scholarly journals Audit quality implications of regulatory change in South Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Harina Ndaba ◽  
Michael Harber ◽  
Warren Maroun
Keyword(s):  
South Africa ◽  
Quantitative Research ◽  
Audit Quality ◽  
Field Work ◽  
Auditor Independence ◽  
Regulatory Change ◽  
Staff Retention ◽  
Audit Process ◽  
Content Type ◽  
External Regulation

PurposeThis paper explores how technical constructions of audit practice are influenced by mandatory audit firm rotation (MAFR) regulations. The paper responds to calls for additional research on how external regulation influences audit quality and supplements the predominately quantitative research dealing specifically with firm rotation and its relevance for audit quality.Design/methodology/approachData are collected from South Africa which is the latest jurisdiction to adopt MAFR (from 2017). Detailed interviews with 49 participants comprising 24 audit partners and 25 non-auditors are conducted to explore how MAFR can impact audit quality. For this purpose, audit quality is defined according to a schematic developed interpretively and based on professional auditing standards and the prior research on audit quality.FindingsThere is no guarantee that MAFR will bolster auditors' independence or contribute to a more thorough audit approach. On the contrary, the effort required by incoming audit firms to gain an understanding of new clients coupled with material tendering costs is expected to decrease the profitability of audit engagements with adverse implications for audit quality. A loss of client experience and staff retention challenges may contribute further to a decline in audit quality. There may be some improvements to audit practice when an incumbent firm's work is going to be scrutinised by a new auditor but audit methodologies, including the nature and extent of testing performed, are not expected to change significantly because of MAFR. In this way, the regulation may be a symbolic response to a perceived decline in audit quality and auditor independence rather than part of an effective strategy to encourage more rigorous audit practice for the benefit of the users of financial statements.Originality/valueThe current paper provides one of the first exploratory accountants of how MAFR is expected to impact audit practice and, in turn, audit quality. The research responds to the call for more field-work studies on the mechanics of the audit process by engaging directly with practitioners instead of relying on inferential testing of broad audit quality surrogates. The study also makes an important empirical contribution by providing primary evidence on how external regulation influences audit practice from a seldom studied African perspective.

scholarly journals The perceived association between audit rotation and audit quality: evidence from the UAE

2020 ◽  
Vol 10 (3) ◽  
pp. 345-377
Author(s):  
John Kalimilo Malagila ◽  
Ganga Bhavani ◽  
Christian Tabi Amponsah
Keyword(s):  
United Arab Emirates ◽  
Audit Quality ◽  
Developing Economies ◽  
Research Question ◽  
Auditor Independence ◽  
Exploratory Research ◽  
Developing Economy ◽  
Audit Process ◽  
Content Type ◽  
Audit Firms

PurposeThe purpose of this paper is to explore the perceived association between audit rotation (AR) and audit quality (AQ) using respondents from a sample of audit firms operating in a developing economy, the United Arab Emirates (UAE). The paper addresses the following research question: How do UAE auditors perceive the association between various forms of AR and AQ?Design/methodology/approachThe authors collected perception data from a sample of UAE auditors using a questionnaire, and applied several non-parametric statistical techniques to analyze the data, and to answer five exploratory research questions on the perceived association between various forms of AR and AQ.FindingsThe findings suggest that the UAE auditors in our sample did not perceive the association between individual types of AR and AQ as significantly different, and that AR in general is essential for AQ improvement and enhances trust in the audit process. Similarly, we find more support for the perception that medium audit tenure is associated with a lower impairment effect on auditor independence. Furthermore, we find no significant differences in perception based on gender, but younger/less experienced professionals and professionals in self-employed practices and small audit firms (compared to other demographics) significantly perceived AR enforceability and AT length to be associated with AQ. Our findings help to enrich our understanding of the perceived AR-AQ association in a relatively new context and less researched audit area in a developing economy.Originality/valueAlthough lively debates on the question of AR and AQ within the accounting, finance, investment professions and in the financial media continue, there has been relatively limited knowledge and a dearth of empirical studies on this question in most developing economies. Being the first attempt in the country – the UAE, this study contributes towards addressing this gap in empirical knowledge by exploring the perceived association between various forms of AR and AQ in a developing economy.

scholarly journals The Effect of Independence and Integrity on Audit Quality: Is There A Moderating Role for E-Audit?

2021 ◽  
Vol 23 (3) ◽  
Author(s):  
Diza Dianeke Budi Prabowo ◽  
Dwi Suhartini
Keyword(s):  
Industrial Revolution ◽  
Audit Quality ◽  
Practical Implication ◽  
Financial Statements ◽  
Auditor Independence ◽  
Audit Process ◽  
Accounting Firms ◽  
Audit Reports ◽  
The Impact

The financial statements must be reliable and become a benchmark in considering an audit decision on the financial statements. In order for this to be achieved, independence and integrity is required in carrying out the audit process. E-Audit helps overcome challenges in the industrial revolution 4.0 and prevent fraud. This research aims of testing and analyzing the role of e-audit in moderating the impact of auditor independence and integrity on audit quality. The data was collected through a questionnaire distributed to auditors at Public Accounting Firms in Surabaya. There are 36 respondents involved. The data were analyzed using SmartPLS. The results showed that auditor independence positively effect audit quality, auditor integrity positively effect audit quality; e-audit does non moderate the effect of auditor independence on audit quality; ande-Audit negatively moderates the effect of auditor integrity on audit quality. The practical implication of this research is that when determining high audit quality, independent auditors should at least increase their independence and integrity so that the resulting audit reports are of high quality and can be a reference for decision makers.

The use of social media by South African organisations

2018 ◽  
Vol 15 (2) ◽  
pp. 198-210 ◽  
Author(s):  
Nomusa Nomhle Dlamini ◽  
Kevin Johnston
Keyword(s):  
South Africa ◽  
Social Media ◽  
South African ◽  
Quantitative Research ◽  
Brand Management ◽  
Research Question ◽  
Management Tool ◽  
Content Type ◽  
Quantitative Research Methods ◽  
Main Research

Purpose The purpose of this paper is to present how organisations in South Africa are using social media. The paper further explores the value of social media to South African organisations and if it is important for an organisation to have a social media presence. Design/methodology/approach The study used quantitative research methods to answer the main research question and sub-questions. Findings The data collected revealed that most organisations in South Africa are using social media for free advertising, CRM and marketing. The popular social media sites used by these organisations are Facebook and Twitter, with LinkedIn increasing in popularity. The data further revealed that social media is important in organisations for relationship building, contact keeping advertising, marketing, attracting customers, brand management and information gathering. Research limitations/implications The role of social media is changing, it was initially a marketing tool, but the findings revealed that majority of organisations are using social media for free advertising, CRM and marketing. Social media is an easy CRM tool that offers effective and efficient capabilities. Practical implications It is important to use integrate social media with the organisations processes to market and advertise new products, it is an instant and cost-saving way of communicating with customers, and helps in reaching and attracting new customers. Social implications Social media is important for keeping contact and building relationships with customers, advertising and marketing, way to attract customers, brand management tool and gathering information. Originality/value The study provides guidance to how organisation can use social media, identifying the value of using social media and highlighting the importance of social media in an organisation in the South African context.

Using energy profiles to identify university energy reduction opportunities

2016 ◽  
Vol 17 (2) ◽  
pp. 188-207 ◽  
Author(s):  
Nandarani Maistry ◽  
Harold Annegarn
Keyword(s):  
South Africa ◽  
Energy Efficiency ◽  
Energy Consumption ◽  
Quantitative Research ◽  
Electricity Consumption ◽  
Working Hours ◽  
Content Type ◽  
Academic Calendar ◽  
The University

Purpose – The purpose of this paper is to outline efforts at the University of Johannesburg, a large metropolitan university in Gauteng province, to examine energy efficiency within the context of the green campus movement, through the analysis of electricity consumption patterns. The study is particularly relevant in light of the cumulative 230 per cent increase in electricity costs between 2008 and 2014 in South Africa that has forced institutions of higher education to seek ways to reduce energy consumption. Design/Methodology/Approach – A quantitative research design was adopted for the analysis of municipal electricity consumption records using a case study approach to identify trends and patterns in consumption. The largest campus of the University of Johannesburg, which is currently one of the largest residential universities in South Africa, was selected as a case study. Average diurnal consumption profiles were plotted according to phases of the academic calendar, distinguished by specific periods of active teaching and research (in-session); study breaks, examinations and administration (out-of-session); and recesses. Average profiles per phase of the academic calendar were constructed from the hourly electricity consumption and power records using ExcelTM pivot tables and charts. Findings – It was found that the academic calendar has profound effects on energy consumption by controlling the level of activity. Diurnal maximum consumption corresponds to core working hours, peaking at an average of 2,500 kWh during “in-session” periods, 2,250 kWh during “out-of-session” periods and 2,100 kWh during recess. A high base load was evident throughout the year (between 1,300 and 1,650 kWh), mainly attributed to heating and cooling. By switching off the 350 kW chiller plant on weekdays, a 9 per cent electricity reduction could be achieved during out-of-session and recess periods. Similarly, during in-session periods, a 6 per cent reduction could be achieved. Practical implications – Key strategies and recommendations are presented to stimulate energy efficiency implementation within the institution. Originality Value – Coding of consumption profiles against the academic calendar has not been previously done in relation to an academic institution. The profiles were used to establish the influence of the academic calendar on electricity consumption, which along with our own observation were used to identify specific consumption reduction opportunities worth pursuing.

Female audit partners and accruals quality: evidence from Indonesia

2020 ◽  
Vol 10 (2) ◽  
pp. 305-319
Author(s):  
Gatot Soepriyanto ◽  
Pamela Krisky ◽  
Yanto Indra ◽  
Arfian Zudana
Keyword(s):  
Audit Quality ◽  
Positive Impact ◽  
Risk Tolerance ◽  
Alternative Measure ◽  
Audit Process ◽  
Content Type ◽  
Accruals Quality ◽  
Abnormal Accruals ◽  
The Individual ◽  
Audit Reports

PurposeThis study examines the association between accruals quality and gender of the firm's audit engagement partner in Indonesia. Specifically, prior studies provide evidence that gender-based difference in diligence, conservatism and risk tolerance, it is plausible that female auditors may improve audit quality. Indonesia provides a valuable research setting to investigate the issue, as it is mandatory to disclose the identity of the audit partners in the audit reports.Design/methodology/approachThis study employs multivariate regression model to test the hypothesis, which examines the association between accruals quality and audit partners gender. Using a sample of Indonesian publicly listed firms, we run a panel of regression of audit quality measure proxied by abnormal accruals on female auditor variable and firm-specific controls. To triangulate the results, we also conduct sensitivity analysis using high and low category of abnormal accruals, an alternative measure of accruals quality (i.e. Beneish's M score) and propensity score matching (PSM).FindingsWe find that firms with female audit engagement partners are not associated with smaller abnormal accruals, thereby implying that female auditors may not constrain effects on earnings management. In other words, gender is not an important predictor for audit quality in Indonesia.Research limitations/implicationsWe are not able to use broader measures of audit quality such as GAAP violations/restatement, litigation or audit fee. This is because the Indonesian setting somewhat limits us to collect them due to lack of regulatory actions and/or database availability.Practical implicationsThis study will contribute to the regulators (such as Financial Service Authorities/OJK) and professionals, on the effectiveness of female audit partners in improving audit quality. The study can be used as an evidence to support the gender equality in the accounting and audit industry.Social implicationsOur findings suggest that auditor gender does not lead to the improvement of accruals quality in Indonesia. Given the fact that only 14% of firms in our sample audited by female audit partners, it is plausible that the positive traits of female top managers may not transmit to the overall audit process. As such, it is important to encourage more female involvement in top position of auditing and accounting industry is required to advance the profession and its positive impact to the society.Originality/valueThere are no prior studies in Indonesia examining the effect of audit partner gender on accruals quality using archival data. As such, this research will be the first to document such evidence and therefore can improve our understanding on the role of auditor characteristic on audit quality. We also respond to the call from DeFond and Zhang (2014) to push analysis of audit quality to the individual auditor level by examining the gender of audit partner.

Tax services, consequence severity, and jurors' assessment of auditor liability

2013 ◽  
Vol 29 (1) ◽  
pp. 50-75 ◽  
Author(s):  
John M. Thornton ◽  
Michael K. Shaub
Keyword(s):  
Audit Quality ◽  
Auditor Independence ◽  
Tax Planning ◽  
Court Case ◽  
Content Type ◽  
Auditor Liability ◽  
Audit Failure ◽  
The Impact ◽  
Independence In Appearance

Purpose – The purpose of this research is to determine whether the type of tax services provided by a public accounting firm to its audit client and the consequence severity of an audit failure impact jurors' assessment of audit quality and auditor liability. Design/methodology/approach – The authors administer a court case to 168 jurors manipulating three levels of tax services provided to an audit client (none, tax preparation, and aggressive tax planning services); two levels of consequence severity of the alleged audit failure, observing the impact on jurors' assessment of audit quality, auditor responsibility for audit failure; and damages awarded the plaintiff. Findings – Consistent with recent US regulations, jurors perceive the quality of the audit to be lower when auditors provide aggressive tax planning services, but not for tax preparation services. Damages are greater when auditors provide aggressive tax planning services across both levels of consequence severity. Research limitations/implications – The results indicate that the type of tax services provided may impact jurors' views of audit quality and damage assessments against auditors. The questionnaire uses previously validated measures, but the results may not be generalizable to jurors in all jurisdictions. Practical implications – Though empirical evidence is mixed at best about the impact of auditors providing non-audit services on auditor independence in fact, auditor independence in appearance, and thus audit quality, such impacts may affect the way jurors perceive the situation. Originality/value – The study directly tests the implications for auditor liability of new restrictions on tax services and more accurately measures the impact of consequence severity, using actual jurors.

Intra-transfer of ownership factors and external transfer of ownership effects: evidence from the Gauteng enterprising community, South Africa

2020 ◽  
Vol 14 (5) ◽  
pp. 765-785
Author(s):  
Risimati Maurice Khosa
Keyword(s):  
South Africa ◽  
Family Business ◽  
Quantitative Research ◽  
Family Members ◽  
Organisational Change ◽  
Primary Data ◽  
Next Generation ◽  
Snowball Sampling ◽  
Content Type ◽  
Internal Transfer

Purpose This paper aims to determine the perceptions of family-owned small enterprises on the external transfer of ownership and intra-transfer of ownership using empirical data. This permitted the research to successfully point out the factors that influence the internal transfer of ownership, and also, the effects of intra-transfer of ownership from a viewpoint of both family members and non-family members in small family-owned enterprises. Design/methodology/approach A quantitative research design was used to conduct this research, where primary data was gathered from a sample of 257 respondents using convenience and snowball sampling techniques. Data was collected through a survey instrument distributed via internet-based surveys (SurveyMonkey) and through a drop-off method. The gathered data was then captured, coded and analysed using Stata (version 15) statistical software. Findings The results divulged that intra or internal transfer of ownership is the preferred avenue compared to external transfer of ownership. This is because, when a family business is transferred to the next generation, it presents some benefits to family members working in the business and to the family at large. As a result, the empirical results show that factors that influence the internal transfer of ownership include: favouritism; security, stability and growth; a formal and structured succession plan. Business improvement and organisational change are then the effects of external transfer ownership. Although these effects make business sense, family members will advocate for internal transfer of ownership for them not to lose the benefits that come with the internal transfer of ownership. Research limitations/implications This paper adds to the current family business research in South Africa, thus reducing the shortage of such research. Moreover, the paper proposes further research that will provide tested, practical and detailed guidelines of survival in the next generation. Practical implications The paper empirically highlights the perils of selecting a successor based on favouritism rather than merit and possible consequences, thereby assisting those involved in family enterprise succession to make an informed decision when choosing a successor. Originality/value This research paper provides empirical evidence of the internal transfer of ownership factors and external transfer of ownership effects from a South African perspective.

Does the use of honorific appellations in audit reports connote higher financial misstatement risk? Evidence from China

2018 ◽  
Vol 26 (2) ◽  
pp. 154-181 ◽  
Author(s):  
Feng Chen ◽  
Xingqiang Du ◽  
Shaojuan Lai ◽  
Mary Ma
Keyword(s):  
Audit Quality ◽  
Positive Association ◽  
Auditor Independence ◽  
Accounting Firms ◽  
Content Type ◽  
Public Firms ◽  
Financial Misstatements ◽  
Financial Misstatement ◽  
Chinese Auditors ◽  
Audit Reports

Purpose From the sociolinguistic perspective, the purpose of this paper is to examine whether the honorific and actual-name appellations that Chinese auditors use to address clients in audit reports connote differential financial misstatement risk. Specifically, the authors hypothesize that auditors’ use of honorifics signals their inferior social status relative to their clients, thereby leading to compromised auditor independence, lower audit quality, and higher financial misstatement risk. Design/methodology/approach The authors use a sample of manually coded appellation data from audit reports of Chinese public firms between 2003 and 2012 to conduct the research. Findings The authors find significantly greater financial misstatements, both in terms of likelihoods and magnitudes, for companies addressed by honorifics than for those addressed by actual names. Moreover, compared to auditors’ consistent honorific usage, discretionary honorific usage has a stronger positive association with misstatements. The authors further show that the positive association between honorific usage and client misstatement risk weakens when the audit firm is a Top 10 accounting firms in China, is an industry specialist, is formed as a partnership, or resides in a more concentrated audit market. Originality/value This study contributes to the sociolinguistics literature in accounting and provides evidence supporting the reform proposed by the International Auditing and Assurance Standards Board to enhance the usefulness of audit reporting.

scholarly journals Do key audit matters (KAMs) matter? Auditors’ perceptions of KAMs and audit quality in Finland

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antti Rautiainen ◽  
Jani Saastamoinen ◽  
Kati Pajunen
Keyword(s):  
Audit Quality ◽  
European Union Country ◽  
Added Value ◽  
Audit Process ◽  
Content Type ◽  
Electronic Survey ◽  
Work Effectiveness ◽  
The Impact ◽  
Audit Effectiveness ◽  
Practical Implications

Purpose Key audit matters (KAMs) in International Standard for Auditing, 701 seek to enhance the value of the auditor’s report by increasing the transparency of how the audit was performed. The purpose of this study is to investigate how professional auditors themselves perceive the impact of KAMs on audit quality and audit effectiveness. Design/methodology/approach Statistical analyses of an electronic survey of certified public auditors (CPAs) in Finland. Findings Regarding the perceptions of KAMs, the authors found two dominant views on auditing: quality and efficiency. In general, the respondents did not consider that KAMs improve audit quality. However, auditors focusing on efficiency considered that KAMs make the audit process more fluent. Further, the use of KAMs may facilitate audit effectiveness and cooperation between auditors and managers. The authors also found three factors related to the KAMs processes and auditing work: effectiveness, risks and workload. Practical implications Auditors may use KAMs to provide focus in their work. This facilitates balancing between the demands for added value while keeping the workload and audit risks at a tolerable level. Originality/value This study contributes to the emerging literature on KAMs as well as to the literature examining practitioner views of changes in auditing regulation. It is, as far as we know, the first study to report survey evidence on how CPAs themselves perceive KAMs and the effects of KAMs on audit work in an European Union country context.

Determinants of behavioural intentions in the audit market

2019 ◽  
Vol 11 (1) ◽  
pp. 87-103
Author(s):  
Asmerom Atewebrhan Ghebremichael
Keyword(s):  
Service Quality ◽  
Audit Quality ◽  
Supervisory Board ◽  
Auditor Independence ◽  
Board Members ◽  
Content Type ◽  
Behavioural Intentions ◽  
Functional Quality ◽  
Quality Dimensions ◽  
A Minor

PurposeThis study uses conceptualizations and models of service quality and behavioural intentions from the service marketing and audit quality literature to investigate the influence of supervisory board members’ perceptions about various dimensions of audit quality on their behavioural intentions. These dimensions pertain to auditor’s technical competence, functional (service) quality and auditor independence.Design/methodology/approachA survey of supervisory board members of large and medium companies in The Netherlands is made to identify audit quality dimensions. The multivariate analysis is used to identify the quality dimensions influencing supervisory board members’ behavioural intentions.FindingsOverall, the author’s results indicate that the quality dimensions identified in this study have significant influence mainly in the supervisory board members’ intention to refer their auditors to an acquaintance. In this regard, the salient determinants are the functional quality dimensions and auditor independence. The technical quality dimensions are not found to be crucial. In contrast, most of the quality dimensions are not significant determinants of supervisory board members’ intention to retain or recommend the purchase of non-audit services from the auditor albeit having a minor influence. The results have some implications for regulators and audit firms.Research limitations/implicationsThe author’s results are limited by the low response rate that did not allow us to conduct factor analysis on all the functional and technical variables at the same time.Originality/valueThis paper is the first to integrate service quality and behavioural intentions concepts from the marketing literature and auditing literature and apply it in a corporate governance setting.

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