Audit and legal implications of PCAOB’s inspections among BRIC

2016 ◽  
Vol 58 (2) ◽  
pp. 231-244
Author(s):  
Henry Huang ◽  
H. Gin Chong
Keyword(s):  
New York ◽  
Internal Control ◽  
Audit Quality ◽  
Stock Exchange ◽  
Dominant Role ◽  
Content Type ◽  
Sarbanes Oxley ◽  
The Usa ◽  
Audit Reports ◽  
Big Four

Purpose – This paper aims to analyze Public Companies Accounting Oversight Board (PCAOB) inspection reports on audit reports of those inspected accounting firms in Brazil, Russia, India and China (BRIC). In meeting the requirements of the Sarbanes-Oxley Act, the PCAOB conducts inspections on audit reports of firms listed on the New York Stock Exchange. Design/methodology/approach – The reports include those submitted by both the US audit parent firms and their secondary firms located outside the USA. In each PCAOB report, it unravels the nature of audit deficiencies. The focus is on Big Four because they play a dominant role in the marketplace and issuers’ market capitalization. All the seven-year deficiencies are documented since publications of the reports from 2004 to 2012. Findings – Of the 37 reports, 19 (51 per cent) were issued relating to audits conducted by the Big Four. Out of these 19 reports, 10 (53 per cent) contain inspection criticism. These include audit quality and common recurring audit deficiencies. Research limitations/implications – This paper is based solely on those inspection reports published by the PCAOB. Practical implications – The findings have significant implications to audit firms and the audit profession on improving audit quality, firms’ internal control and reports. Originality/value – No known prior research paper is available on the ramifications of the PCAOB’s inspection reports relating to BRIC.

The effect of board and audit committee effectiveness on internal control disclosure under different regulatory environments in South Asia

2019 ◽  
Vol 17 (2) ◽  
pp. 170-200 ◽  
Author(s):  
Khurram Ashfaq ◽  
Zhang Rui
Keyword(s):  
South Asia ◽  
Internal Control ◽  
Audit Committee ◽  
Stock Exchange ◽  
Univariate Analysis ◽  
External Control ◽  
Content Type ◽  
Audit Firm ◽  
Big Four ◽  
Comply Or Explain

Purpose The purpose of this paper is to investigate the internal control disclosure (ICDISC) practices in South Asia and compare those disclosure practices across enforced setting (India) versus comply or explain setting (Pakistan and Bangladesh). Further, whether the audit firm size moderates the relationship between ICDISC practices and board & audit committee effectiveness. Design/methodology/approach To achieve these objectives, a sample of 100 non-financial companies was selected from Pakistan and India for three years’ period (2013-2015), whereas 93 companies were selected from Bangladesh based on market capitalization. The ICDISC index has been used which is based on the COSO framework. Findings Results of univariate analysis show that public sector companies in South Asia tend to disclose significantly more internal control information as compared to private sector companies. In terms of enforcement variable, the results of Mann–Whitney test show that companies listed in enforced setting have disclosed significantly greater extent of overall as well as individual categories of ICDISC as compared to companies listed in comply or explain setting. Based on multivariate analysis results for overall sample, it was found that board and audit committee characteristics and ownership by government have positive significant effect on ICDISC except representation of female or foreigner on audit committee which was found negatively significant. In addition to this, listing on foreign stock exchange and enforcement effect emerged as significant variables to influence ICDISC. Finally, the results of additional analysis state that the role of board and audit committee for influencing ICDISC has been moderated by the external auditor size in South Asia. In addition, enforcement variable is highly positively significant for companies having non-big four audit firm. Research limitations/implications These results imply that enforcement variable acts as an important alternative external control mechanism when companies do not have big four audit firm as their external auditors. Originality/value This is very first study on ICDISC in South Asia which explores the effect of enforcement and governance on ICDISC practices of firms. It also contributes toward the literature that the regulation on reporting of internal control can be effective in developing country only if there is strong penalty for non-compliance by regulatory authorities.

Audit quality following the Public Company Accounting Oversight Board’s operation

2017 ◽  
Vol 17 (5) ◽  
pp. 927-946
Author(s):  
She-Chih Chiu ◽  
Chin-Chen Chien ◽  
Hsuan-Chu Lin
Keyword(s):  
Audit Quality ◽  
Univariate Analysis ◽  
Self Regulation ◽  
Discretionary Accruals ◽  
Content Type ◽  
Positive Effects ◽  
Audit Firms ◽  
Public Company ◽  
The Usa ◽  
Big Four

Purpose The purpose of this paper is to investigate the extent to which the transition from self-regulation to heteronomy has changed the gap in audit quality between Big Four and non-Big Four auditors. Design/methodology/approach This study analyzes publicly held companies in the USA between 1999 and 2012 using univariate analysis, multivariate analysis and quantile regression analysis. Audit quality is measured with discretionary accruals. Findings This study shows an insignificant difference in audit quality between the clients of Big Four and non-Big Four auditors after Public Company Accounting Oversight Board (hereafter, PCAOB) began its operations. In the analysis of the effects of PCAOB inspections on the audit quality of audit firms that are inspected annually and triennially, the findings show that the inspections have more positive effects when carried out annually. This suggests that the frequency of inspection is positively associated with audit quality. Overall, these results provide evidence that recent improvements in audit quality have been caused by changes in regulatory standards. Originality/value The paper provides three major original contributions. First, the authors add to the literature on audit quality by further demonstrating a reduced gap in audit quality between Big Four and non-Big Four audit firms due to heteronomy. Secondly, this study contributes to the debate as to whether independent inspections on audit firms are beneficial or not and suggests that the PCAOB inspections help increase audit quality. Finally, the results of this work contribute to the growing literature examining discretionary accruals.

The perceived impact of the KAM reforms on audit reports, audit quality and auditor work practices: stakeholders’ perspectives

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lan Anh Nguyen ◽  
Michael Kend
Keyword(s):  
Design Methodology ◽  
Audit Quality ◽  
Content Type ◽  
Stakeholder Groups ◽  
Key Stakeholders ◽  
Assurance Services ◽  
Perceived Impact ◽  
Audit Reports ◽  
Big Four

Purpose The purpose of this study is to understand how the new reforms related to key audit matters (KAM) disclosures in Australia may have impacted audit quality by eliciting the perceptions of key stakeholders in the audit and assurance services market. Design/methodology/approach The study uses a qualitative approach and New Institutional Sociology (NIS) to explain how auditors have responded to the KAM reforms. Interviews were conducted with 20 individuals representing identified groups of stakeholders in the market for audit and assurance services in Australia. Findings The study finds there is little consensus between some stakeholder groups on whether the KAM reforms may have improved audit quality, based on the perceptions shared. The findings conveyed that the auditors and regulators, standard setters acknowledge that KAM disclosures are either costly and/or time-consuming to implement. The Big Four auditors indicate these reforms led to changes mainly around internal consultations and independent reviews, whereas the non-Big Four auditors highlighted increased interactions with audit clients. Originality/value This is one of the first studies to examine the perceived post-implementation impacts on audit quality of the KAM reforms (ISA 701) after the initial two years of implementation and how auditors have responded, explored through the lens of institutional logic.

Local accounting firms’ pricing responses to entry of the Big Four accounting firms into China

2016 ◽  
Vol 6 (1) ◽  
pp. 50-68 ◽  
Author(s):  
Vikram Desai ◽  
Bixia Xu ◽  
Tao Zeng
Keyword(s):  
Market Entry ◽  
Audit Fees ◽  
Annual Reports ◽  
Pricing Strategies ◽  
Accounting Firms ◽  
Content Type ◽  
Audit Market ◽  
The Usa ◽  
Audit Reports ◽  
Big Four

Purpose – The historical development and size of China’s audit market provides an opportunity to investigate important questions regarding the functioning of the market for audit services that are difficult, if not impossible, to test in other globally established markets. The purpose of this paper is to examine the effect of the market entry of the Big Four accounting firms into China on the audit fees charged by its local accounting firms. Design/methodology/approach – In this paper the authors rely primarily on the incumbent pricing literature (Simon, 2005; Geroski, 1995) to assist them in developing the specific hypotheses and empirical tests. This paper is an empirical study, which examines whether local incumbent accounting firms cut prices in response to the Big Four’s entry by using data from annual reports and audit reports for China’s listed companies from the 1994 to 2008 period. Findings – This study shows that local incumbent firms cut prices post-entry. This study also finds that it was local large-sized accounting firms as well as accounting firms located in regions with highly developed- and competitive markets that cut prices in response to the Big Four’s entry. Practical implications – This study has important implications for the Big Four accounting firms as it provides useful information about pricing strategies that would likely be used by local accounting firms in a new market. Local accounting firms in emerging markets can also gain useful insights about the pricing strategies adopted by the Big Four accounting firms when they enter a market. Originality/value – Audit market research has little to offer on how local accounting firms respond in their pricing to the entry of Big Four accounting firms into their market, mainly because in western countries such as Canada, England, and the USA, the Big Four accounting firms are the oldest firms operating in those markets. This paper is the first study that examines the effect of the market entry of the Big Four accounting firms into China.

scholarly journals PENGARUH SOLVABILITAS, SEGMEN OPERASI, DAN REPUTASI KAP TERHADAP AUDIT DELAY PADA PERUSAHAAN MANUFAKTUR DI INDONESIA

2017 ◽  
Vol 20 (3) ◽  
Author(s):  
Herni Kurniawati ◽  
Fanny Andriani Setiawan ◽  
Septian Bayu Kristanto
Keyword(s):  
Internal Control ◽  
Financial Management ◽  
Stock Exchange ◽  
Manufacturing Companies ◽  
Negative Effect ◽  
Operational Activities ◽  
Audit Reports ◽  
Big Four ◽  
Positive Effect ◽  
Public Accountant

Timeliness is one of the indicators used in the measure how quickly and accurately a company in publish financial reports in the context of decision making for investors. The information presented on time is considered able to provide a description of the condition that the company in a state of healthy both in the financial management internal control and routine operational activities. Audit delay is defined as a shift in the time that caused by delays in the settlement of the annual financial audit reports. This can occur because of a problem that appears not only from internal company but can also occur because of external factors. In this research we examined whether the solvency, operating segment of the company, and reputation Public Accountant (the big four and non-the big four) have an impact on the duration and scope of the work of the auditor. The object of this research is manufacturing companies listed in Indonesia Stock Exchange period 2011-2013. This research uses linear regression to test is whether or not the influence of solvency, operating segment and reputation Public Accountant to audit delay, aided by a software program eviews 6 and PASW Statistics 18. The results of this research are (1) the level of solvency of companies has positive effect on audit delay, (2) the number of business segments and the number of geographical segment has a negative effect on audit delay, (3) the reputation of Public Accountant has positive effect on audit delay.

The effect of academic education on employers’ satisfaction and audit quality in Iran

2016 ◽  
Vol 48 (5) ◽  
pp. 249-256
Author(s):  
Mahdi Salehi ◽  
Mostafa Bahrami ◽  
Fatemeh Alizadeh
Keyword(s):  
Internal Control ◽  
Design Methodology ◽  
Audit Quality ◽  
Accounting Standards ◽  
Financial Statements ◽  
Academic Education ◽  
Content Type ◽  
Audit Firm ◽  
Audit Reports

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.

Absence of the weekend effect and industry-style portfolios

2019 ◽  
Vol 12 (4) ◽  
pp. 463-475
Author(s):  
Selma Izadi ◽  
Abdullah Noman
Keyword(s):  
New York ◽  
Stock Market ◽  
Structural Breaks ◽  
Stock Exchange ◽  
Structural Break ◽  
Weekend Effect ◽  
Content Type ◽  
Market Portfolio ◽  
The Us ◽  
Using Data

Purpose The existence of the weekend effect has been reported from the 1950s to 1970s in the US stock markets. Recently, Robins and Smith (2016, Critical Finance Review, 5: 417-424) have argued that the weekend effect has disappeared after 1975. Using data on the market portfolio, they document existence of structural break before 1975 and absence of any weekend effects after that date. The purpose of this study is to contribute some new empirical evidences on the weekend effect for the industry-style portfolios in the US stock market using data over 90 years. Design/methodology/approach The authors re-examine persistence or reversal of the weekend effect in the industry portfolios consisting of The New York Stock Exchange (NYSE), The American Stock Exchange (AMEX) and The National Association of Securities Dealers Automated Quotations exchange (NASDAQ) stocks using daily returns from 1926 to 2017. Our results confirm varying dates for structural breaks across industrial portfolios. Findings As for the existence of weekend effects, the authors get mixed results for different portfolios. However, the overall findings provide broad support for the absence of weekend effects in most of the industrial portfolios as reported in Robins and Smith (2016). In addition, structural breaks for other weekdays and days of the week effects for other days have also been documented in the paper. Originality/value As far as the authors are aware, this paper is the first research that analyzes weekend effect for the industry-style portfolios in the US stock market using data over 90 years.

Is Hong Kong ready for accounting education reform: an analysis of tri-partite views

2014 ◽  
Vol 27 (3) ◽  
pp. 249-265 ◽  
Author(s):  
Theodore T.Y. Chen
Keyword(s):  
Hong Kong ◽  
Education Reform ◽  
Financial Reporting ◽  
Accounting Education ◽  
Accounting Firms ◽  
Content Type ◽  
The Usa ◽  
Accounting Practitioners ◽  
The Uk ◽  
Big Four

Purpose – The purpose of this study is to determine whether Hong Kong is ready for accounting education reform. Design/methodology/approach – The approach for this study is using a Likert-scale questionnaire for the academic institutions, the Hong Kong Institute of Certified Public Accountants and the big four accounting firms, followed by detailed follow-up interviews with each. Findings – There is general agreement among accounting academics and the profession that the Accounting Education Change Commission initiatives should be adopted in Hong Kong. Hong Kong accounting academics in public institutions do not oppose to a balance between teaching and research, but would oppose to an emphasis of teaching over research. This is important as an overemphasis on research could mean less time for teaching and curriculum development. The big four accounting firms are either happy with the way Hong Kong universities have been educating the accounting graduates or have no complaints against them. This is also important as an urge for accounting education reform usually comes from the practitioners as in the USA. Originality/value – The USA was the first country that saw the need for accounting education reform as accounting practitioners felt that curriculum and pedagogical considerations placed heavy emphasis on the technical aspects of accounting at the expense of a general, broad-based education. Similar needs for change were also found in the UK and Australia. As Hong Kong is one of the world’s major financial centres with a large securities exchange, there is a great deal of emphasis on accounting standards, financial reporting, corporate governance, etc., and hence the importance of accounting education. Is Hong Kong ready for the change?

The effect of auditor narcissism on audit market competition

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hojat Mohammadi ◽  
Mahdi Salehi ◽  
Meysam Arabzadeh ◽  
Hassan Ghodrati
Keyword(s):  
Financial Markets ◽  
Significant Relationship ◽  
Design Methodology ◽  
Audit Quality ◽  
Stock Exchange ◽  
Market Competition ◽  
Competitive Pressure ◽  
Content Type ◽  
Listed Firms ◽  
Audit Market

Purpose This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure). Design/methodology/approach This paper’s method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2018 using a sample of 188 firms (1,310 observations). The method used for hypothesis testing is linear regression using panel data. Findings The results show a negative and significant relationship between auditor narcissism and audit market competition and its indices, including auditor concentration, clients’ concentration and competitive pressure. Moreover, a positive and significant relationship was observed between audit quality and audit market competition and its indices, including auditor concentration, client concentration and competitive pressure. Originality/value To analyzes competition indices in the audit market (auditor concentration, clients’ concentration and competitive pressure). The variable is assessed once more using the exploratory factor analysis of the so-called three variables single variable, named audit market competition. So the central question of the study is investigated within a broader sense. Moreover, as the present study is carried out in the emergent financial markets with extremely competitive audit markets to figure out the effect of auditors’ intrinsic characteristics on such markets’ competitiveness, it can provide useful information in this field.

scholarly journals The effect of creative corporate culture and intangibility on the performance of foreign firms traded on the NYSE

2018 ◽  
Vol 15 (4) ◽  
pp. 356-372 ◽  
Author(s):  
Marcia Martins Mendes De Luca ◽  
Paulo Henrique Nobre Parente ◽  
Emanoel Mamede Sousa Silva ◽  
Ravena Rodrigues Sousa
Keyword(s):  
New York ◽  
Least Squares ◽  
Corporate Culture ◽  
Corporate Performance ◽  
Stock Exchange ◽  
Generalized Least Squares ◽  
Ordinary Least Squares ◽  
Foreign Firms ◽  
Content Type ◽  
Negative Effect

Purpose Following the tenets of resource-based view, the present study aims to investigate the effect of creative corporate culture according to the competing values framework model at the level of corporate intangibility and its respective repercussions on performance. Design/methodology/approach The sample included 117 non-USA foreign firms traded on the New York Stock Exchange (NYSE), which issued annual financial reports between 2009 and 2014 using the 20-F form. To meet the study objectives, in addition to the descriptive and comparative analyses, the authors performed regression analyses with panel data, estimating generalized least-squares, two-stage least-squares and ordinary least-squares. Findings Creative culture had a negative effect on the level of intangibility and corporate performance, while the level of intangibility did not appear to influence corporate performance. When combined, creative culture and intangibility had a potentially negative effect on corporate results. In conclusion, creative corporate culture had a negative effect on performance, even in firms with higher levels of intangibility, characterized by elements like experimentation and innovation. Originality/value Although the study hypotheses were eventually rejected, the analyses are relevant to both the academic setting and the market because of the organizational and institutional aspects evaluated, especially in relation to intangibility and creative culture and in view of the unique cross-cultural approach adopted. Within the corporate setting, the study provides a spectrum of stakeholders with tools to identify the profile of foreign firms traded on the NYSE.

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