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1
Fakhfakh, Mondher. "The harmonization of audit reports of Islamic banks." Journal of Islamic Accounting and Business Research 8, no. 2 (April 10, 2017): 203–28. http://dx.doi.org/10.1108/jiabr-05-2014-0016.
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Purpose The purpose of this paper is to examine the level of harmonization of auditors’ reports issued by independent auditors of Islamic banks. Design/methodology/approach The homogenization of the auditors’ reports of Islamic banks has been statistically measured. Supranational auditing standards on auditors’ reports (ISA 700 and AAOIFI standard) are used as the control. Findings The results show lack of harmonization in several elements related to the form of the auditor’s report and in all elements related to the content of the auditor’s report among the Islamic banks. Originality/value This paper provides new empirical evidence about the measurement of harmonization in the form and content of the auditors’ reports of Islamic banks. It discusses the level of compliance with the elements enumerated by the standards issued by the International Federation of Accountants and the Accounting and Auditing Organization for Islamic Financial Institutions.
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Fakhfakh, Mondher. "The Islamic harmonization of consolidated auditors’ reports." Journal of Islamic Accounting and Business Research 11, no. 3 (January 2, 2020): 647–73. http://dx.doi.org/10.1108/jiabr-08-2017-0114.
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Purpose The purpose of this paper is to examine the level of harmonization of consolidated auditors’ reports issued by the independent auditors of Islamic banks. Design/methodology/approach A statistical measurement of the homogenization of the consolidated auditors’ reports of Islamic banks. International and Islamic auditing standards on consolidated auditors’ reports are used as the control (ISA 700 and AAOIFI standard-IAS2). Findings The results show a lack of harmonization among the Islamic bank’s groups in several elements related to the form of the consolidated auditor’s report and in all elements related to the independent auditor’s report. Originality/value This paper provides new empirical evidence about the measurement of harmonization in the form and content of the consolidated auditors’ reports of Islamic banks groups. It discusses the level of compliance with the consolidated elements enumerated by the standards issued by the International Federation of Accountants and the Accounting and Auditing Organization for Islamic Financial Institutions.
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Goicoechea, Estibaliz, Fernando Gómez-Bezares, and José Vicente Ugarte. "Improving Audit Reports: A Consensus between Auditors and Users." International Journal of Financial Studies 9, no. 2 (April 29, 2021): 25. http://dx.doi.org/10.3390/ijfs9020025.
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Audit reports represent the only information stakeholders have about conducted audits and they are a key instrument used in economic and financial decisions. Improving audit reports should be a priority of regulators and auditors. The authors solicited perceptions from 212 experienced auditors and financial report users about the value of audit reports and ways to improve their format and content. An analysis of the responses suggests that adding information on audits (such as auditor’s responsibility about fraud) and on annual accounts and client’s information systems, without significant changes in the format, would improve the decision usefulness of audit reports. The growing sophistication of markets and reporting standards requires new information in audit reports, such as auditors’ conclusions about management’s estimates in annual accounts. The study is useful to regulators, auditors’ corporations, academics, and users and contributes to the current audit literature by providing evidence on consensus between auditors and users with regard to the format and content of audit reports.
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Ferreira, Catarina, and Ana Isabel Morais. "Analysis of the relationship between company characteristics and key audit matters disclosed." Revista Contabilidade & Finanças 31, no. 83 (August 2020): 262–74. http://dx.doi.org/10.1590/1808-057x201909040.
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ABSTRACT The general objective of this study is to analyze whether the particularities of audited companies influence the volume of key audit matters (KAMs). Its specific objectives are to identify the number of KAMs disclosed by Brazilian companies and analyze the main factors associated with their disclosure. The paper aims to contribute to an area of investigation still lacking in studies that analyze the factors affecting KAM disclosure, which makes audit reports more individualized. The study contributes to understanding the main auditing issues in Brazilian companies that auditors consider relevant, by providing evidence on factors associated with their disclosure. This research is relevant for agencies that issue auditing standards and for financial information users. For issuers of auditing standards, the study is relevant because it identifies the factors associated with KAM disclosure, enabling it to be confirmed that the new audit report model has contributed to its destandardization. For financial information users, the study demonstrates that KAM disclosure varies from company to company, thus contributing to greater transparency of the audit report. Data were collected from the Audit Reports and Consolidated Financial Statements of the 447 Brazilian companies listed on the São Paulo Securities, Commodities, and Futures Exchange (BM&FBovespa), on December 31st of 2016, and an ordinary least squares (OLS) regression was applied to the defined model. The results show a positive relationship between the number of KAMs disclosed and both the auditor being a Big 4 and the complexity of the audited company. The auditor’s fees and auditor’s opinion being modified show a negative relationship with the number of KAMs. The article is relevant for companies, auditors, and regulatory and supervisory bodies as it identifies company characteristics that influence KAM disclosure and are determinants for the non-standardization of the auditor’s report.
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Sawangjan, Phattarawade, and Muttanachai Suttipun. "The relationship between key audit matters (KAM) disclosure and stock reaction: Cross-sectional study of Thailand, Malaysia, and Singapore." 11th GLOBAL CONFERENCE ON BUSINESS AND SOCIAL SCIENCES 11, no. 1 (December 9, 2020): 69. http://dx.doi.org/10.35609/gcbssproceeding.2020.11(69).
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In 2015, the International Standard on Auditing has been revised by the International Auditing and Assurance Standards Board (IAASB) which aims to increase communication quality and information value on the audit reports by using key audit matters (KAM) disclosure. This is because the traditional audit reports provided information asymmetry between corporations and users of financial statement especially investors as well as poor communication quality. Therefore, to reduce information asymmetry between the corporations and investors, this study mainly aims to test whether there is any relationship between KAM disclosure and stock reaction in ASEAN countries represented by Thailand, Malaysia, and Singapore. However, the results of relationship between KAM disclosures and stock reaction from the previous related studies were mixed. For example, Fellnäs et. al. (2015) and Srijunpetch (2017) found that the new audit reports increased firm value and stock reaction. It is because the new audit reports provide quality of communication from auditor's work on the confidence of financial statement users. Moreover, it also helps to reduce the audit expectation gap. On the other hand, Altawalbeh and Alhajaya (2019) found no relationship between KAM disclosure and stock price because the auditors do not report KAM for improving communication quality, but they do because of the regulation. Keywords: Auditor Report's, Key Audit Matters Disclosure, Stock Reaction, Stock Price, Stock Volume
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Kadous, Kathryn, and Molly Mercer. "Can Reporting Norms Create a Safe Harbor? Jury Verdicts against Auditors under Precise and Imprecise Accounting Standards." Accounting Review 87, no. 2 (October 1, 2011): 565–87. http://dx.doi.org/10.2308/accr-10203.
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ABSTRACT We conduct an experiment with 749 mock jurors to examine whether juries evaluate auditors differently under precise versus imprecise standards when the client reporting is held constant. We find that the impact of standard precision on jury verdicts depends on the aggressiveness of the audit client's financial reports and on the industry reporting norm. When the client's reporting is more aggressive and violates the precise standard, juries return fewer verdicts against auditors under the imprecise standard, especially when the reporting complies with the industry norm. When the client's reporting is less aggressive and complies with the precise standard, juries return more verdicts against auditors under the imprecise standard, but only when the client's reporting is more aggressive than the industry norm. Compliance with industry reporting norms appears to provide auditors with safe harbor protection from negligence verdicts when accounting standards are imprecise.
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Salehi, Mahdi, Mostafa Bahrami, and Fatemeh Alizadeh. "The effect of academic education on employers’ satisfaction and audit quality in Iran." Industrial and Commercial Training 48, no. 5 (June 6, 2016): 249–56. http://dx.doi.org/10.1108/ict-05-2015-0036.
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Purpose – The purpose of this paper is to examine the effect of academic education of auditors on the satisfaction of employees and the quality of audit reports. Design/methodology/approach – In order to collecting data a questionnaire designed and developed among the auditors, managers, and professors in Iran during November 20, 2014. Findings – The results of the study reveal that the inability to fully understand the audit report is one of the major problems of customers. For the audit firm, issues such as observation of accounting standards in financial statements, preparation of sufficient documents for the auditor, strong internal control, and understanding the limitations and problems of auditors were considered important. Originality/value – To the best of the authors’ knowledge the current paper is the first study which deals with the topic of the study in developing countries, especially Iran.
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Christensen, Brant E., Steven M. Glover, and David A. Wood. "Extreme Estimation Uncertainty in Fair Value Estimates: Implications for Audit Assurance." AUDITING: A Journal of Practice & Theory 31, no. 1 (January 1, 2012): 127–46. http://dx.doi.org/10.2308/ajpt-10191.
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SUMMARY The overall complexity and estimation uncertainty inherent in financial statements have increased in recent decades; however, the related reports and services have changed very little, including the format of the balance sheet and income statement, the content in the auditor's report, and the level and nature of assurance provided on estimates. We examine estimates reported by public companies and find that fair value and other estimates based on management's subjective models and inputs contain estimation uncertainty or imprecision that is many times greater than materiality. Importantly, changes in the estimates often impact net income; consequently, the extreme estimation uncertainty also resides in measures such as earnings per share. We do not question the value audits provide to the marketplace, the importance of fair value reporting, or the ability of auditors to deploy up-to-date valuation and auditing techniques. Rather, we suggest that the convergence of relatively recent events is placing an increasingly difficult, and perhaps in some cases unrealistic, burden on auditors. We consider whether the convergence of events in regulation and standard setting may have outstripped auditors' ability to provide the level and nature of assurance currently required on estimates with extreme estimation uncertainty by auditing standards and regulators. We discuss potential changes to financial reporting and auditing standards that may improve the information provided to users and also address the concerns we raise. Finally, we suggest avenues for future research that may be fruitful in addressing how changes to standards would influence the behavior of preparers, auditors, and users. JEL Classifications: M4; M40; M41; M42. Data Availability: All data are publicly available.
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Toy, Alan, and David C. Hay. "Privacy Auditing Standards." AUDITING: A Journal of Practice & Theory 34, no. 3 (September 1, 2014): 181–99. http://dx.doi.org/10.2308/ajpt-50932.
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SUMMARY Privacy audits are an area of auditing practice that are becoming increasingly relevant to audit firms as well as to regulators such as privacy commissioners. Privacy audit reports can be a resource for consumers and groups representing them. However, there is limited consistency between the standards applied in privacy audits when compared across different auditors and across different jurisdictions. Inconsistency of standards reduces international comparability of privacy audits, thereby lowering their potential value to the entities subject to audit, and to users of the reports. We suggest a set of fundamental principles for privacy audits drawn from recent proposals for legislative and/or policy reform by leading official bodies in the U.S. and the European Union. We apply this framework to 30 privacy audit reports issued in five countries. The results show that few conform to the proposed fundamental principles. This inconsistency limits their value and effectiveness.
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Bennouri, Moez, Mehdi Nekhili, and Philippe Touron. "Does Auditor Reputation “Discourage” Related-Party Transactions? The French Case." AUDITING: A Journal of Practice & Theory 34, no. 4 (January 1, 2015): 1–32. http://dx.doi.org/10.2308/ajpt-51036.
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SUMMARY We use a unique dataset from a sample of 85 French firms over the period 2002–2008 in order to answer the following questions: Is there any relation between the use of auditors with a brand-name reputation for providing high-quality audit reports and the number of related-party transactions (RPTs) reported to outside shareholders? And, how does a more transparent environment for the reporting of related-party transactions affect this relationship, if at all? We find that firms audited by Big 4 auditors report fewer related-party transactions. The period under study includes the change in accounting standards in Europe that occurred in 2005 with the adoption of IFRS standards, which resulted in a more transparent reporting environment for RPTs. We find that the negative relationship between auditor reputation and the number of reported of RPTs is “weaker” in a more transparent reporting environment. We argue that these results are related to the accounting uncertainty surrounding the reporting of related-party transactions that particularly affects the behavior of Big 4 auditors. JEL Classifications: G34, G38, K33, M42. Data Availability: All untabulated results are available upon request from the authors.
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Jiu, Lili, Bin Liu, and Yuanyuan Liu. "How a Shared Auditor Affects Firm-Pair Comparability: Implications of Both Firm and Individual Audit Styles." AUDITING: A Journal of Practice & Theory 39, no. 3 (March 1, 2020): 133–60. http://dx.doi.org/10.2308/ajpt-17-008.
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SUMMARY In this study, we examine the roles of audit firms and individual auditors in improving financial statement comparability. We conduct the study in the Chinese setting, in which the identities of signing auditors are revealed in audit reports and accounting standards are principle based. After controlling for audit firm style, we find that firm pairs with shared signing auditors have incrementally greater comparability. Our results indicate that individual auditors exhibit their own personal style in implementing accounting standards and exercising professional judgment in the audit process. Overall, our study underscores the association between individual auditors and comparability, with practical implications for market participants and policymakers.
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Brazel, Joseph F., Tina D. Carpenter, and J. Gregory Jenkins. "Auditors’ Use of Brainstorming in the Consideration of Fraud: Reports from the Field." Accounting Review 85, no. 4 (July 1, 2010): 1273–301. http://dx.doi.org/10.2308/accr.2010.85.4.1273.
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ABSTRACT: Audit standards require auditors to conduct fraud brainstorming sessions on every audit. The Public Company Accounting Oversight Board has raised concerns about auditors’ fraud judgments and the quality of their brainstorming sessions. We develop a measure of brainstorming quality to examine how it affects auditors’ fraud decision-making processes. We test our measure using field survey data of auditors’ actual brainstorming sessions for 179 audit engagements. Respondents report considerable variation in the quality of brainstorming in practice. We find some evidence that high-quality brainstorming improves the relations between fraud risk factors and fraud risk assessments. We also determine that brainstorming quality positively moderates the relations between fraud risk assessments and fraud-related testing. Our results suggest that the benefits of brainstorming do not apply uniformly, because low-quality sessions likely incur the costs of such interactions without receiving the attendant benefits. By documenting best practices from high-quality brainstorming sessions, our findings can inform auditors on how to improve their consideration of fraud.
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Duflo, Esther, Michael Greenstone, Rohini Pande, and Nicholas Ryan. "Truth-telling by Third-party Auditors and the Response of Polluting Firms: Experimental Evidence from India*." Quarterly Journal of Economics 128, no. 4 (September 26, 2013): 1499–545. http://dx.doi.org/10.1093/qje/qjt024.
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Abstract In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. This article reports on a two-year field experiment in the Indian state of Gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting. There are three main results. First, the status quo system was largely corrupted, with auditors systematically reporting plant emissions just below the standard, although true emissions were typically higher. Second, the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards. Third, treatment plants, in turn, reduced their pollution emissions. The results suggest reformed incentives for third-party auditors can improve their reporting and make regulation more effective.
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Tran, Manh Dung, Khairil Faizal Khairi, and Nur Hidayah Laili. "A longitudinal study of audit quality differences among independent auditors." Journal of Economics and Development 21, no. 2 (October 7, 2019): 234–46. http://dx.doi.org/10.1108/jed-10-2019-0040.
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Purpose The purpose of this paper is to investigate the differences of audit quality of financial statements among auditors, including Big 4 and non-Big 4 auditors. Design/methodology/approach By employing cross-sectional analysis of compliance (a proxy of audit quality) of goodwill impairment testing of listed firms in the context of Hong Kong, the variation of audit quality of financial statements of auditees has been shown. Findings Audit quality of Big 4 auditors is viewed to be higher than that of non-Big 4 audit firms and the homogeneity of audit quality among Big 4 auditors is not long accepted, but variation. Practical implications Even though unqualified opinions have been given on the auditors’ reports, the quality of financial statements audit is a skeptical issue because of the high level of non-compliance of goodwill impairment testing under International Financial Reporting Standards. Originality/value This study does emphasize the higher audit quality of financial statements of Big 4 auditors than that of non-Big 4 auditors and stresses the variation of audit quality among Big 4 auditors.
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Geiger, Marshall A., K. Raghunandan, and William Riccardi. "The Global Financial Crisis: U.S. Bankruptcies and Going-Concern Audit Opinions." Accounting Horizons 28, no. 1 (December 1, 2013): 59–75. http://dx.doi.org/10.2308/acch-50659.
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SYNOPSIS This study investigates whether auditors' going-concern modified opinion (GCO) decisions were less likely after the start of the recent “Global Financial Crisis” (GFC). Auditing regulators and the business press had complained that auditors did not provide adequate warning in their reports prior to many companies filing for bankruptcy during the GFC. Accordingly, we examine auditors' GCO opinions for financially stressed clients that subsequently entered into bankruptcy during the period from 2004 to 2010. We find that, after controlling for other factors related to GCOs, the propensity of auditors to issue a GCO prior to bankruptcy significantly increased after the onset of the GFC. Additional tests reveal similar results when we separately examine clients of the Big 4 and non-Big 4 firms, suggesting both sized firms significantly increased the likelihood of issuing a GCO to a subsequently bankrupt client after the start of the GFC. Our results should be of interest to regulators, investors, audit firms, academics, and standard setters as they evaluate U.S. auditor performance during the GFC, and in contemplation of changes to auditing standards as a result of the GFC.
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Pérez Pérez, Yolanda, María del Mar Camacho Miñano, and María Jesús Segovia-Vargas. "Risk on financial reporting in the context of the new audit report in Spain." Revista de Contabilidad 24, no. 1 (January 1, 2021): 48–61. http://dx.doi.org/10.6018/rcsar.363001.
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Riesgo en la información financiera en el contexto del nuevo informe de auditoría en España. Tras la crisis financiera y debido a la mayor complejidad de la información financiera, los grupos de interés de las empresas solicitaban un informe de auditoría más completo para reducir el gap de expectativas de la auditoría. En este contexto, el Consejo Internacional de Normas de Auditoría y Aseguramiento (IAASB) aprobó una nueva norma internacional sobre los informes de auditoría. Uno de los principales cambios es la obligación de las empresas que cotizan en bolsa de describir en el informe de auditoría las cuestiones clave de auditoría (KAMs), en particular, las relacionadas con los riesgos significativos de la información financiera. Este artículo analiza empíricamente el contenido del nuevo informe de auditoría tras la reforma contable recientemente aprobada en España y los factores que condicionan los KAMs desglosados por el auditor. Utilizando la totalidad de la muestra de empresas españolas que cotizan en bolsa, nuestros resultados indican que estas firmas presentan en su mayoría entre dos y cuatro KAMs y que casi la totalidad incluyen el reconocimiento de ingresos, el deterioro del fondo de comercio y la recuperación de impuestos diferidos en los informes de auditoría del año 2017. Aplicando una regresión lineal multinomial, las variables significativas que condicionan los KAMs en nuestra muestra son el sector, el tipo de mercado y el número medio de palabras por KAM. Esta evidencia contribuye a la literatura al enfatizar la importancia de los riesgos sobre la información financiera en el informe ampliado de auditoría. After the financial crisis and with the greater complexity of financial reporting, stakeholders asked firms for more informative audit reports to close the audit expectation gap. In this context, the International Auditing and Assurance Standards Board (IAASB) approved a new international standard on auditor’s reports. One of the major changes is the obligation for listed companies to describe the key audit matters (KAM) in the audit report, in particular, those related to the significant financial reporting risks. This paper empirically analyses the content of the new auditor’s reports after the accounting reform recently issued in Spain and the factors that condition the KAMs disclosed by auditors. Using the sample of all Spanish listed companies, our results show that these firms mostly report on two to four KAMs and the majority of these relate to revenue recognition, impairment of goodwill and deferred tax recovery in the 2017 audit reports. Applying a multinomial linear regression, the significant variables that condition the KAMs in our sample are sector, market type, and average word count. This evidence contributes to the literature by emphasizing the importance of risks in financial reporting in extended audit reports.
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Gissel, Jodi L. "Professional Skepticism: Practitioners’ Perceptions And Training Practices." Review of Business Information Systems (RBIS) 22, no. 2 (December 4, 2018): 1–14. http://dx.doi.org/10.19030/rbis.v22i2.10224.
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While regulators criticize auditors for lacking appropriate professional skepticism (SEC, 2010, 2013; PCAOB, 2012), auditing standards lack a clear, consistent definition (Nelson, 2009; Hurtt, Brown-Liburd, Earley, & Krishnamoorthy, 2013), leaving application of professional skepticism “open to interpretation” (Glover & Prawitt, 2013, p. 2). If individual auditors view professional skepticism as open to interpretation (i.e., subjective), auditors may believe they are appropriately applying standards on professional skepticism based on their individual interpretations. However, if regulators apply a different definition of professional skepticism when reviewing auditors’ work, this may help explain ongoing criticisms from regulators stating auditors lack appropriate professional skepticism. The author reports insights of 66 auditors’ perceptions and finds the majority believe professional skepticism has a subjective (as opposed to uniform) definition. This finding is consistent across auditor rank and firm size, suggesting the potential for variations in application of professional skepticism in practice. Supplemental analyses indicate tax practitioners are more likely than auditors to view professional skepticism as subjective, particularly at the partner rank. The author presents professional skepticism training practices for 25 firms that suggest most firms recognize the importance of professional skepticism training and its regular reinforcement. However, there are concerns surrounding the fact that mentoring is listed as the most common training method, which lacks benefits of more formal training activities. Overall, this study provides relevant insights from practitioners and strengthens recent calls for developing a “common definition and shared understanding” of professional skepticism and a framework for evaluating application of professional skepticism (Glover & Prawitt, 2014, p. 5-6).
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Nelson, Mark W., John A. Elliott, and Robin L. Tarpley. "Evidence from Auditors about Managers' and Auditors' Earnings Management Decisions." Accounting Review 77, s-1 (March 1, 2002): 175–202. http://dx.doi.org/10.2308/accr.2002.77.s-1.175.
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This paper reports analyses of data obtained using a field-based questionnaire in which 253 auditors from one Big 5 firm recalled and described 515 specific experiences they had with clients who they believe were attempting to manage earnings. This approach enables us to analyze separately managers' decisions about how to attempt earnings management and auditors' decisions about whether to prevent earnings management by requiring adjustment of the financial statements. Our results indicate that managers are more likely to attempt earnings management, and auditors are less likely to adjust earnings management attempts, which are structured (not structured) with respect to precise (imprecise) standards. We also find that managers are more likely to make attempts that increase current-year income, but auditors are more likely to require that those attempts be adjusted, that managers are more likely to make attempts that decrease current-year income with unstructured transactions and/or when standards are imprecise, and that auditors are more likely to require adjustment of attempts that they identify as material or that are attempted by small clients.
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Chen, Feng, Xingqiang Du, Shaojuan Lai, and Mary Ma. "Does the use of honorific appellations in audit reports connote higher financial misstatement risk? Evidence from China." Asian Review of Accounting 26, no. 2 (May 8, 2018): 154–81. http://dx.doi.org/10.1108/ara-08-2017-0128.
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Purpose From the sociolinguistic perspective, the purpose of this paper is to examine whether the honorific and actual-name appellations that Chinese auditors use to address clients in audit reports connote differential financial misstatement risk. Specifically, the authors hypothesize that auditors’ use of honorifics signals their inferior social status relative to their clients, thereby leading to compromised auditor independence, lower audit quality, and higher financial misstatement risk. Design/methodology/approach The authors use a sample of manually coded appellation data from audit reports of Chinese public firms between 2003 and 2012 to conduct the research. Findings The authors find significantly greater financial misstatements, both in terms of likelihoods and magnitudes, for companies addressed by honorifics than for those addressed by actual names. Moreover, compared to auditors’ consistent honorific usage, discretionary honorific usage has a stronger positive association with misstatements. The authors further show that the positive association between honorific usage and client misstatement risk weakens when the audit firm is a Top 10 accounting firms in China, is an industry specialist, is formed as a partnership, or resides in a more concentrated audit market. Originality/value This study contributes to the sociolinguistics literature in accounting and provides evidence supporting the reform proposed by the International Auditing and Assurance Standards Board to enhance the usefulness of audit reporting.
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McDaniel, Linda S., and Laura E. Simmons. "Auditors' Assessment and Incorporation of Expectation Precision in Evidential Analytical Procedures." AUDITING: A Journal of Practice & Theory 26, no. 1 (May 1, 2007): 1–18. http://dx.doi.org/10.2308/aud.2007.26.1.1.
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This paper reports on an experiment that investigates auditors' abilities to assess expectation precision and incorporate their assessments into judgments related to substantive analytical procedures, as required by professional standards. Auditors appear sensitive to both account predictability and level of information detail in assessing expectation precision overall; however, their assessments do not reflect differences in level of detail when the account is less predictable. This finding supports regulators' and prior researchers' calls for additional guidance to assist auditors in forming expectations that consider the nature of the account. We also find that auditors judge the level of assurance from analytical procedures consistent with their precision assessments. However, in contrast to guidance specified in professional standards, we find that auditors do not always incorporate their precision assessments into judgments about the range of possible differences between expected and recorded amounts, nor the likelihood of misstatement causes. Failing to do so may lead auditors to make important decision errors.
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Bramasto, Ari, Sri Dewi Anggadini, and Asri Syahriani. "KUALITAS AUDIT MELALUI ANALISIS FAKTOR- FAKTOR INDEPENDENSI DAN PROFESIONALISME AUDIT INTERNAL." JURNAL AKUNTANSI 10, no. 1 (April 30, 2021): 16–23. http://dx.doi.org/10.37932/ja.v10i1.248.
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ABSTRACTAudit quality is the accuracy of information reported by the auditor in accordance with the auditing standards used by the auditor including information on accounting violations in the company's financial reports, for that the role of the internal auditor is important for the sustainability of the company, where its role is to provide continuous supervision and assessment, the resulting audit quality depends of the independence and professionalism of the auditors themselves. This study aims to determine how much influence the independence of Internal Audit on audit quality and how much influence the professionalism of internal auditors on audit quality at PT Foximas Mandiri Bandung.The method used in this research is descriptive and verification methods. The population in this study were employees of PT Foximas Mandiri Bandung. Sampling was done using the Census Technique, with a sample of 26 respondents. The type of data used in this study is primary data. The data collection technique used statistical test modeling using the SPSS V.22 program.The results of this study indicate that: 1) The independence of the Internal Audit has an effect on audit quality, the internal auditors are free from pressure or managerial intervention and avoiding the use of unclear language in the audit report being the factor with the lowest gap, namely 9.23% 2) Professionalism of Internal Audit influence on audit quality, confidence in perophysical regulations is the factor with the lowest gap, namely 1.54% .
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Salehi, Mahdi, Mahmoud Lari Dasht Bayaz, Shaban Mohammadi, Mohammad Seddigh Adibian, and Seyed Hamed Fahimifard. "Auditors’ response to readability of financial statement notes." Asian Review of Accounting 28, no. 3 (June 3, 2020): 463–80. http://dx.doi.org/10.1108/ara-03-2019-0066.
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PurposeThe main objective of the present study is to assess the potential impact of readability of financial statement notes on the auditor's report lag, audit fees and going concern opinion (GCO).Design/methodology/approachThe statistical population of this study includes all listed firms on the Tehran Stock Exchange (TSE) for the period of 2012–2017. The systematic elimination method is used for sampling and multiple regression and EViews software are used for testing the hypothesis models.FindingsThe obtained results show that there is a significant and positive relationship between audit report lags and readability of financial statements. Moreover, it is also revealed that readability of financial statements is positively associated with audit fees. Furthermore, the findings suggest a negative correlation between readability indexes and issuing GCOs, denoting hard-to-read statements is considered as a risk factor by auditors. Finally, the observations of our robustness tests suggest that the association between audit report lag and readability of financial statements is robust.Originality/valueThis is the first conducted investigation concerning auditor's response to the readability of financial statement notes in TSE. The outcome of current paper may pave the way for revising and developing Iranian accounting standards in order to give a fairer and clearer picture of financial reports.
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Libby, Robert, and William R. Kinney. "Does Mandated Audit Communication Reduce Opportunistic Corrections to Manage Earnings to Forecasts?" Accounting Review 75, no. 4 (October 1, 2000): 383–404. http://dx.doi.org/10.2308/accr.2000.75.4.383.
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This paper reports two experiments in which Big 5 audit managers estimate reported (audited) earnings conditional on analysts' consensus forecast, auditing standards, and auditor discovery of a quantitatively immaterial earnings overstatement. We find that auditors judge overstatement correction less likely if it would cause a missed forecast, even for objectively measured misstatements. This behavior is consistent with SEC Chairman Levitt's concerns about opportunistic corrections to manage earnings to forecasts. Also, SAS No. 89's mandated representations and communications do not increase corrections that would cause a missed forecast, indicating that the Auditing Standards Board has limited ability to reduce opportunistic corrections through such regulations.
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Tagesson, Torbjörn, and Peter Öhman. "To be or not to be – auditors’ ability to signal going concern problems." Journal of Accounting & Organizational Change 11, no. 2 (June 1, 2015): 175–92. http://dx.doi.org/10.1108/jaoc-04-2013-0034.
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Purpose – This paper aims to chart Swedish auditors’ likelihood of issuing going concern warnings (GCWs), and to investigate the relationship between formal auditor competence, audit fees and audit firm, respectively, and the likelihood of issuing GCWs. Design/methodology/approach – The empirical data are based on annual reports and audit reports for 2,547 limited companies that went bankrupt in 2010 in the wake of the financial crisis and had filed a financial statement in the year before the bankruptcy. Findings – The findings indicate that Swedish auditors seldom issue GCWs. Moreover, there is a positive relationship between audit fee level and the likelihood of issuing GCWs, and Big 4 auditors being more likely to issue such warnings than other auditors. However, the analyses identify differences between audit firms (within the group of Big 4 firms and within the group of other audit firms) in terms of their predictions of client bankruptcies. This suggests a need for further investigation of firm-specific differences. Contrary to what was predicted, authorized auditors are not more likely to issue GCWs than approved auditors. Research limitations/implications – This paper did not investigate the impact of audit experience and tenure or the possibility that auditors may signal survival problems by resigning. Practical implications – Levying appropriate audit fees creates opportunities for thorough audits, but auditors’ formal competence based on training and qualification is not a factor that enforces audit quality. Based on the findings, the authors also suggest some clarifications of existing standards to reduce ambiguity regarding the reporting of survival problems. Originality/value – The Swedish setting is a context in which most companies are small, creditor interest in accounting and auditing is strong and auditors must issue a modified audit opinion if half of the shareholders’ equity is spent. This setting offers a unique research opportunity because the formal competence differs between Sweden’s two categories of certified auditors, and it allows exploration beyond the dichotomy of Big 4 versus other audit firms.
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Boiral, Olivier, Iñaki Heras-Saizarbitoria, and Marie-Christine Brotherton. "Professionalizing the assurance of sustainability reports: the auditors’ perspective." Accounting, Auditing & Accountability Journal 33, no. 2 (November 18, 2019): 309–34. http://dx.doi.org/10.1108/aaaj-03-2019-3918.
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Purpose The purpose of this paper is to examine the professionalism and professionalization of sustainability assurance providers based on the experiences and perceptions of auditors involved in this activity. Design/methodology/approach The empirical study was based on 38 semi-directed interviews conducted with assurance providers from accounting and consulting firms. Findings The findings highlight the division of this professional activity between accounting and consulting firms, each of which question the professionalism of the other. The main standards in this area tend to be used as legitimizing tools to enhance the credibility of the assurance process rather than effective guidelines to improve the quality of the verification process. Finally, the complex and multifaceted skills required to conduct sound sustainability assurance and the virtual absence of recognized and substantial training programs in this area undermine the professionalization of assurance providers. Research limitations/implications This work has important practical implications for standardization bodies, assurance providers and stakeholders concerned by the quality and the reliability of sustainability disclosure. Originality/value This study shows how practitioners in this area construct and legitimize their professional activity in terms of identity, standardization and competences. The work contributes to the literatures on the assurance of sustainability reports, self-regulation through standardization and professionalization.
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Carmichael, Douglas R. "Reflections on the Establishment of the PCAOB and Its Audit Standard-Setting Role." Accounting Horizons 28, no. 4 (July 1, 2014): 901–15. http://dx.doi.org/10.2308/acch-50851.
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SYNOPSIS This is an essay on the causes of the establishment of the PCAOB as the U.S. regulator of auditors of the financial statements of public companies, and the key developments in its role as a professional standard setter. From its inception in the U.S., the accounting profession was largely self-regulated. There was a degree of governmental regulation by state licensing laws, and the SEC's regulation of the offering and trading of securities of public companies. The federal securities laws gave the SEC direct authority over accounting standards, and indirect authority over auditing requirements through its ability to specify the form of audit reports. The SEC, however, looked primarily to the accounting profession to set its own standards. Some viewed the ability to set professional standards as an essential hallmark of professionalism. In 2002, that comfortable arrangement changed dramatically, and the regulation of auditors of public companies became the purview of the PCAOB.
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Lee, Teck Heang, and Azham Md. Ali. "The ‘Knowledge Gap’ and ‘Deficient Performance Gap’ between Auditors and Corporate Managers: An Empirical Study in Malaysia." Gadjah Mada International Journal of Business 10, no. 1 (January 12, 2008): 113. http://dx.doi.org/10.22146/gamaijb.5589.
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This paper reports the findings of a questionnaire survey of “knowledge gap” and “deficient performance gap” conducted in Malaysia on auditors and corporate managers. A total of 47 auditors and 72 corporate managers in Klang Valley responded to the survey. The aims of the study are two folds. Firstly, it ascertains the knowledge of the auditors and corporate managers of the auditors’ duties as required by the Malaysian Companies Act 1965 and the Malaysian Approved Standards on Auditing. Secondly, it elicits the perceived performance of auditors in relation to these required duties. The results of the study indicate the existence of “knowledge gap” and “deficient performance gap” between auditors and corporate managers. Overall, the results indicate that: (1) the auditors in Malaysia are knowledgeable about their duties and (2) the corporate managers have limited knowledge of auditors’ duties and they are less satisfied with some of the duties performed by the auditors.
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Fakhfakh, Mondher. "The Comparability of Audit Reports Issued In the European Union: An Empirical Study Based On Separate and Consolidated Financial Data." International Journal of Accounting and Financial Reporting 2, no. 2 (December 31, 2012): 386. http://dx.doi.org/10.5296/ijafr.v2i2.3017.
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The purpose of this article is to analyse the degree of European harmonisation of audit reports. This analysis refers to the international auditing standards that have been formally adopted in Europe.In this article we analysed the wording of audit reports issued in the European union. This analysis is accompanied by tests that verify the assumptions of homogeneity and comparability of European reports. The interpretation of results is assisted by several statistical techniques including univariate and multivariate tests.The results show that the objective of the European harmonisation of audit reports is not fully realised. Despite the wealth of information in some reports, European auditors do not always conform to the International Standard on Auditing ISA 700.This paper includes an empirical analysis on the normative content of audit reports Europe. This analysis refers to international standards that support the performance of audit reports in Europe. In addition to information on the separate financial statements, this article considers, for the first time, the consolidated reports. The author discusses and tests the hypothesis of European harmonisation of audit reports.
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Amira, Hamed, and Bin Qoud Nuha. "The impact of conditional conservatism on creative accounting: A suggested framework." Risk Governance and Control: Financial Markets and Institutions 9, no. 1 (2019): 33–44. http://dx.doi.org/10.22495/rgcv9i1p3.
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This paper provides a framework of how conditional conservatism contributes to the reduction of creative accounting which in turn affects auditor fees, litigation risk, auditor independence and improved auditing quality. All these factors are reflected in the degree of stakeholders’ confidence in financial reports. The absence of conservatism in the Financial Accounting Standards Board’s (FASB) conceptual framework is due to its belief that conditional conservatism causes a bias in accounting information and that it compromises neutrality. However, by supporting conservatism with a set of controls including upgraded training, intensified effort of auditors, increased professional skills and activated audit committees, users’ financial statement become more reliable which helps users make the right decisions.
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Sotnikova, Lyudmila. "Accounting for Fixed Assets and Capital Investments As a Key Issue in the Audit of Financial Statements." Auditor 7, no. 7 (August 13, 2021): 28–42. http://dx.doi.org/10.12737/1998-0701-2021-7-7-28-42.
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The article is devoted to the issues of accounting of fixed assets in organizations, whose securities are circulated by the organizers of trade on the securities market. These organizations include public joint stock companies, which are subject to mandatory audit. In the auditor's reports issued to such organizations, in accordance with the requirements of ISA 701 "Key Audit Matters", key audit matters should be disclosed. Very often, auditors choose such key issues as "fixed assets" and "capital investments", especially on the eve of the entry into force from January 1, 2022 of the new accounting standards - FSBU 6/2020 "Fixed assets" and FSBU 26 / 2020 "Capital investments". The article discusses the features of accounting for fixed assets and capital investments, due to which auditors assess the risk of misstatement of accounting (financial) statements as increasing and conduct audit procedures to identify such prerequisites for the formation of statements as the valuation of fixed assets and rights to them belonging to the reporting organization.
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Lin, Chan-Jane, Hsiao-Lun Lin, and Ai-Ru Yen. "Dual audit, audit firm independence, and auditor conservatism." Review of Accounting and Finance 13, no. 1 (February 4, 2014): 65–87. http://dx.doi.org/10.1108/raf-06-2012-0053.
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Purpose – This study aims to examine whether China's unique dual audit policy affects one specific aspect of audit quality: auditor conservatism. In China, listed companies issuing B/H-shares in addition to A-shares must release two financial reports – one based on Chinese accounting standards and the other based on international accounting standards (ISA). The China Securities Regulatory Commission (CSRC) further requires that the financial reports following Chinese accounting standards should be audited by a domestic CPA firm, and the financial reports following ISA should be audited by an approved overseas CPA firm. This study investigates whether the dual audit requirement induces more auditor conservatism. Design/methodology/approach – Based on a sample of 7,046 firm-year observations that issue A-shares from 2001 to 2006, the authors empirically test whether the dual audit requirement induces more auditor conservatism, measured by the level of discretionary accruals. Findings – The authors find the dual audit requirement significantly restricts the use of income-increasing discretionary accruals but not income-decreasing discretionary accruals. Moreover, financial reporting becomes most conservative when two auditors are from two un-affiliated audit firms. Nevertheless, the difference-in-difference analysis fails to show a significant decrease in auditor conservatism after the revocation of the dual audit rule for the treatment group with dual audit before but no dual audit after 2007 comparing to the control group that experience no change in 2007. Originality/value – First, the previous studies examine issues regarding the effects of supervision pressure through experimental setting. The authors extend the literature by examining empirically the impact of perceived peer pressure on auditor conservatism. Second, the findings from China regarding the effect of the dual audit system on auditor conservatism serve as a reference for other emerging markets that have not yet established sound audit systems.
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Wheeler, Stephen W., Sandra J. Cereola, and Timothy J. Louwers. "The Impact of Auditor Association on Client Multi-Venue Disclosure Transparency." Current Issues in Auditing 8, no. 2 (May 1, 2014): A1—A9. http://dx.doi.org/10.2308/ciia-50811.
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SUMMARY: We investigate the issue of duplicate disclosures of a common accounting issue in audited financial statements and the unaudited Management Discussion and Analysis (MD&A) sections of annual 10-K filings. We do so to address whether the degree of auditor association with client public disclosures affects the transparency of these disclosures. Despite different, but similar, disclosure criteria for the two venues, we note significantly lower disclosure frequencies for presumed LIFO liquidations in the MD&A than in the financial statement footnotes. Furthermore, none of the audit reports for the companies examined contained explanatory language to indicate that auditors considered these disclosure-tendency differences to be material inconsistencies as defined in SAS Nos. 8 and 118. We discuss how the wording of the applicable auditing standards may cause the noted disclosure differences, indicating a need to clarify further auditors' responsibilities regarding other information in documents containing audited financial statements.
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Wang, Xinhua, and Bibo Yang. "International Differences Between Big Four Auditors and Their Smaller Counterparts in Monitoring Earnings Management." International Journal of Accounting and Financial Reporting 2, no. 2 (August 10, 2012): 55. http://dx.doi.org/10.5296/ijafr.v2i2.2086.
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Earnings management that misrepresents the firm’s financial picture and misleads investors is a persistent problem. One role of the auditor is to efficiently monitor the accounting reports so as to better inform investors as to the true status of the firm and help close the asymmetric information gap between owners and management. Auditors, however, operate within the constraints of social and legal environments that often display vast international differences. Using sample data from around 50,000 firm-year observations in 42 countries, the paper shows that in the United States the Big Four auditors more effectively monitor overstated earnings than their smaller counterparts, while elsewhere they tend to be more effective in monitoring both overstated and understated earnings. An important policy implication of the results is that uniform worldwide audit and financial reporting standards may not be as effective as might be hoped, because international differences in ownership structures and the resultant agency issues create different reporting incentives.
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Lubenchenko, О. Е. "Documenting the Results of Audit of the Information Disclosed in the Notes to the Financial Reporting Compiled by International Standards." Statistics of Ukraine 89, no. 2-3 (November 24, 2020): 127–47. http://dx.doi.org/10.31767/su.2-3(89-90)2020.02-03.14.
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Financial reporting releases the information requiring disclosure in accordance with national or international accounting and reporting standards. This information is usually released in the notes to the financial reporting, intended for a broader range of users. The notes are the most informative document, by which a user of the reporting can assess the company’s solvency, financial viability or business activity, can be informed about the terms of transactions with related parties, can make assumptions and receive data on management accounting, which are laid as the basis for the management strategy building. The released information is subject to obligatory disclosure, as its content is to be analyzed by national and international regulators and auditors in a way similar to the principal forms of financial reporting. An auditor assesses the received audit evidence in view of its sufficiency and reliability. Results of audit procedures can be summarized and documented. Because the International Standards on Auditing do not provide examples of documenting, the working document “The auditor’s testing of disclosure of the information attached to the financial reporting compiled by IFRS” has been formed, to support the process of documenting audit procedures with respect to the information given in the notes to the financial reporting. Using this working document, an auditor is able to obtain detailed information about a company and indicators of its financial reports, about its items and transactions that, not being subject to recognition in the reporting, are important for the management, about the accounting foundations and the opinions of management on which a company relied in compiling the reports. Depending on the operation specifics of a company, the working document can be supplemented by the following sections: IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, IFRS 8 “Operational Segments”, IAS 19 “Employee Benefits”, IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, IAS 40 “Investment Property” etc. The test, which is a unified working document, can be used by any audit firm. The auditor’s opinion on the information disclosure in the notes to the financial reporting is vitally important bearing in mind that not all the users of financial reports have deep knowledge of the International Accounting and Reporting Standards, but all of them need unbiased and complete data about the company status and performance.
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Lubenchenko, О. Е. "Documenting the Results of Audit of the Information Disclosed in the Notes to the Financial Reporting Compiled by International Standards." Statistics of Ukraine 89, no. 2-3 (November 24, 2020): 127–47. http://dx.doi.org/10.31767/su.2-3(89-90)2020.02-03.14.
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Financial reporting releases the information requiring disclosure in accordance with national or international accounting and reporting standards. This information is usually released in the notes to the financial reporting, intended for a broader range of users. The notes are the most informative document, by which a user of the reporting can assess the company’s solvency, financial viability or business activity, can be informed about the terms of transactions with related parties, can make assumptions and receive data on management accounting, which are laid as the basis for the management strategy building. The released information is subject to obligatory disclosure, as its content is to be analyzed by national and international regulators and auditors in a way similar to the principal forms of financial reporting. An auditor assesses the received audit evidence in view of its sufficiency and reliability. Results of audit procedures can be summarized and documented. Because the International Standards on Auditing do not provide examples of documenting, the working document “The auditor’s testing of disclosure of the information attached to the financial reporting compiled by IFRS” has been formed, to support the process of documenting audit procedures with respect to the information given in the notes to the financial reporting. Using this working document, an auditor is able to obtain detailed information about a company and indicators of its financial reports, about its items and transactions that, not being subject to recognition in the reporting, are important for the management, about the accounting foundations and the opinions of management on which a company relied in compiling the reports. Depending on the operation specifics of a company, the working document can be supplemented by the following sections: IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, IFRS 8 “Operational Segments”, IAS 19 “Employee Benefits”, IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, IAS 40 “Investment Property” etc. The test, which is a unified working document, can be used by any audit firm. The auditor’s opinion on the information disclosure in the notes to the financial reporting is vitally important bearing in mind that not all the users of financial reports have deep knowledge of the International Accounting and Reporting Standards, but all of them need unbiased and complete data about the company status and performance.
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Viswanathan, Bharathan, Robinson Joseph, Philip Thomas, and Sambasivan Elumalai. "Analysis of perceptions of auditors/chartered accountants’ on selected Indian accounting standards." International Journal of Basic and Applied Sciences 4, no. 4 (September 1, 2015): 340. http://dx.doi.org/10.14419/ijbas.v4i4.4946.
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<p>Indian accounting standards are not only principle based but also based on users’ perceived ethical notions on professional ethics and compliance with professional code of conduct that are issued by the Institute of Chartered Accountants of India (ICAI).Codes of conduct for accountants give guidelines for proper behavior in the profession. The present study attempts to understand the perceptions of practicing auditors and professional Chartered Accountants (CAs) on the Indian accounting Standards and adherence to the professional code of conduct issued by the ICAI. The study is based on a survey conducted among a sample of qualified CAs. On the basis of the findings, the study concluded that ethical accounting standards are fundamentally necessary for accountants to produce quality financial reports free from material misstatements.</p>
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Bedard, Jean C., Nathan Cannon, and Anne L. Schnader. "The Changing Face of Auditor Reporting in the Broker-Dealer Industry." Current Issues in Auditing 8, no. 1 (June 1, 2014): A1—A11. http://dx.doi.org/10.2308/ciia-50691.
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SUMMARY The broker-dealer (BD) industry is facing increasing scrutiny because of the recent financial crisis and well-publicized scandals. As is often the case for public companies, a root cause of the problems underlying scandals in the BD sector is ineffective internal controls. This paper describes the current regulatory environment for auditors of BDs, focusing on Congressional actions taken, as well as guidance for auditors in preparing their reports on clients' internal controls and compliance with regulations as required by the SEC. We describe aspects of current attestation standards contributing to uncertainty with respect to the level of assurance that auditors should obtain when evaluating their clients' internal controls for purposes of SEC reporting, and evidence from regulators on the variability in audit quality. Then, we describe the SEC's proposed changes to BD reporting and the PCAOB's proposal for related attestation standards. We conclude with some thoughts about the implications of these proposals for auditing and reporting in this important industry sector.
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Specht, James, Albert Kagan, and Scott D. Maanum. "A Proposed Supplemental Teaching Model For Enhancing Students Understanding Of Sarbanes Oxley." American Journal of Business Education (AJBE) 2, no. 1 (January 1, 2009): 59–62. http://dx.doi.org/10.19030/ajbe.v2i1.4022.
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The Sarbanes Oxley Act of 2002 brought about major changes in how accounting firms conduct audits of publicly traded companies. Corporate officials have additional responsibilities in the areas of internal controls and financial reports. In addition there is a new organization responsible for established auditing standards for publicly traded companies, the Public Company Accounting Oversight Board. Accordingly, there are new requirements and responsibilities for auditors of publicly traded companies. In effect, the emergence of separate auditing standards for publicly traded companies and for companies that are not publicly traded is creating two distinct fields of auditing. These changes require a different approach to teaching auditing to accounting students. This article proposes one approach to teaching these significant changes for entry level auditors.
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Wallage, Philip. "Assurance on Sustainability Reporting: An Auditor's View." AUDITING: A Journal of Practice & Theory 19, s-1 (October 1, 2000): 53–65. http://dx.doi.org/10.2308/aud.2000.19.s-1.53.
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This article discusses initial experiences with a new assurance service: the verification of sustainability reports providing assertions regarding financial, environmental, and social issues. For illustration purposes, references to the verification of The Shell Report 2000 are made. Because of the new content and format of sustainability reports, established standards for reporting and verification are not yet available. Therefore, applying specifically developed criteria is inevitable. In this article, examples and characteristics of criteria that are needed to evaluate management assertions regarding sustainability are described. Furthermore, verification procedures that can be used and the content and design of a conclusion on a sustainabilty audit are described. It can be concluded that the verification of sustainability reports is a very challenging assurance service for financial auditors. Academics should be challenged as well, because of the need for further research in this area.
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Steyn, Dirk A., Thea L. Voogt, and Ben Marx. "The engagement decision in medium audit practice in South Africa." Journal of Economic and Financial Sciences 1, no. 2 (October 31, 2007): 171–84. http://dx.doi.org/10.4102/jef.v1i2.366.
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The decision to accept an appointment as registered external auditor to an audit client (the engagement decision) has in recent years been subject to an increased level of professional care and consideration, mainly as a result of previous experiences of engagement decisions that have led to audit practitioners suffering significant financial losses and litigation exposure, as well as significant amendments to statutory regulation and new International Standards on Auditing. The engagement decision is affected by a number of factors or motivational drivers. The purpose of this article is to discuss some of these factors related to the audit practitioner’s business that may be grouped together under the headings of commercial, professional and organisational considerations. The article further reports on the extent to which auditors in medium audit practice in South Africa considers the three groups of considerations during the engagement decision, based on questionnaire results. Lastly, the article comments on the need for a balanced approach to the three groups of considerations to manage the auditor’s business risk associated with the engagement decision.
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Amin, Asbi, and Anwar Anwar. "DIMENSI KARAKTERISTIK LAPORAN KEUANGAN PEMERINTAH." Jurnal Akuntansi 10, no. 3 (October 31, 2020): 223–30. http://dx.doi.org/10.33369/j.akuntansi.10.3.223-230.
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This research to prove the commitment of the leadership, the capacity of the financial apparatus, the implementation of the Regional Financial Accounting Standards, and the internal control function have an influence on the characteristics of government financial reports. This research is a quantitative study using primary data. The population in this study were senior auditors of the South Sulawesi Representative Audit Board using a purposive sampling technique so that the sample was sixty-eight auditors. The data were collected by using a questionnaire method. The analytical method used in testing the hypothesis is multiple linear regression analysis. The results of the study prove that the commitment of the leadership, the capacity of the financial apparatus, the application of the Regional Financial Accounting Standards, and the internal control function significantly influence the characteristics of government financial reports.Keywords: leadership commitment, the capacity of financial Apparatur, the implementation of government accounting standards, internal control, the quality of local government financial statements.
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ZENUNI, Brisejda RAMAJ, and Mirela UJKANI MITI. "Accountancy Performance and Achievement (Accountancy Development Index), Case of Albania." European Journal of Economics and Business Studies 9, no. 1 (October 6, 2017): 235. http://dx.doi.org/10.26417/ejes.v9i1.p235-243.
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The transparency and quality of audits performed by professional accountants and auditors are of crucial importance for the functioning of the global financial infrastructure. Over de last decade, more and more auditors were confronted with the globalization of their clients and became so-called group auditors responsible for the overall quality of the audit engagement even if other auditors in other jurisdictions may be involved. It goes without saying that auditors around the globe do not work in the same environment, do not have to comply with the same rules and regulations and do not have the same level of education before they can apply for an audit license. The qualification, education, training and experience of professional accountants and auditors are of crucial importance for the functioning of the global financial infrastructure. A wide range of stakeholders, including regulators and standard setters, professional accountancy organizations and accountancy firms as well as issuers of financial reports and users of accounting services depend on their professional expertise. The Evaluation of the situation of accountancy education with its components of qualification, education and training in selected countries and Ballcan compared with the requirements of the IES. The status of accountancy education with its components of qualification, education and training in Albania (Accountancy Development Index). The (ADI) illustrates how adoption and implementation of international standards can be visualized for all pillars of the global financial infrastructure and how separate pillar scores can be used to clarify results at the sub-pillar or milestone level.
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Aljinovic Barac, Zeljana, Tina Vuko, and Slavko Šodan. "What can auditors tell us about accounting manipulations?" Managerial Auditing Journal 32, no. 8 (September 4, 2017): 788–809. http://dx.doi.org/10.1108/maj-03-2017-1534.
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Purpose This paper aims to examine the frequency and the nature of International Financial Reporting Standards/International Accounting Standards (IFRS/IAS) violations that resulted in modified audit opinions (MAOs); determinants of MAO decision; and underlying motives, targets and techniques of accounting manipulations. Design/methodology/approach Descriptive statistics and in-depth investigation on archival data collected from the published audit reports are used to analyse the frequency and the nature of IFRS violations that resulted in MAOs, while the logistic regression is applied to identify the possible determinants of MAO decisions. A survey instrument is used to identify the relative importance of different manipulation motives, targets and techniques from the perspective of an external auditor. Findings Results from the archival research show that MAOs are expressed in 29% of audit reports of listed companies in Croatia. A majority of the qualifications refer to noncompliance with provisions of IAS 39, IAS 16, IAS 1, IAS 2 and IAS 36. The survey results show that manipulations are principally oriented towards creditors, tax authorities and suppliers with the intention to hide bad performance, get better terms of crediting and minimize fiscal and political costs. Results from the field study complement and confirm the archival research results in respect to the accounting areas and techniques used for manipulation purposes. Originality/value The analysis provides a rather robust estimation of the extent of accounting manipulations, compared to commonly used earnings management metrics. Application of multi-method research that integrates archival research and field study offers significant contribution to the existing earnings management literature in methodological approach. The results directly address particular provisions of the IFRS that are frequently violated and provide better understanding of the features of accounting manipulations in a specific institutional setting.
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Casterella, Jeffrey R., Rosemond Desir, Matthew A. Stallings, and James S. Wainberg. "Information Transfer of Bankruptcy Announcements: Examining the Impact of Auditor Opinions." Accounting Horizons 34, no. 1 (September 1, 2019): 45–66. http://dx.doi.org/10.2308/acch-52572.
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SYNOPSIS Auditing standards require auditors to consider whether there is “substantial doubt” that their client will remain a going concern and to, accordingly, modify the audit report (PCAOB AS 2415). Prior research reports larger negative excess returns for bankrupt firms when bankruptcies occur without a prior going concern opinion. We investigate whether such audit opinions can also have an impact on industry peer firms. We find that peer firms experience significantly larger negative stock price drops when rivals' bankruptcies are not preceded by a going concern opinion. In addition, we find evidence of incremental stock price declines for peer firms when Big N audit firms fail to issue a going concern opinion. These findings should be of significant interest to regulators, auditors, and capital market participants as they serve to enhance our current understanding of the importance of going concern opinions for the share pricing of industry peer firms. JEL Classifications: G14; G33; M4; M42. Data Availability: All data are from public sources identified in the manuscript.
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Yiannoulis, Yiannis K. "Synopsis of the Accounting Research in Hellas." Accounting and Finance Research 10, no. 1 (February 26, 2021): 75. http://dx.doi.org/10.5430/afr.v10n1p75.
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The scope of this paper is to provide a synopsis of the accounting research in the Hellenic corporate environment. In addition, we will examine the quality of audit in publicly listed companies, as prescribed by the term “audit gap”; this term specifies and characterizes the growing public concern regarding the audit report credibility and efficiency.These two topics (Hellenic accounting and auditing environment) have been isolated and examined from the previous researchers in depth; however, the novel think of this study is that it examines this “audit gap”, which is the gap between the expectations the public has from the auditors and what auditors actually do in their reports (Caramanis, 2008). This research is useful for capital market and audit authorities as they should focus more on improving audit work and preparing accounting and auditing standards that prevent earnings management. However, our study has the limitation that it examined the capital market, audit and accounting environment of a single country, i.e. Hellas/Greece.
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Hegazy, Karim, and Mohamed Hegazy. "Audit firms and industry specialization in an emerging economy." Journal of Accounting & Organizational Change 14, no. 3 (September 3, 2018): 338–62. http://dx.doi.org/10.1108/jaoc-03-2017-0024.
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PurposeThis study aims to investigate the implications of audit industry specialization on auditor’s retention and growth within an emerging economy. Factors such as whether the firm is a Big 4, a firm with international affiliation, a local firm and the type of industry were studied to analyse the reasons behind audit firm retention and growth.Design/methodology/approachThis research is based on a field study related to audit firms providing services to listed companies in an emerging economy. The sample includes the top 100 publicly held companies’ in the Egyptian stock market during 2006-2011 for which their annual reports are analysed to determine the audit firms’ retention and growth. An assessment of the continuity of the auditors and the increase in the number of audit clients were also measured.FindingsThe results confirm that industry specialization has an important effect on the auditor’s retention, especially for industries where capital investment is significant such as buildings, construction, financial services, housing and real estate. Big 4 audit firms retained their clients because of their industry specialization and brand name. Evidence was found that good knowledge of accounting and auditing standards resulted in audit firms with international affiliation competing with the Big 4 for clients’ retention and growth.Originality/valueThis study contributes to the existing literature, as it is among the first to provide empirical evidence on auditor retention, growth and auditor’s dominance in an emerging economy such as Egypt.
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Reinstein, Alan, Carl J. Pacini, and Brian Patrick Green. "Examining the Current Legal Environment Facing the Public Accounting Profession: Recommendations for a Consistent U.S. Policy." Journal of Accounting, Auditing & Finance 35, no. 1 (January 9, 2017): 3–25. http://dx.doi.org/10.1177/0148558x16680717.
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We examine the recent history and trends of U.S. auditor liability to third parties to help regulators and legislators develop policies to protect and maintain audit quality while limiting auditor liability exposure. Although the United States has yet developed a formal policy to address auditor liability, some European Union member countries and Australia, in varying degrees, support such limitation. Thus, we also explore current EU and Australian policies as examples of potential recommendations to U.S. policy makers. In light of a litigious environment, U.S. Certified Public Accounting firms generally accept potential clients only after analyzing potential risks, dismiss many risky clients, raise their total or hourly fees, spend more time examining attestation evidence, and perform other procedures to reduce their litigation risk. This risk arises largely from the federal and state legal systems, assuming that auditors can better absorb and control losses from misleading financial statements than can financial statement users. While culpable, this litigious environment led to the demise of two large international Certified Public Accounting firms—Arthur Andersen and Laventhol & Horwath. Is the global economy better off having fewer accounting firms with the capacity to perform international audits? A Public Company Accounting Oversight Board’s recent Exposure Draft would require auditors of issuers to expand significantly their audit reports beyond current Pass/Fail standards, which could increase audit firms’ disclosures and resultant liabilities. After examining U.S. federal and state statutes plus court decisions regarding auditor liability, we suggest methods to protect the public while allowing audit firms to thrive in these environments.
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Ariail, Donald L., Joe Durden, Marilynn Leathart, and Lynette Chapman-Vasill. "Avondale Estates: A Case Study in Governmental Accounting and Auditing—A Historical Approach." Issues in Accounting Education 27, no. 2 (January 1, 2012): 419–40. http://dx.doi.org/10.2308/iace-50128.
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ABSTRACT The 82 years of accounting evolution that separate the audits of 1928 and 2009 under different accounting and auditing standards are examined through a cross-disciplined case study that compares the historical 1928 and the contemporary 2009 financial statements and the accompanying audit reports of Avondale Estates, Georgia. The 1928 and 2009 reports and financial statements of this municipality, along with the municipality's current budget information accessible over the Internet, can be used in a number of ways to enhance the instruction of governmental accounting at the undergraduate, graduate, and doctoral levels. In addition to aiding in the teaching of current governmental accounting standards, the case also can be used to give the student a historical perspective on governmental accounting and the accounting profession. By comparing the accounting and reporting standards used in 1928 and 2009, the student will gain an understanding of the evolution of accounting thought. Moreover, the auditors' reports for the two periods illustrate the historical and continuing public service role of the CPA profession as detailed in ET Section 53 of the AICPA Professional Standards (AICPA 2010). Thus, this case study gives the accounting instructor a useful vehicle for teaching accounting history and thought.
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Mardini, Ghassan H., Louise Crawford, and David M. Power. "Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8." Journal of Applied Accounting Research 16, no. 1 (May 11, 2015): 2–27. http://dx.doi.org/10.1108/jaar-09-2012-0066.
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Purpose – The purpose of this paper is to explore the perceptions of external auditors, preparers and users (investors and analysts) of financial statements in Jordan about this new segmental reporting standard; a decision usefulness framework underpins the research. Design/methodology/approach – The objective of this study is to explore the perceptions of external auditors, preparers and users (investors and analysts) of financial statements in Jordan about this new segmental reporting standard; a decision usefulness framework underpins the research. Findings – The findings reveal that a majority of interviewees found that IFRS 8 was not a problematic standard, and that the management approach of IFRS 8 was an improvement on the previous standard – International Accounting Standard (IAS) 14R – because the information produced was seen as useful to users of financial statements. Moreover, the respondents indicated that there was an improvement in the quantity and quality of segmental information under IFRS 8 in annual reports for 2009; it was more understandable, relevant, reliable and comparable than the segmental information which had previously been reported. Research limitations/implications – No attempt was made to assess the usefulness of segmental information reported under IFRS 8 by Jordanian listed companies in their annual reports for other groups such as lenders, suppliers, customers, trade creditors and the general public (IASC, 1989). Thus, a survey about the impact of IFRS 8 on other groups may yield further insights about the decision usefulness of the new standard’s disclosures. However, Jordanians are not familiar with such research instruments and the culture within the society is relatively secretive (Piro, 1998). Practical implications – The findings of the current research should be valuable for international accounting standard setters at the International Accounting Standards Board. It provides some indication about the impact of this new standard. Originality/value – This research shows that segmental information reported under IFRS 8 is more useful for decision makers needs compared to segmental information that previously reported under IAS 14R. It also provides a great insight about the impact of this new segmental disclosure standard.
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Le, Thi Thu Ha, and Thanh Thuy Pham. "Assessment of the quality of the audits of Vietnamese commercial banks financial statements." Mezhdunarodnaja jekonomika (The World Economics), no. 3 (March 1, 2021): 232–38. http://dx.doi.org/10.33920/vne-04-2103-06.
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The aim of the research is to assess the quality of the audits of Vietnamese commercial banks’ fi nancial statements in recent years. Two audit quality indicators are used in the assessment: fi rstly, the quality of the audit reports and the audited fi nancial statements; and secondly, the quality of the factors aff ecting audit quality. One of the factors aff ecting audit quality the characteristic of audit organizations such as the scale of the organizations, the level of knowledge in the fi eld of banking audit, Qualifi cations and experience of auditors, Independence of the auditor and the audit organization, Cost of the audit, Audit procedures, Audit quality control. Other factors are quality control of audit of fi nancial statement of commercial banks; communication between banking supervisors; legislative base (system of accounting standards, standards on auditing); and the eff ectiveness of the internal control system (ICS) of commercial banks. To study and assess the quality of the audits of commercial banks’ fi nancial statements, the authors conducted questionnaires, interviews on audit and study of audited accounting (fi nancial) statements. The result of the research indicates that the audits of Vietnamese commercial banks’ fi nancial statements have basically met the quality required by the current auditing standards. However, there are still some shortcomings in audit methodology and procedures, audit reports and audited fi nancial statements. The authors also suggest some measures to the audit fi rms and government bodies to improve the audit quality.