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1
Fauzi, Ahmad, and Ach Faqih Supandi. "Perkembangan Audit Syariah Di Indonesia." Jurnal Istiqro 5, no. 1 (January 30, 2019): 24. http://dx.doi.org/10.30739/istiqro.v5i1.339.
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Shari'ah audits, especially in Indonesia, have opportunities in Indonesia with the world's largest Muslim majority population. And the shari'ah audit challenges for future development are better, including (1) regulatory issues such as shari'ah audit standards that are inadequate, the absence of a sharia audit framework and lack of encouragement from the government. (2) Problems of human resources such as the qualifications of shari'ah auditors in accounting and syari'ah are not balanced, the limited number of shari'ah auditors, lack of accountability of shari'ah auditors (DPS) and shari'ah auditors (DPS) are less independent. (3) Audit process problems such as DPS are not yet equipped with sharia audit procedures, Ex-ante and audit ex-poses have not been maximized and the separation of financial audits with sharia audits.
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Krishnan, Jagan, K. Raghunandan, and Joon S. Yang. "Were Former Andersen Clients Treated More Leniently Than Other Clients? Evidence from Going-Concern Modified Audit Opinions." Accounting Horizons 21, no. 4 (December 1, 2007): 423–35. http://dx.doi.org/10.2308/acch.2007.21.4.423.
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In the wake of the collapse of Enron and Andersen, several questions were raised about Enron's accounting and the behavior of its auditor. An important question is whether ex-Andersen's clients received more conservative treatment by their new auditors, either due to a greater perceived litigation risk because of their previous association with Andersen or because of a “correction” of alleged lax auditing by Andersen. We examine going-concern modified audit opinions for former clients of Arthur Andersen, and compare them with opinions issued for other newly acquired clients. We find that auditors were less likely to issue going-concern modified audit opinions to small clients who switched from Andersen than to their existing clients. However, this trend reverses with an increase in client size, with large former Andersen clients more likely to receive going-concern opinions. Our results are consistent with suggestions that increased litigation risk associated with the larger ex-Andersen clients led to increased conservatism by the new auditors. We conjecture that the reduced conservatism for the smaller ex-Andersen clients is likely due to high ex ante conservatism of the Big 4 in not accepting clients perceived to be risky.
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Cahan, Steven F., and Wei Zhang. "After Enron: Auditor Conservatism and Ex-Andersen Clients." Accounting Review 81, no. 1 (January 1, 2006): 49–82. http://dx.doi.org/10.2308/accr.2006.81.1.49.
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This study examines whether after Arthur Andersen's demise, successor auditors required more conservative accounting for their ex-Andersen clients in order to minimize litigation risk. We use unadjusted and performance-adjusted measures of abnormal accruals, and we examine the level of and changes in the abnormal accruals of ex-Andersen clients in 2002 relative to a control sample of clients that were audited by a Big 4 auditor in 2001 and 2002. We conduct univariate and multivariate tests. In our multivariate tests, we control for other factors that may affect litigation risk crosssectionally. Our results indicate that the ex-Andersen clients had lower levels of and larger decreases in abnormal accruals in 2002. This is consistent with auditor conservatism and suggests the successor auditors viewed an Andersen audit as a unique source of litigation risk.
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Khurana, Inder K., and K. K. Raman. "Litigation Risk and the Financial Reporting Credibility of Big 4 versus Non-Big 4 Audits: Evidence from Anglo-American Countries." Accounting Review 79, no. 2 (April 1, 2004): 473–95. http://dx.doi.org/10.2308/accr.2004.79.2.473.
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Prior research suggests that Big 4 auditors provide higher quality audits in the U.S. in order to protect the firm's brand name reputation and to avoid costly litigation. In this study, we examine whether the perceived higher quality of a Big 4 audit is related to auditor litigation exposure or to reputation concerns. Specifically, we utilize an estimable proxy for financial reporting credibility—the ex ante cost of equity capital—to examine whether Big 4 auditors are perceived as providing higher quality audits (relative to non-Big 4 auditors) in the U.S., and in the less litigious (but economically similar) environments in other Anglo-American countries during the 1990–99 period. We find that a Big 4 audit is associated with a lower ex ante cost of equity capital for auditees in the U.S. but not in Australia, Canada, or the U.K. Our findings suggest that it is litigation exposure rather than brand name reputation protection that drives perceived audit quality.
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Kadous, Kathryn. "The Effects of Audit Quality and Consequence Severity on Juror Evaluations of Auditor Responsibility for Plaintiff Losses." Accounting Review 75, no. 3 (July 1, 2000): 327–41. http://dx.doi.org/10.2308/accr.2000.75.3.327.
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This study investigates whether providing higher quality audits increases auditors' chances of avoiding legal liability. Negligence rules hold auditors responsible for plaintiff losses only when the quality of the audit provided fails to meet standards of care. The results of my experiment suggest that the ex post observed consequences of audit failure can affect the standards of care to which jurors hold auditors. Specifically, participants serving in the role of jurors assessed higher standards of care for auditors when the consequences of audit failure were more severe. Furthermore, when the consequences of audit failure were more severe, participants' evaluations of the auditor did not depend on the quality of the audit provided—auditors who provided higher quality audits were evaluated just as negatively as those who provided lower quality audits. In contrast, when audit failure led to only moderately negative consequences, auditors who provided higher quality audits received more favorable evaluations. These results suggest that providing higher quality audits will not necessarily protect auditors from legal liability when the consequences of audit failure are severe.
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Piercey, M. David. "Documentation Requirements and Quantified versus Qualitative Audit Risk Assessments." AUDITING: A Journal of Practice & Theory 30, no. 4 (November 1, 2011): 223–48. http://dx.doi.org/10.2308/ajpt-10171.
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SUMMARY The “not documented, not done” requirements of Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 3 substantially increased auditors' obligations to document their risk assessments. This study examines a potentially unintended consequence of such a requirement on auditors who have pressure to reach lenient, client-preferred risk assessments. Because documentation requirements potentially expose auditors' lenient judgments to more ex post scrutiny (e.g., regulator inspection, litigation), one would ordinarily not expect that adding them would cause auditors with client pressures to become more lenient. However, I expect that adding documentation requirements leads auditors who assess risk in qualitative (rather than quantified) terms to engage more in a specific word-smithing strategy that is shown by prior research to help rationalize reaching more lenient audit conclusions. Thus, even though documentation potentially exposes more lenient judgments to scrutiny, I show that auditors assessing risk in qualitative terms respond to this pressure by rationalizing their lenient assessments even more vigilantly. This leads to more lenient judgments, ironically, as a result of adding the documentation requirement. Adding documentation requirements does not have this effect on quantified risk assessments. Prior research also suggests that auditors typically assess risk in words. Thus, under common conditions, the PCAOB's documentation requirements may have unintended effects, with adverse implications for audit effectiveness contrary to their regulatory intent. Data Availability: Contact the author.
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Glover, Steven M., Douglas F. Prawitt, and T. Jeffrey Wilks. "Why Do Auditors Over-Rely on Weak Analytical Procedures? The Role of Outcome and Precision." AUDITING: A Journal of Practice & Theory 24, s-1 (December 1, 2005): 197–220. http://dx.doi.org/10.2308/aud.2005.24.s-1.197.
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Recent evidence from highly publicized frauds and from the Public Oversight Board's Panel on Audit Effectiveness (2000) indicates that auditors sometimes over-rely on evidence provided by weak substantive analytical procedures. In Experiment 1 we examine whether auditors' assessments of evidence quality are affected by a “favorable outcome” bias, manifested when an analytical procedure indicates that the balance under examination is fairly stated. In Experiment 2 we examine whether an explicit ex ante prompt can activate knowledge that will sensitize auditors to the weaknesses of an unreliable substantive analytical procedure. The first experiment provides evidence that auditors attribute more strength to a weak, aggregate-level analytical procedure that produces an expectation that is not significantly different from the unaudited numbers (i.e., a “favorable” outcome), than to the same analytical procedure that produces an expectation that is significantly different from the unaudited numbers. Further, auditors in the “favorable outcome” condition adjust their initial assessments down to a level very similar to that of auditors in the “unfavorable outcome” condition after seeing a more precise analytical procedure, while auditors in the unfavorable outcome condition do not change from their initial assessment after seeing the more precise procedure. Taken together, our results suggest that when a low-quality analytical procedure yields no significant difference, auditors tend to overestimate the strength of the evidence provided. Results from the second experiment indicate that the explicit consideration of potential weaknesses associated with the highly aggregated analytical procedure reduces auditors' assessments of the strength of evidence obtained from the aggregate procedure. Subjects' explanations suggest that the prompt activated their knowledge of the factors contributing to the quality of the analytical procedure.
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Kaplan, Steven E., and David D. Williams. "Do Going Concern Audit Reports Protect Auditors from Litigation? A Simultaneous Equations Approach." Accounting Review 88, no. 1 (August 1, 2012): 199–232. http://dx.doi.org/10.2308/accr-50279.
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ABSTRACT: Audit researchers have a long-standing interest in understanding whether issuing a going concern report to financially stressed clients protects auditors from litigation. An endogeneity issue arises, in that litigation risk affects the going concern decision and the going concern decision impacts auditor litigation risk. Using a simultaneous equations approach, we find a significant positive association between auditors' ex ante litigation risk and going concern reporting. By applying simultaneous equations, we also find a significant negative association between going concern reporting and auditor litigation, suggesting that auditors deter lawsuits by issuing going concern reports to their financially stressed clients. Our research further provides a more rigorous analysis of the relation between going concern reporting and lawsuit outcomes in the form of auditor litigation dismissals, small settlement amounts, and large settlement amounts. Our results indicate that when auditors are named in lawsuits, having issued a going concern report reduces the likelihood of large financial settlements. Data Availability: The data used in this study are publicly available through sources identified in the study.
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Nagy, Albert L. "Mandatory Audit Firm Turnover, Financial Reporting Quality, and Client Bargaining Power: The Case of Arthur Andersen." Accounting Horizons 19, no. 2 (June 1, 2005): 51–68. http://dx.doi.org/10.2308/acch.2005.19.2.51.
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This paper examines the effect of mandatory auditor change on audit quality in the unique environment created by the failure of Arthur Andersen (AA). The failure of AA forced a significant number of companies (ex-AA clients) to change auditors and also helped increase the overall skepticism exhibited on external audits. The demise of AA does not truly replicate a mandatory rotation regime, but it does provide a rich setting to examine one aspect of such a regime—the effect that a forced auditor change has on the level of audit quality. Furthermore, because ex-AA clients were forced to change auditors on a one-time basis and will not necessarily have to change auditors in the future, client bargaining power is likely to influence auditor behavior and is considered in this study's empirical analyses. This study provides evidence that, for smaller companies, the level of audit quality improved for companies forced to switch from AA, and that the negative relation between short auditor tenure and audit quality was effectively mitigated over the period of AA's demise. The lack of results for larger companies could reflect higher bargaining power toward their auditor. Further research is needed to determine if a forced auditor change would improve audit quality for larger companies in a true mandatory auditor rotation regime, where the amount of bargaining power possessed by companies would seemingly diminish.
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Elliott, John A., Aloke Ghosh, and Elisabeth Peltier. "Pricing of Risky Initial Audit Engagements." AUDITING: A Journal of Practice & Theory 32, no. 4 (May 1, 2013): 25–43. http://dx.doi.org/10.2308/ajpt-50523.
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SUMMARY We reexamine the association between audit fees and risky initial engagements by developing an ex ante client-risk metric that is based on auditor change 8-K filings. We concentrate on auditor-client disagreements and other reportable events (restatement, management integrity, scope limitations, illegal acts, reaudits) disclosed in the 8-K auditor change filings. We find that audit fees are significantly higher for clients reporting disagreements and other reportable events in their 8-K auditor change filings for the initial year of engagement. However, the fee premium is only attributable to Big 4 auditors. While the Big 4 charge 45 percent higher fees when clients have disagreements or other reportable events, there is no such fee premium associated with non-Big 4 clients. More importantly, Big 4 predecessor auditors increase fees prior to the auditor switch as clients develop problems. Big 4 successor auditors continue to charge significantly higher fees for at least three years following adverse 8-K disclosures. Our results provide evidence on how successor and predecessor auditors incorporate risk in the pricing of audit fees, where risk is based on the information contained in auditor change 8-K reports.
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Carcello, Joseph V., Ann Vanstraelen, and Michael Willenborg. "Rules Rather than Discretion in Audit Standards: Going-Concern Opinions in Belgium." Accounting Review 84, no. 5 (September 1, 2009): 1395–428. http://dx.doi.org/10.2308/accr.2009.84.5.1395.
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ABSTRACT: We study going-concern (GC) reporting in Belgium to examine the effects associated with a shift toward rules-based audit standards. Beginning in 2000, a major revision in Belgian GC audit standards took effect. Among its changes, auditors must ascertain whether their clients are in compliance with two “financial-juridical criteria” for board of directors' GC disclosures. In a study of a sample of private Belgian companies, we report two major findings. First, there is a decrease in auditor Type II errors, particularly by non-Big 6/5 auditors for their clients that fail both criteria. Second, there is an increase in Type I errors, again particularly for companies that fail both criteria. We also conduct an ex post analysis of the decrease in Type II errors and the increase in Type I errors. Our findings suggest the standard engenders both favorable and unfavorable effects, the net of which depends on the priorities assigned to the affected parties (creditors, auditors, companies, and employees).
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Ojeaga, Joseph Oseikhuemhen, and Raymond A. Ezejiofor. "Determinants of Audit Quality and Audit Quality: A Study of Listed Companies in Nigeria." Journal of Accounting and Financial Management 9, no. 5 (September 13, 2023): 64–76. http://dx.doi.org/10.56201/jafm.v9.no5.2023.pg64.76.
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The study ascertained the determinants of audit quality of listed companies on the Nigerian Stock Exchange. Ex Post Facto research design was used for the study. A sample of sixty three (63) companies was used for the study from a population of one hundred and seventy companies listed on the Nigerian Exchange. The binary logit regression was applied when the dependent variable is dichotomous in nature (i.e. 1 and 0). Based on the outcome, it could be deduced that the explanatory variable of auditors’ independence poses an inverse significant impact on audit quality. The result also showed that audit tenure has a significant negative impact on audit quality. Based on the findings of this study, it was recommended among others, that management are expected to ensure strong corporate governance principles that would ensure that external auditors remain independence of insiders’ influence. This is expected to enhance the auditors’ objectivity which would lead to higher audit quality ceteris paribus.
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Kontogeorga, Georgia. "The introduction of “ex-ante” audit in Greek municipalities: Leaders of non-compliance?" Corporate Ownership and Control 14, no. 4 (2017): 85–92. http://dx.doi.org/10.22495/cocv14i4art7.
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Although European countries have already ceased the traditional type of audit, Greece still exercises an “a priori” audit in the expenses of public organisations. The “ex-ante” audit in Greece has a long tradition with the exemption of local government for which this type was established relatively recently, namely in 2005. This paper aims to illustrate the results from the first period of implementation of ex-ante audit in the municipalities. The research was conducted with the statistical analysis of Annual Reports of the Hellenic Court of Audit and questionnaires distributed to the auditors of the Court and the executives of audited entities and led to the conclusion that the introduction of ex-ante audit in the local government illustrated serious problems in their financial management.
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Pyzoha, Jonathan S. "Why do Restatements Decrease in a Clawback Environment? An Investigation into Financial Reporting Executives' Decision-Making during the Restatement Process." Accounting Review 90, no. 6 (February 1, 2015): 2515–36. http://dx.doi.org/10.2308/accr-51049.
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ABSTRACT Prior archival studies find that firms that voluntarily adopted clawback policies have experienced a reduction in restatements. I experimentally examine this outcome by investigating the influence of two key factors (i.e., executive compensation structure and auditor quality) on financial reporting executives' (hereafter, “executives”) decision-making regarding a proposed restatement that will lead to a clawback of their incentives. I find that executives (i.e., CFOs, controllers, and treasurers) facing a lower quality auditor are less likely to agree with amending prior financial statements when a higher proportion of their pay is incentive-based. However, this tendency is reduced when executives face a higher quality auditor, indicating that higher quality auditors can act as effective monitors. My results identify an ex post unintended consequence of clawback regulation that could at least partially offset the benefits of the ex ante deterrent effects of clawbacks, and that could contribute to findings of less frequent restatements when clawback policies are in place. I discuss potential implications regarding the role of executives during restatement decisions and auditors' risk assessments in a clawback environment. Data Availability: Data are available from the author upon request.
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Lawrence, Alastair, Miguel Minutti-Meza, and Ping Zhang. "Can Big 4 versus Non-Big 4 Differences in Audit-Quality Proxies Be Attributed to Client Characteristics?" Accounting Review 86, no. 1 (January 1, 2011): 259–86. http://dx.doi.org/10.2308/accr.00000009.
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ABSTRACT: This study examines whether differences in proxies for audit quality between Big 4 and non-Big 4 audit firms could be a reflection of their respective clients’ characteristics. In our analyses, we use three audit-quality proxies—discretionary accruals, the ex ante cost-of-equity capital, and analyst forecast accuracy—and employ propensity-score and attribute-based matching models in attempt to control for differences in client characteristics between the two auditor groups while estimating the audit-quality effects. Using these matching models, we find that the effects of Big 4 auditors are insignificantly different from those of non-Big 4 auditors with respect to the three audit-quality proxies. Our results suggest that differences in these proxies between Big 4 and non-Big 4 auditors largely reflect client characteristics and, more specifically, client size. We caution the reader that this study has not resolved the question, although we hope that it encourages other researchers to explore alternative methodologies that separate client characteristics from audit-quality effects.
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Ahmad, Maslina. "The Impact of Ex-auditors’ Employment with Audit Clients on Perceptions of Auditor Independence." Procedia - Social and Behavioral Sciences 172 (January 2015): 479–86. http://dx.doi.org/10.1016/j.sbspro.2015.01.387.
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Daoust, Laurence, and Bertrand Malsch. "How ex-auditors remember their past: The transformation of audit experience into cultural memory." Accounting, Organizations and Society 77 (August 2019): 101050. http://dx.doi.org/10.1016/j.aos.2019.03.003.
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Chung, Heesun, Catherine Heyjung Sonu, Yoonseok Zang, and Jong-Hag Choi. "Opinion Shopping to Avoid a Going Concern Audit Opinion and Subsequent Audit Quality." AUDITING: A Journal of Practice & Theory 38, no. 2 (June 1, 2018): 101–23. http://dx.doi.org/10.2308/ajpt-52154.
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SUMMARY Despite regulatory concerns over opinion shopping (OS) behavior, there exists little systematic evidence on the prevalence and consequences of OS to avoid a going concern opinion (GCO). Using Lennox's (2000) framework to identify OS, we find that distressed firms successfully engage in OS to avoid a GCO. Moreover, clients engaging in OS exhibit a higher ex post Type II error rate in audit opinions than clients that do not, and the higher Type II error rate is salient for clients switching auditors for OS but not for clients retaining auditors for OS. We continue to find this asymmetric effect of the two types of OS on audit quality measured by restatements. These results indicate that auditor switching for OS not only results in a higher likelihood of audit reporting failures but also impairs other dimensions of audit quality, while auditor retaining for OS has little adverse effect on audit quality.
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Martinov‐Bennie, Nonna, Jeffrey Cohen, and Roger Simnett. "Impact of the CFO's affiliation on auditor independence." Managerial Auditing Journal 26, no. 8 (September 6, 2011): 656–71. http://dx.doi.org/10.1108/02686901111161322.
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PurposeThe purpose of this paper is to examine the potential impact of two affiliation factors, as encapsulated by the chief financial officer's (CFO) prior organizational (alumnus vs non‐alumnus) and professional background (audit vs non‐audit ex‐partner), on auditor independence in post‐Enron and post‐HIH era.Design/methodology/approachThe study is a 2×2 factorial between subjects experimental design with 52 audit partners and managers as participants. The two manipulated independent variables are client CFO prior firm affiliation (alumni vs non‐alumni) and professional background (audit partner vs non‐audit partner providing taxation, accounting and other non‐audit services).FindingsThe results of the study do not appear to signal loss of independence and professional skepticism in auditors' judgment when dealing with an alumni or ex‐auditor CFO. On average, auditors' endorsement of the client's preferred aggressive accounting treatment is low and the audit adjustment is material and significantly greater than the client's proposed adjustment.Originality/valueThe 2001 corporate collapses of Enron in the USA and HIH in Australia have reshaped the auditing profession. HIH, the most publicized corporate fraud in Australia resulting in estimated losses of $5 billion, was partly blamed on Arthur Andersen yielding to management's aggressive accounting policies and failure to display independence as a result of close relationships between the former partners and the audit team. As distinct from a number of prior studies conducted pre‐Enron and pre‐HIH, the results of this study, conducted with experienced audit professionals in Australia, do not support a loss of independence and professional skepticism by auditors in the current post‐Enron and post‐HIH environment and are consistent with the findings of the only other recent experimental study by Kerler III and Killough examining the closeness of the auditor‐client relationship. The results are also consistent with results of recent archival studies which find a decline in earnings management behavior, either because of reduced management incentives or reduced auditor willingness to consent. The evidence of this study lends supports to the latter explanation.
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Alamieyeseigha Ebimoboere Rebecca and Adamu Garba Zango. "External Auditor Attributes and Financial Reporting Quality of Quoted Manufacturing Companies in Nigeria." International Journal of Latest Technology in Engineering Management & Applied Science 14, no. 1 (February 13, 2025): 183–90. https://doi.org/10.51583/ijltemas.2025.1401018.
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Abstract: The study examined external auditor attributes and financial reporting quality of quoted manufacturing companies in Nigeria. Specifically, the study focused on audit fees, and auditors’ industry specialization as a dependent variable and financial reporting quality as independent variable. Ex-post facto research design was adopted. The population included all 44 quoted manufacturing companies in Nigeria out of which 10 were selected as sample size of the study. The study covered the period from 2014 to 2023 and utilized secondary data extracted from the annual accounts of the companies for the period of the study. The study employed the use of descriptive statistics, correlation and panel regression analysis techniques to analyze the data with the aid of STATA version 16. From the regression results, it was revealed that audit fees and auditor industry specialization have statistically positive significant effect on financial reporting quality of quoted manufacturing companies in Nigeria. The study concluded that external auditor attributes have strong explanatory power in determining the quality of financial reporting of quoted manufacturing companies in Nigeria. The study recommended that given the complex nature of the manufacturing companies they should insist on hiring industry specialist auditors. Even, the “Code” stipulates that in order to ensure quality audit outcomes, the engagement partner and audit team should possess the knowledge, relevant skills and experience. The findings from this study have implication to the policy makers and auditors. The findings implied that auditors fee and auditor industry specialization matter with regard the quality of financial reporting. Therefore, the regulators concern over the auditor fee and auditor industry specialization is a major problem in the listed manufacturing firms in Nigeria.
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Lai, Kam-Wah. "Audit Reporting of Big 4 Versus Non-Big 4 Auditors: The Case of Ex-Andersen Clients." International Journal of Accounting 48, no. 4 (December 2013): 495–524. http://dx.doi.org/10.1016/j.intacc.2013.10.001.
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Ngelo, Agnes Aurora, Yani Permatasari, Siti Zaleha Abdul Rasid, Iman Harymawan, and Wulandari Fitri Ekasari. "Ex-Auditor CEOs and Corporate Social Responsibility (CSR) Disclosure: Evidence from a Voluntary Period of Sustainability Report in Indonesia." Sustainability 14, no. 18 (September 12, 2022): 11418. http://dx.doi.org/10.3390/su141811418.
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This study examines the relationship between ex-auditor CEOs in companies and corporate social responsibility disclosure in the Indonesian setting, where the presence of ex-auditor CEOs is increasing every year. We use the sample of 581 firm-year observations from 106 firms that published sustainability reports on the Indonesian Stock Exchange from 2010–2020. The results show that CEOs with an auditor background are more likely to disclose CSR information. This suggests that the auditor background of the CEO can affect corporate decision making, specifically the decision of CSR disclosure, because their auditing experience is also related to a monitoring mechanism of voluntary information, such as CSR disclosure. Moreover, auditors are practically accustomed to being required to have professional judgment when carrying out their work, so they are more aware and careful in terms of running a sustainable business by disclosing the CSR. This study enhances the literature by providing insights into the disclosure practice of CSR among firms with ex-auditor CEOs that are robust to Heckman’s two-stage model and the Coarsened Exact Matching test. This study provides empirical evidence of a relationship between ex-auditor CEOs and CSR information disclosure and several additional analyses in the period of a voluntary sustainability report in Indonesia.
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Dobija, Dorota. "The early evolution of corporate control and auditing: the English East India Company (1600-1640)." Accounting, Auditing & Accountability Journal 31, no. 1 (January 15, 2018): 214–36. http://dx.doi.org/10.1108/aaaj-03-2015-1991.
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Purpose The purpose of this paper is to explain the origins and evolution of auditing and control by linking the changes in the manner in which the audits were conducted with the changes in the institutional function and development of the English East India Company (EIC). Design/methodology/approach Using Sunder’s contract theory of a firm as an interpretive framework, this paper introduces to the debate material documenting the evolution of the auditing practice during a period of 40 years using the single case of the EIC. Findings Auditing in the EIC evolved from a simple adjudication on allowable expenditures to ex post verification of transactions, and from using volunteers to paid auditors. Initially, the company was organized into a series of separate, terminable stocks, and simple verification by volunteer auditors chosen from among the shareholders was sufficient to secure the latter’s interests. When the increasing number, size, and complexity of transactions by the EIC rendered the adjudication approach insufficient, ex post verification of financial transactions was added. With a clearer separation between ownership and control at the time of the introduction of permanent joint stock, the audit function assumed a more professional form. Originality/value This paper contributes to the research on the early modern period at a time of the formation and rapid development of the first joint-stock organization. It offers a dynamic picture of the evolution of control and auditing as a response to the growth of business, organizations, and the attendant challenges of governance.
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Banker, Rajiv D., Xiaorong Li, Steven A. Maex, and Wenyun Shi. "The Audit Implications of Cloud Computing." Accounting Horizons 34, no. 4 (June 30, 2020): 1–31. http://dx.doi.org/10.2308/horizons-19-166.
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SYNOPSIS Over the last decade, many firms have shifted from in-house managed information systems to cloud computing arrangements. Despite regulatory interest in the audit impact of new technologies, little empirical work has studied how auditors behave when clients introduce cloud platforms into their accounting information system. Ex ante, it is unclear whether cloud computing allows for increased audit efficiency through reliance on service organization control reports or introduces additional complexity and risk to the audit. Leveraging a 2015 accounting standards update from the Financial Accounting Standards Board to identify material cloud users, we find that these firms pay an audit fee premium of approximately 5 percent compared to nonusers. This premium attenuates when hiring an audit office with more cloud users in its portfolio, suggesting that cloud audit experience can reduce auditors' costs when conducting such audits. We also explore how audit lag and subsequent restatements vary cross-sectionally with cloud use. JEL Classifications: M41; M48. Data Availability: Data are available from the public sources cited in the text.
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Arora, Nischay, and Balwinder Singh. "Impact of Auditor and Underwriter Reputation on Underpricing of SME IPOs in India." Management and Labour Studies 44, no. 2 (March 28, 2019): 193–208. http://dx.doi.org/10.1177/0258042x19829285.
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Small and medium enterprises (SMEs) being relatively new, young and with little operating history tends to suffer from the problem of information asymmetry and ex ante uncertainty. This problem can be reduced through the use of various signals in the initial public offering (IPO) process. Hence, this study attempts to shed some light on the signalling role of prestigious auditors and underwriters and their interacted effects on IPO returns in an emerging market like India. Cross-sectional data comprising of final 286 SME IPOs issued during February 2012–March 2018 listed on the BSE SME platform and NSE EMERGE have been taken into consideration. Multiple regression analysis has been used to empirically test the signalling role. The results reveal that underwriter reputation helps in reducing information asymmetry and signals firm quality to investors. Underwriter reputation documents a positive relationship while auditor reputation lacks statistical significance. The negative relation of interaction effect of auditors and underwriters reveal that underwriter reputation plays a significant role in positively influencing investors’ perception and assisting them in taking investment decisions.
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Tanyi, Paul, K. Raghunandan, and Abhijit Barua. "Audit Report Lags after Voluntary and Involuntary Auditor Changes." Accounting Horizons 24, no. 4 (December 1, 2010): 671–88. http://dx.doi.org/10.2308/acch.2010.24.4.671.
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SYNOPSIS: We find that the audit report lag is significantly higher for former Andersen clients (that did not follow their Andersen partner to the new audit firm) than for clients voluntarily changing auditors from another Big 5 predecessor for the fiscal year ended December 31, 2002 (the first year with the new auditor for ex-Andersen clients). The differences in audit reporting lags between the two groups are not significant for fiscal years ended December 31, 2000 (the last year before Andersen’s Enron related problems surfaced), or 2003 (the second year with the successor auditor). We also find that clients with voluntary (i.e., non-Andersen) auditor changes have only marginally higher audit reporting lags compared to clients without auditor changes. Our results, focusing on a cost component of involuntary auditor changes, thus provide relevant empirical evidence for debates surrounding mandatory auditor rotation. We also find that ex-Andersen clients that followed the Andersen partner to the new audit firm had shorter audit report lags than ex-Andersen clients that did not follow their Andersen partner. Our findings highlight the importance of individual relationships in the auditing process, and suggest new avenues for future research.
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Yeng, Solomon, and Clement Oppong. "Audit Independence and Financial Reporting Quality: An Insight from Sub-Saharan African Stock Markets." European Journal of Accounting, Auditing and Finance Research 12, no. 5 (April 15, 2024): 1–16. http://dx.doi.org/10.37745/ejaafr.2013/vol12n5116.
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This study examines the possible effects of audit independence on financial reporting quality in the Sub-Sahara African Stock Markets. Using quantitative data obtained from the annual financial reports of 106 listed firms in the 6 sub-Saharan African stock markets of ten-year period (2012 to 2021). The Ex-post factor research design was considerably suitable for the study.The result shows that audit tenure has a positive impact and is significant in explaining financial reporting quality. The results further show that audit firm size has a positive impact but is insignificant in explaining financial reporting quality. Audit fees were found to have a positive and significant impact on. It is recommended that listed firms should increase audit tenure and policies on audit tenure should be revised. It is also recommended that firms should carefully assess the audit report of previous auditors when determining whether to appoint a new auditor. Lastly, Firms should increase the amount of fees paid to auditors to enhance their work while adhering to ethical principles with regard to audit fees. The focus on only firms listed on Stock Market of Sub Saharan African
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Ghosh, Aloke (Al), and Charles Y. Tang. "Auditor Resignation and Risk Factors." Accounting Horizons 29, no. 3 (September 1, 2015): 529–49. http://dx.doi.org/10.2308/acch-51074.
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SYNOPSIS Although auditor litigation risk is considered as a leading explanation for auditor resignations, audit risk and business risk might also trigger resignations. Auditor litigation risk is defined as the risk of the auditor being involved in a lawsuit, audit risk is defined as the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated and, finally, business risk is defined as the risk associated with the client's survival and profitability. Because the three risk factors are not mutually exclusive, we examine their relevance and incremental importance using measures from the pre- and post-resignation periods. Using summary indices from the pre-resignation period, we find that all of the three ex ante risk indices are incrementally important for resignations, especially when the predecessor auditor is a Big 4 firm. Because the ex ante risk factors are prone to measurement errors and are less likely to capture the auditor's proprietary information about the client, we analyze data from the post-resignation period when the auditor's proprietary information is likely to become publicly known. We find that within a three-year period following an auditor's resignation, clients are more likely to (1) be involved in class-action lawsuits (ex post litigation risk), (2) have internal control problems (ex post audit risk), and (3) to be delisted from a national stock exchange (ex post business risk). Our research demonstrates that auditors consider all three risk factors, and not just litigation risk, in resignation decisions.
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Mohammadi, Shaban, Hamid Saremi, and Mina Almasi. "The role of management changes in the auditor's report." International Journal of Accounting and Economics Studies 3, no. 2 (July 2, 2015): 117. http://dx.doi.org/10.14419/ijaes.v3i2.4830.
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<p>The purpose of this study was to identify the relationship between the company management and auditors have commented. This in-clouds the period from 2002 to 2012. The study sample included 100 companies from a number of listed companies on the Stock Ex-change in Tehran. This research is a correlation. Test hypotheses based on multivariate regression was performed. research findings indicate that the auditor's opinion the most affected factors such as change management, audit fees, auditor's term of office, firm size, debt ratio, the ratio of profit and loss is reported. The results emphasize that the management of change increases, the number of items before the said paragraph comments reduced.</p>
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Akhor, Sadiq Oshoke, Uwadiah John Oroboh, Ajueyitse Martins Otuedon, Godwin Ohiokha, Onutomaha Dennis Akrawah, Sunny Ewan Aigbonmian, Timothy Onochonjo Usman, et al. "The effect of non-audit services on audit quality." Corporate Governance and Organizational Behavior Review 7, no. 4, special issue (2023): 326–33. http://dx.doi.org/10.22495/cgobrv7i4sip10.
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Audit quality (AQ) is value-relevant if the information is capable of making a difference in the decisions taken by various stakeholders. Therefore, the provision of non-audit services (NAS) to clients, and auditors can create economic bonding and self-review threats that compromise independence and AQ (Friedrich & Quick, 2023). The study investigates the effects of NAS on AQ in the Nigerian insurance industry. The ex-post facto research design was adopted and data were sourced from the annual reports of the 22 insurance companies listed on the Nigerian Exchange Group (NGX) between 2015 and 2020 and sampled through a filtering method. The study used descriptive statistics, correlation matrix, and binary regression techniques to test the formulated hypotheses. The study made use of a binary logistic econometric approach because the dependent variable is a dummy variable assuming the value of “1” and “0”. In agreement with the study of Pappert and Quick (2022), the regression results revealed that the provision of NAS, audit fees, and firm size significantly affect AQ in the Nigerian insurance industry, while auditor tenure had an insignificant effect on AQ. The study recommended that the provision of NAS should be strengthened and monitored to align with the list of services that auditors are not prohibited from rendering to the client.
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Hurtt, R. Kathy. "Development of a Scale to Measure Professional Skepticism." AUDITING: A Journal of Practice & Theory 29, no. 1 (May 1, 2010): 149–71. http://dx.doi.org/10.2308/aud.2010.29.1.149.
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SUMMARY: Professional skepticism is an important concept in audit practice, as evidenced by its prominence throughout the auditing standards. In this paper I propose that professional skepticism is a multi-dimensional individual characteristic. As an individual characteristic, professional skepticism can be both a trait (a relatively stable, enduring aspect of an individual) and also a state (a temporary condition aroused by situational variables). I develop a scale designed to ex ante measure an individual’s level of trait professional skepticism based on characteristics derived from audit standards, psychology, philosophy, and consumer behavior research. I conduct a rigorous and iterative scale validation process using students and professional auditors. The final 30-item professional skepticism scale with instructions for use is included, as well as suggestions for future research.
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Mendes de Oliveira, Debora Kobayashi, Joshua Onome Imoniana, Valmor Slomski, Luciane Reginato, and Vilma Geni Slomski. "How do Internal Control Environments Connect to Sustainable Development to Curb Fraud in Brazil?" Sustainability 14, no. 9 (May 6, 2022): 5593. http://dx.doi.org/10.3390/su14095593.
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This paper investigates the connection of internal control environment to sustainable development goals to curb fraud in Brazil. We drew on the interpretivist and constructivist perspectives with discourse analysis. Data corpus consists of interviews of 20 respondents who are external auditors, internal auditors, and employees of the controller’s department of an organization of ecommerce and archival documents. Results did not find any significant relationship between the connection of internal control functions (ICF) and the Sustainable Development Goals (SDGs) inasmuch as the connection of ICF to efficiency is tied to policies in compliance with standards, management tone, roles of enforcement, accountability, and adherence and obedience of rules. Triangulating SDG-16 with the dimensions of the control environment, fraud manifests mainly as a result of lack of commitment to integrity and values, as well as ineffectiveness of monitoring functions. This study concludes for the building of effective, accountable and even institutions with the embedding monitoring functions to sustain development goals. Since ex ante literatures examined the conceptual framework in isolation, this study connects it to sustainable development goals. Finally, this study signals an implication in the internal control literature as it clarifies the scientific theories and practical baseline of internal control environment to the policymakers, practitioners, and academia in view of the way forward on the connection of ICF to the SDG in the fight against corporate frauds.
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Files, Rebecca, Nathan Y. Sharp, and Anne M. Thompson. "Empirical Evidence on Repeat Restatements." Accounting Horizons 28, no. 1 (September 1, 2013): 93–123. http://dx.doi.org/10.2308/acch-50615.
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SYNOPSIS This study examines the characteristics and market consequences of repeat restatements. We find that 38 percent of the restating companies in our sample restate at least twice between 2002 and 2008, and 31 percent of repeat restatement firms restate three or more times during the same period. Our tests identify several auditor and restatement characteristics that distinguish single from repeat restatements at the time of the first restatement. Repeat restatements are more likely among clients of non-Big N auditors and those with lower ex ante accounting quality. However, firms that switch auditors between the end of their misstatement period and the restatement announcement are less likely to experience repeat restatements. Although subsequent restatements tend to be less severe than the first in a series of restatements, firms suffer similar declines in stock prices with up to three restatement announcements. In addition, firms often restate the same fiscal periods multiple times, and these “overlapping” restatements are more frequent when managers are distracted by other difficulties, such as discontinued operations or internal control weaknesses. Our findings should be valuable to investors, regulators, and other parties interested in repeat restatements. We provide research design recommendations for researchers to incorporate in future research. JEL Classifications: M41; M42; G34. Data Availability: All data used in this study are publicly available from the sources indicated.
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Liu, Zhenfeng, Yun Cheng, and Ruonan Liu. "Why Non-accelerated Filers Voluntarily Comply with SOX 404b?" International Journal of Accounting & Finance Review 5, no. 2 (August 15, 2020): 1–10. http://dx.doi.org/10.46281/ijafr.v5i2.709.
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This paper investigates the managers’ incentives to voluntarily comply with SOX 404b and the determinants of firms who voluntarily disclose SOX 404b internal control over financial reporting assessment. We find that voluntary SOX 404b reporting non-accelerated filers are more likely to receive effective internal control over financial reporting opinion than accelerated filers and large accelerated filers. We find that voluntary SOX 404b reporting non-accelerated filers are more likely to hire Big Four as independent auditors than non-SOX 404b reporting non-accelerated filers. We also predict and found substantially sufficient cases where non-accelerated filers which used to be, or ex-post became accelerated filers or large accelerated filers, and non-accelerated filers with parent companies complying with SOX 404b are motivated to voluntarily comply with SOX 404b.
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Callen, Jeffrey L., Sean W. G. Robb, and Dan Segal. "Revenue Manipulation and Restatements by Loss Firms." AUDITING: A Journal of Practice & Theory 27, no. 2 (November 1, 2008): 1–29. http://dx.doi.org/10.2308/aud.2008.27.2.1.
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SUMMARY: This paper investigates the relation between the extent of a firm’s past and expected future losses or negative cash flows and the ex ante probability that it will manipulate revenues. When a firm has a string of losses or negative cash flows, traditional valuation models do not yield reliable estimates of firm value, and traditional price-earnings ratios are not meaningful. Evidence suggests that market participants tend to value loss firms on the basis of the level and growth in revenues, rather than cash flows and earnings, thereby motivating these firms to overstate revenue. In fact, empirical results indicate that there is a positive relation between the number of years that firms exhibit and/or anticipate losses or negative cash flows and investment in receivables after controlling for credit policy. We further show that the ex ante likelihood that firms manipulate revenue in violation of GAAP is positively associated with the history of past and expected future losses or negative cash flows, as well as with the investment in accounts receivable (adjusted for credit policy). Our results suggest another indicator of manipulation that may be used by auditors and regulators in identifying firms that are more likely to overstate revenues.
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E., Appah, Onowu J.U., Audu A.J., and Tonye Y.A. "Audit Firm Attributes and External Auditors’ Switching Behaviour of Insurance Companies in Nigeria." African Journal of Accounting and Financial Research 5, no. 2 (October 3, 2022): 73–92. http://dx.doi.org/10.52589/ajafr-kwbb3frl.
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Auditor replacement has been a critical issue in research to be solved in order to enhance the quality of audit reports. This study investigated the nexus between audit firm characteristics and external auditors’ switching behaviour of insurance companies in Nigeria. The specific objectives include the relationship between audit delay, audit tenure, audit fees, audit client size and audit firm size on audit switching. The study employed ex post facto and correlational research designs with a population of forty-seven (47) insurance companies. The study used the Taro Yamene formula to determine the sample size of forty-two (42) insurance companies and data was collected from the financial reports of sampled companies. The secondary data obtained from the annual reports were analysed using univariate, bivariate and multivariate analysis. The multiple regression analysis revealed that audit delay negatively and significantly impacts on audit switching of listed insurance companies in Nigeria; audit tenure negatively and significantly impacts on audit switching of listed insurance companies in Nigeria; audit fees positively and significantly impact on audit switching of listed insurance companies in Nigeria; audit client size negatively and insignificantly impact on audit switching of listed insurance companies in Nigeria; audit firm size positively and significantly influence external auditor switching of listed in insurance firms in Nigeria. On the basis of the findings, the study concluded that audit firm characteristics influence the level of external auditor switching of listed insurance companies in Nigeria. Hence, the study recommended amongst others, that companies should conduct proper short and long term effects of audit delay, audit tenure, audit fees, audit client size and audit firm size on external auditors replacement before selection and engagement of new auditor because each wrong decision might affect audit quality. The implication of this study was to improve the research on the relevance of external auditors’ switching because of the decision of the firms in defining audit firm services and audit quality.
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Aubert, François, Jeff J. Wang, and Gary Grudnitski. "Convergence consensus analyst earnings estimates and option pricing in modeling material accounting misstatements." Review of Accounting and Finance 18, no. 1 (February 11, 2019): 134–56. http://dx.doi.org/10.1108/raf-05-2017-0101.
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Purpose The purpose of this paper is to introduce analyst estimates and option pricing-based variables in modeling material accounting misstatements. Design/methodology/approach The paper uses a logistic regression model to analyze a comprehensive sample of AAER and non-AAER firms listed in the USA. Findings By applying a cross-sectional, sequence of time-series logistic regression models, the authors find better identifiers of ex ante risk of fraud than prediction models based on an inspection of abnormal accruals. These identifiers include the managed earnings (ME) component of a firm and the change in a firm’s option contracts’ implied volatility (IV) prior to an earnings announcement. Practical implications The empirical findings contribute to an understanding of earnings manipulation (fraud) and should be of value to auditors and regulatory bodies interested in identifying financial statement fraud, particularly the Securities and Exchange Commission, which has been improving its accounting quality model (AQM or Robocop) fraud detection tool for many years. The results contribute substantially to enhancing the current accounting literature by introducing two non-accrual-based measures that significantly enhance the predictive power of an accrual-based accounting misstatement prediction model. Originality/value This paper radically departs from relying on the assumption that the clearest and easiest pathway to detect fraud reporting ex ante is through an examination of accruals. Instead, the authors use a richer source of information about the possibility of a firm’s misstatement of its financial accounting numbers, namely, analyst estimates of ex post earnings and the IV from exchange-traded option contracts.
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Anggono, Anggono, Sauh Hwee Teng, Siti Aisyah Nasution, Ari Irawan, and Tarwiyah Tarwiyah. "Pengaruh Work-Life Balance Dan Time Pressure Terhadap Kinerja Auditor." Owner 8, no. 4 (September 30, 2024): 4251–61. http://dx.doi.org/10.33395/owner.v8i4.2470.
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The problem to be investigated in this research is the declining trend in auditor performance at the HGZ Public Accounting Firm. This research aims to analyze the effect of work-life balance and time pressure on auditor performance at the HGZ Public Accounting Firm. The type of research conducted by researchers is ex post facto. HGZ Public Accounting Firm has 60 auditors in total, and the research sample in this study amounted to 51 auditors who were taken by simple random sampling through a lottery drawing. The data collection technique used to obtain data in this research was used in a questionnaire. The data analysis technique used in this research is multiple linear regression, which consists of outer model analysis for instrument validity and reliability and inner model analysis for testing research hypotheses. The results showed that work-life balance had a positive and significant effect on auditor performance, and time pressure had a positive and significant impact on auditor performance. This study concludes that applying work-life balance and high time pressure will improve auditor performance at the HGZ Public Accounting Firm. The research implication that can be given is that the HGZ Public Accounting firm continues to maintain the time pressure policy because this policy is good and updates the work-life balance policy so that auditor performance increases. Two suggestions can be given to future researchers: use comparative causal research in examining auditor performance and look for homogeneous respondents so that the research results can be widely generalized.
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Trotman, Andrew J., and Keith R. Duncan. "Internal Audit Quality: Insights from Audit Committee Members, Senior Management, and Internal Auditors." AUDITING: A Journal of Practice & Theory 37, no. 4 (August 1, 2017): 235–59. http://dx.doi.org/10.2308/ajpt-51877.
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SUMMARY We investigate the concept of internal audit function (IAF) quality from a multi-stakeholder perspective through conducting 36 interviews with key IAF stakeholder groups: audit committee members, senior management, internal audit executives, and outsourced internal audit partners from the major accounting firms. We adapt established quality frameworks that suggest quality is a five-dimensional construct (including input, process, output, outcome, and contextual dimensions) to the internal audit context. We find that the various stakeholder groups focus on different quality dimensions in their evaluation of IAF quality. For example, the groups focus on the process dimension (internal audit executives), output dimension (audit committee members and internal audit partners), or outcome dimension (senior management and internal audit partners). We also find that the five dimensions comprise multiple indicators of IAF quality. We conduct six supplementary interviews with external audit partners to compare their insights on IAF quality to the focal IAF stakeholder groups. External auditors evaluate quality via the output dimension after an ex ante assessment focusing on the input dimension. Finally, we contribute to the IAF quality literature by developing a multi-stakeholder IAF quality framework.
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Olalekan Iredele, Oluwamayowa, Gbadegesin Babatunde Adeyeye, and Ebenezer Babatunde Owoyomi. "CREATIVE ACCOUNTING AND SHAREHOLDERS WEALTH MAXIMIZATION IN LISTED CONSUMER GOODS COMPANIES IN NIGERIA." Copernican Journal of Finance & Accounting 11, no. 1 (June 20, 2022): 49–66. http://dx.doi.org/10.12775/cjfa.2022.003.
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This study examines the effect of creative accounting practices on the shareholders wealth of 90 firm-year observations of ten (10) consumer goods companies listed on the Nigerian Stock Exchange (NSE). Ex post facto research design was adopted usingdataset for the period 2011–2019 which were collated from the annual reports and financial statements of the listed consumer goods companies. Four hypotheses were proposed and tested using pooled panel data regression. Findings revealed that frequentchanges in inventory valuation method and assets valuation methods respectively have significant effect on shareholders wealth, while frequent changes in depreciation methods and liabilities valuation methods do not significantly affect shareholders’ wealth. The study recommends that external auditors should pay attention to discretionary items in the financial statements in order to ensure that the assumptions used by managers are fair. Regulators should also evaluate the adequacy of policies around inventory and assets valuation while financial analysts and shareholders should note the application and consistency of accounting policies on inventory and assets.
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Basu, Sudipta, Jagan Krishnan, Jong Eun Lee, and Yinqi Zhang. "Economic Determinants and Consequences of the Proactive Disclosure of Internal Control Weaknesses and Remediation Progress in IPOs." AUDITING: A Journal of Practice & Theory 37, no. 4 (July 1, 2017): 1–24. http://dx.doi.org/10.2308/ajpt-51876.
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SUMMARY This study investigates (1) why some IPO firms proactively disclose internal control weaknesses (ICWs) and remediation progress in their prospectuses before going public, despite being exempt from the requirements of Sections 302 and 404 of the Sarbanes-Oxley Act at the time of IPO, and (2) the association of such disclosures with IPO underpricing (i.e., the first-day return). We find that IPO firms that proactively disclose ICWs and remediation progress have higher litigation risk, are audited by industry specialist auditors, and are more likely to have audit committees prior to the IPO, compared with firms that do not disclose such information, after controlling for the ex ante probability of having ICWs. IPO underpricing is lower for firms that disclose ICWs and remediation progress, consistent with the conjecture that the disclosure of ICWs and remediation progress signals extensive premarket due diligence, thus reducing the information asymmetry between informed and uninformed investors. JEL Classifications: G24; K22; M13; M41; M42; M49.
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Emby, Craig, Alexander M. G. Gelardi, and D. Jordan Lowe. "A Research Note on the Influence of Outcome Knowledge on Audit Partners' Judgments." Behavioral Research in Accounting 14, no. 1 (January 1, 2002): 87–103. http://dx.doi.org/10.2308/bria.2002.14.1.87.
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Audit partners may be called upon to evaluate, ex post, the work of another auditor. One example of such an evaluation is a Peer Review. An experiment was conducted that examined the influence of outcome knowledge on the going concern and peer evaluation judgments of 122 audit partners from Canada and the United States. Outcome information was manipulated at three levels—no outcome, negative outcome, and positive outcome information. The results confirm previous research and show that audit partners are subject to the influence of outcome information. Negative outcome information influenced (1) audit partners' assessments of the likelihood of the client's continued existence (hindsight effects), (2) the evaluation of the incumbent auditor's judgment (outcome effects), and (3) judgments of the importance of evidence items. Auditors who received outcome information tended to rate outcome-consistent items of evidence as more important. This suggests that the biasing effect of outcome knowledge operates by acting as a filter that magnifies the relative salience of outcome-consistent information.
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Olabisi, Jayeola, Sunday Kajola, Matthew Abioro, and Oyefemi Oworu. "Determinants of Audit Quality: Evidence from Nigerian Listed Insurance Companies." Vestnik Volgogradskogo gosudarstvennogo universiteta. Ekonomika, no. 2 (September 2020): 182–92. http://dx.doi.org/10.15688/ek.jvolsu.2020.2.17.
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The study examines the factors that determine audit quality among listed insurance companies in Nigeria. The study adopts Ex-post facto research design, and 15 companies are purposively selected, out of 25 listed insurance companies in Nigeria as of 2018. Panel data is extracted from the annual account and reports of the selected companies over a period of ten years (2009–2018). Pearson correlation analysis, Ordinary Least Square (OLS) and Regression are the statistical tools used for the analysis. The results of the study reveal a significant relationship between the audit firm size, audit tenure, audit fee, cash flow and audit quality (p < 0.05). However, there is no significant relationship between auditors independence, joint audit and audit quality (p > 0.05). The study concludes that audit fees, audit firm size, audit tenure and cash flow from operations are major determinants of audit quality as each of them has significantly contributed to audit quality of listed insurance companies in Nigeria. Therefore, the Nigerian listed insurance companies should place a high premium on audit firm size, audit fees, and short term audit tenure when engaging services of an audit firm.
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Daryaei, Abbas Ali, Davood Askarany, and Yasin Fattahi. "Impact of Audit Fees on Earnings Management and Financial Risk: An Analysis of Corporate Finance Practices." Risks 12, no. 8 (August 2, 2024): 123. http://dx.doi.org/10.3390/risks12080123.
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This study employs a robust quantitative ex post facto research design to investigate the complex relationship between audit fees and earnings management. The financial information of 164 firms admitted to the Tehran Stock Exchange (TSE) was used from 2010 to 2019 (pre-COVID period) to achieve the research goal. Analysing data from the Tehran Stock Exchange firms, the study uncovers an inverted U-shaped relationship between audit fees and earnings management. This suggests that moderate audit fees can lead to higher earnings management. Key contributions of this paper include highlighting the role of audit fees in influencing financial reporting quality and risk management, providing empirical evidence on the asymmetric effects of normal and abnormal audit fees on earnings management, and emphasising the need for balanced audit fee structures to ensure financial transparency and mitigate risk. The findings offer valuable insights for academics, practitioners, and policymakers in understanding the nuances of audit fees and their impact on corporate financial practices. This study advances the literature on financial risk management and corporate finance. It emphasises the importance of balanced audit fee structures for management teams, auditors, and policymakers to ensure transparent financial reporting practices.
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Almujaddedi, M. S., and Revi Hayati. "Determinan Indikator Fraud Diamond terhadap Internal Fraud pada Bank Umum Syariah di Indonesia." Jurnal Ilmiah Ekonomi Islam 8, no. 3 (October 29, 2022): 2792. http://dx.doi.org/10.29040/jiei.v8i3.6769.
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The total internal fraud committed by Islamic Commercial Banks in Indonesia from 2010 to 2018 was 690 times. This triggers the existence of various theories to detect fraud, one of which is by using the fraud diamond theory which consists of four elements, namely pressure, opportunity, rationalization, and competence. This research is a quantitative research with ex post facto method. The population in this study is Islamic Commercial Banks in Indonesia which are registered in the Islamic banking statistics from the Financial Services Authority as of 2019. The total sample in this study was 5 banks consisting of BNI Syariah Bank, BRI Syariah Bank, Mega Syariah Bank, Mandiri Syariah Bank, and Bank Muamalat Indonesia. The variables used include independent variables consisting of financial target pressure, financial stability pressure, external pressure, supervision, the ratio of changes in receivables, KAP turnover, and change of directors. Meanwhile, based on the t test, it is known that individually, financial stability pressures (X2) and supervision (X4) have an effect on internal fraud in Islamic commercial banks while the financial target pressure variables (X1), external pressure (X3), the ratio of changes in receivables (X5 ), change of auditors (X6), change of directors (X7), there is no effect on internal fraud at Islamic Commercial Banks in Indonesia.
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Ljutić, Ivana. "Corporate Governance of the Companies Listed on the Belgrade Stock Exchange." Economic Analysis 54, no. 1 (June 2, 2021): 71–91. http://dx.doi.org/10.28934/ea.21.54.1.pp71-91.
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The present article addresses the ex-post metadata statistical analysis of the corporate governance questionnaire of the listed companies at Belgrade Stock Exchange. The period is 2013-2020, with 50 reports filed as public information at the official website of the exchange. Methodology is based on the standardized approach promulgated on the IFC technical support to the exchange. It reflects fully the G20/OECD corporate governance principles and corporate governance assessment quality based on this method. The statistics consisted of handling of large and voluminous data with 50 questions, while the question No. 3 was included as a number but not as a question in the reports. Statistical calculation allowed us to make some conclusions and recommendations. At the same time, we are aware that those reports were not assured or audited internally withing the companies, externally by the auditors or by the stock exchange itself. The main goal of our analysis was to give a standard and harmonized overview on the quality of corporate governance of issuers at the Belgrade Stock Exchange, which in turn could be compared with the relevant exchanges worldwide, also to be used for policy makers, regulators and issuers to make practical steps to further improve the quality of corporate governance.
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Onatuyeh, Edwin, Sunday Aniefor, Catherine Orife, Lucky Ogbolu, and Elizabeth Osevwe-Okoroyibo. "The impact of auditor attributes and firm size on financial reporting timeliness of listed firms." Investment Management and Financial Innovations 21, no. 4 (October 16, 2024): 116–27. http://dx.doi.org/10.21511/imfi.21(4).2024.10.
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This empirical study examines the impact of auditor attributes and firm size on financial reporting timeliness among listed firms in Nigeria. The study employs an ex-post facto type of research, with a quantitative design covering a ten-year period (2013–2022). The sample size comprises sixty-six (66) non-financial firms listed on the Nigerian Exchange Group (NGX). Based on data extracted from the audited annual reports of the sampled sixty-six firms, the robust regression model results reveal that joint audits contributed considerably to shorter financial reporting lags, underscoring the value of collaborative audit efforts in streamlining the audit process. Audit fees maintained a positive significant effect on the reporting lag of listed Nigerian firms. However, audit switch, client firm size, audit opinion, and audit firm size all maintained insignificant effects on the financial reporting timeliness of the Nigerian listed firms investigated. Therefore, the study recommends that listed firms should rather opt for affordable joint audits due to their efficiency in streamlining the audit process. Equally, the study recommends that listed firms should maintain long-term relationships with auditors to leverage increased familiarity, yet remain cautious of likely complacency and breach of auditing ethical guidelines that can arise from prolonged engagements.
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P. E., Akinninyi,, Umoren, A. O., Ibok, N. I., and Ugwoke, R. O. "Risk Factors of Audit Fees of Listed Financial Services in Nigeria." African Journal of Accounting and Financial Research 8, no. 1 (February 20, 2025): 137–52. https://doi.org/10.52589/ajafr-2yyxlehk.
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The volatile nature of Nigeria’s business environment, marked by high regulatory intensity and inherent risks, poses challenges for financial service firms, particularly in meeting mandatory audit obligations. This study examined the effect of risk factors (liquidity risk and operational risk) on audit fees purposely selected among 26 listed financial service firms in Nigeria. Using an ex-post facto research design and panel Least regression model, secondary data from 286 observations (2013–2023) were analyzed. Findings revealed that liquidity risk significantly and negatively affects audit fees (Coefficient = -0.110635, p = 0.0288), indicating firms with better liquidity management incur lower audit costs. Operational risk (Coefficient = 0.025628, p = 0.2899) showed no significant effect. With an R-squared value of 0.472829, the model explained 47.3% of audit fee variations. These findings conclude that liquidity risk is a determinant of audit fees, while operational risk exerts an indirect influence moderated by regulatory frameworks and internal controls mechanisms. The study recommended managers adopt effective liquidity and operational management practices to mitigate perceived risks and negotiate lower audit fees, urging policymakers to emphasize liquidity-focused frameworks. This study contributes to the limited empirical literature on audit fee determinants in Nigeria, offering practical implications for managers, auditors, and regulators.
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Onwuka Okwara, Onwuka, and Akoma Jonathan. "Taxation and Performance of Manufacturing Companies in Nigeria: Evidence from Flour Mills Plc." JOURNAL OF ACCOUNTING AND FINANCIAL MANAGEMENT 8, no. 4 (July 2, 2022): 163–72. http://dx.doi.org/10.56201/jafm.v8.no4.2022.pg163.172.
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The study examined the impact of taxation on the performance of manufacturing company in Nigeria from 2005-2021. The study sought to determine if taxation has any impact on the return on asset (ROA) and earnings per share (EPS) using flour mills plc as a case study. The Ex-post research design was adopted and time series data were collected for the study. The ordinary least square regression analysis was used in the analysis. The findings revealed that there is no significant relationship between taxation and the performance of manufacturing company in Nigeria. From the result of the analysis, independent variable of tax showed a weak and negative relationship with ROA and weak and positive relationship with EPS. The study recommends that there should be improvement in the effectiveness of tax administration by ensuring proper assessment. Also, all Relevant Tax Authorities (ROA) should endeavour to have good relationship with the Professional Associations like Chartered Institute of Taxation of Nigeria (CITN) and Institute of Chartered Accountants of Nigeria (ICAN) involved in tax matters so as to increase their support in reducing tax malpractices perpetrated by tax payers with the connivance and often active support of external auditors and tax consultants. Also, the entire tax system as well as the taxes that affect the performance of manufacturing sectors should urgently be overhauled for more effectiveness to achieve the desired results.
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O. Umoren, Adebimpe, and Eno G. Ukpong. "Company Characteristics and Earnings Quality of Listed Non-Financial Companies in Nigeria." AKSU Journal of Administration and Corporate Governance 3, no. 1 (April 15, 2023): 16–31. http://dx.doi.org/10.61090/aksujacog.2023.102.
Full textAbstract:
The quality of reported earnings has been a concern among regulators, standard setters, practitioners and researchers. To this end, the researchers examined the relationship between company characteristics and the earnings quality of listed non-financial companies in Nigeria. The non-financial firms were classified into natural, industrial and service sectors. Company characteristics were proxied using six dimensions, company size, auditor type, company leverage, company age, board size and board meetings. Income smoothing was utilized in measuring earnings quality. An ex-post facto research design was employed in conducting this study. It utilized a total of 697 firm-year observations from 95 companies for the period from 2012 to 2019. The data collected were analysed using descriptive, correlation and regression analysis. Evidence from the study revealed that company leverage and company age were the most prominent company characteristics that significantly influence earnings quality for most of the sectors and the combination of all sectors. Company leverage had a negative influence while company age had a positive impact. It is concluded that highly geared and younger firms have a greater tendency to manipulate their income to impress stakeholders. Therefore, auditors and regulatory bodies such as Financial Reporting Council should pay close attention to young and highly geared firms to curb income manipulation practices and hence enhance earnings quality.