended Dec 31, 2020 (FY20).
Subsequently, on June 14, Serba Dinamik announced it had agreed in principle to appoint Ernst & Young Advisory Services Sdn Bhd as an independent reviewer to assess the veracity and accuracy of the audit issues highlighted by KPMG. Serba Dinamik further said on Wednesday that its board of directors would meet today todecide whether or not to expand the scope of work to be undertaken by the proposed independent reviewer with regard to audit matters flagged by its external auditor. Shares in Serba Dinamik fell to an all-time low of 40 sen today, before settling at 41 sen, down 12.5 sen or 23.36% from yesterday's closing, valuing the company atRM1.52 billion. Since the start of the year, the stock has fallen by 76.57%."(Source: Sulhi Khalid, theedge.com, June 25, 2021).

 
Required:
Capital market researchers investigate how the capital market reacts to different events and different types of information. Based on the news:

i) Explain how the auditor's report may impact on the company stock price.

ii) Describe how the information can be assumed as relevant information. Justify your answer from capital market research perspective and support your answer with an example.

 

b) There are three forms of market efficiency. Explain the assumption of weak form efficiency and strong form efficiency.

Answer rating: 100% (QA)

i The auditors report can significantly impact a companys stock price as it provides investors with important information about the companys financial ... View the full answer