Well, it creates shorts and can blow up your amplifier and possibly damage your speakers. Luckily it sounds like yours went into protection mode... So yes that would be an issue. You cannot have even a single strand poking out and touching the other terminal. From the sounds of it, you're lucky you didn't fry your amp... get it all cleaned up and tidy, do a factory reset on your avr and try again.
I use banana plugs. They're cheap enough and cleaner connections with no frayed ends. It's nice if (like myself) you swap speakers in and out fairly often too.
Amazon.com: 10PCS 24K Gold Plated 4mm Banana Audio Jack Speaker Connector Wire Plug Cable Adapter for Nakamichi (Fast delivery !US Stock!): Electronics
www.amazon.com
There are other brands that use that same type of plug and they're all pretty much the same, just a different name on the jacket. Look for the ones that have 2 set screws for gripping the cable.
*PS, that goes for the connection to the speakers too. No stray strands!