Key audit risks and audit procedures during the initial year of the COVID-19 pandemic: an analysis of audit reports 2019-2020

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Michael Kend ◽  
Lan Anh Nguyen
Keyword(s):  
Latent Semantic Analysis ◽  
Design Methodology ◽  
Textual Analysis ◽  
Semantic Analysis ◽  
External Audit ◽  
Content Type ◽  
Early Evidence ◽  
Audit Firms ◽  
Audit Reports ◽  
Informational Value

Purpose The purpose of this study is to explore audit procedure disclosures related to key audit risks, during the prior year and the initial year of the COVID-19 outbreak, by reporting on matters published in over 3,000 Australian statutory audit reports during 2019 and 2020. Design/methodology/approach This study partially uses latent semantic analysis methods to apply textual and readability analyses to external audit reports in Australia. The authors measure the tone of the audit reports using the Loughran and McDonald (2011) approach. Findings The authors find that 3% of audit procedures undertaken during 2020 were designed to address audit risks associated with the COVID-19 pandemic. As a percentage of total audit procedures undertaken during 2020, the authors find that smaller practitioners reported much less audit procedures related to COVID-19 audit risks than most larger audit firms. Finally, the textual analysis further found differences in the sentiment or tone of words used by different auditors in 2020, but differences in sentiment or tone were not found when 2020 was compared to the prior year 2019. Originality/value This study provides early evidence on whether auditors designed audit procedures to deal specifically with audit risks that arose due to the COVID-19 pandemic and on the extent and nature of those audit procedures. The study will help policymakers to better understand whether Key Audit Matters provided informational value to investors during a time of global crisis.

Key audit matters: did IAASB unravel the knots of confusion in audit reports decisions?

2021 ◽  
Vol 36 (8) ◽  
pp. 1025-1052
Author(s):  
Mohamed Abdel Aziz Hegazy ◽  
Noha Mahmoud Kamareldawla
Keyword(s):  
Design Methodology ◽  
Financial Statements ◽  
Reporting Standards ◽  
Content Type ◽  
External Auditors ◽  
Big 4 ◽  
Audit Firms ◽  
Audit Reports ◽  
The Relationship ◽  
Practical Implications

Purpose This study aims to investigate how external auditors properly classify the requirements of ISA 701 for key audit matters (KAM) compared with an emphasis of matter or other matters (EOM) in ISA 706 and going concern (GC) in ISAs 706 and 570. Such investigation is important to assess whether the explanatory matters included in ISAs 701, 706 and 570 are appropriate for external auditors so they can properly classify identified audit matters as either KAM, EOM or GC matters and considering the relationship among them. Design/methodology/approach The research used questionnaires sent to a sample of external auditors in five audit firms with international affiliations including two of the Big 4 audit firms. The Z-test for two proportions is conducted to assess whether external auditors were confused when interpreting the explanatory matters included in the ISAs. Findings The research suggests that the current ISA 701 explanations may not adequately help some auditors in their aim of properly identifying all KAM from among the different matters they reach during their audit. When classifying EOM and GC, most of the external auditors misclassified them as KAM. Practical implications This is a timely study. The results have implications for standard setters and regulators through revising the explanations included in the different audit reporting standards including ISA 701 and considering the relationships among them. Originality/value According to the authors’ knowledge, this study is considered among the first that surveyed the appropriateness of the explanations included in ISAs for KAM, EOM, GC and how auditors perceive such explanations when forming their opinion about their clients’ financial statements.

Entrepreneurship in the digital press: a semantic analysis

2019 ◽  
Vol 26 (3) ◽  
pp. 416-431
Author(s):  
Myriam Martí-Sánchez ◽  
Desamparados Cervantes-Zacarés ◽  
Arturo Ortigosa-Blanch
Keyword(s):  
Empirical Evidence ◽  
Thematic Analysis ◽  
Design Methodology ◽  
Semantic Analysis ◽  
Word Association ◽  
Innovation Ecosystem ◽  
Content Type ◽  
The Public ◽  
The Media ◽  
The Way

Purpose The purpose of this paper is to analyse how the media addresses entrepreneurship and to identify the attributes linked to this phenomenon. Design/methodology/approach The sample is defined in terms of a linguistic corpus comprised of content related to entrepreneurship drawn from the digital editions of the three most important Spanish economic newspapers for the period 2010–2017. Word association and co-occurrence analyses were carried out. Further, a non-supervised clustering process was used as the basis for a thematic analysis. Findings Correspondence between social and media patterns related to the entrepreneurship phenomenon is revealed by the results. It is shown how attributes such as “success”, “innovation”, “ecosystem” and “woman” appear as very relevant and are linked to different co-occurrence scenarios. Relevant thematic groups are also identified related to lexical associations such as innovation, digital economy and public policies linked to entrepreneurship. Research limitations/implications It is important to emphasise that this study has identified and explored relationships between words, but not their evolution. Furthermore, conclusions cannot be drawn concerning whether there are differences in how each newspaper has dealt with entrepreneurship because of the way the corpus was constructed. Originality/value The study provides empirical evidence that helps to identify the way media approaches entrepreneurship. The authors carried out the analysis on the media contents and not on the perception of the public on the phenomenon.

Commercialization of audit firms and auditors’ subjective well-being

2020 ◽  
Vol 28 (4) ◽  
pp. 565-585 ◽  
Author(s):  
Yilia Ponomareva ◽  
Timur Uman ◽  
Pernilla Broberg ◽  
Emmy Vinberg ◽  
Karoline Karlsson
Keyword(s):  
Design Methodology ◽  
Empirical Support ◽  
Well Being ◽  
Conservation Of Resources ◽  
Subjective Well Being ◽  
Ongoing Debate ◽  
Content Type ◽  
Audit Firms ◽  
Big Four ◽  
Positive Effect

Purpose The purpose of this study is to explore how the commercialization of audit firms relates to the subjective well-being (SWB) of auditors. Drawing on the conservation of resources and social identity theories, the authors argue that the commercialization of audit firms enhances auditors’ subjective well-being in its overall happiness and job-related dimensions through two theoretical mechanisms. First, it constitutes a valuable resource for an auditor, and second, it reinforces the auditor’s identification with a firm. The authors subsequently contend that this relation is contingent on whether auditors are used in Big four or non-Big four audit firms. Design/methodology/approach The authors test our hypotheses-based data obtained from a survey of 166 Swedish auditors. The data are explored by means of descriptive statistics, correlation matrixes and linear moderating multiple regression analyzes. Findings The authors show that commercial orientation can have a positive effect on auditors’ SWB. The authors also find that the positive relationship between commercialization and SWB is stronger for auditors employed by one of the Big four firms. Originality/value The results contribute to the ongoing debate about the normalization of commercialization within the audit profession by theorizing on and providing empirical support for the positive consequences of commercialization.

Consequences of the implementation of expanded audit reports with key audit matters (KAMs) on audit quality

2020 ◽  
Vol 35 (8) ◽  
pp. 1095-1119
Author(s):  
Weerapong Kitiwong ◽  
Naruanard Sarapaivanich
Keyword(s):  
Design Methodology ◽  
Audit Quality ◽  
Discretionary Accruals ◽  
Regression Analyses ◽  
Content Type ◽  
Weak Evidence ◽  
Financial Restatements ◽  
Audit Reports ◽  
The Impact ◽  
Made In

Purpose This paper aims to ask whether the implementation of the expanded auditor’s report, which included a requirement to disclose key audit matters (KAMs) in Thailand since 2016, has improved audit quality. Design/methodology/approach To answer this question, the authors examined audit quality two years before and two years after its adoption by analysing 1,519 firm-year observations obtained from 312 companies. The authors applied logistic regression analyses to the firm-year observations. Findings The authors found some weak evidence that KAMs disclosure improved audit quality because of auditors putting more effort into their audits and audits being performed thoroughly after the implementation of KAMs. Interestingly, the number of disclosed KAMs and the most common types of disclosed KAMs are not associated with audit quality. Only disclosed KAMs related to acquisitions are more informative because the presence of this type of disclosed KAMs signals the greater likelihood of financial restatements being made in a later year. Originality/value Unlike previous studies on the impact of KAMs disclosure on audit quality, which used discretionary accruals as proxy for audit quality, this study used the occurrence of financial restatements.

Key audit matters: insight from audit experts

2019 ◽  
Vol 27 (3) ◽  
pp. 472-494 ◽  
Author(s):  
Milton Segal
Keyword(s):  
Design Methodology ◽  
Academic Research ◽  
Small Sample ◽  
Content Type ◽  
Interpretive Approach ◽  
Management Policies ◽  
Audit Reports ◽  
The Impact ◽  
The Relationship ◽  
Complete Account

Purpose Key audit matters (KAM) and their impact on the auditor is a relatively understudied area. The purpose of this study is to analyse whether auditors perceive that the recent requirement for auditors of listed companies to report KAMs has enhanced the transparency of audit reports or not, what additional risks they now face, how the risk is being managed and its impact on the relationship with their clients. Design/methodology/approach The paper uses an interpretive approach for detailed interviews with some of South Africa’s leading audit experts to highlight their perspective of the impact of KAM on audit reporting and the audit environment. Findings The experts have various perceptions of what makes a matter “key”. These vary from materiality, to subjectivity and difficulty, as well as incorporating a time-based consideration. Concerns identified include a significant increase in cost and an increase in potential liability, triggering the need for thorough internal risk management policies. The audit experts conclude that KAM has ultimately failed to achieve its goal of greater transparency, with clients virtually ignoring KAM reports. Research limitations/implications The research relies on a relatively small sample of subject experts and may not provide a complete account of the view of all audit professionals and KAM reports issued. It analyses the impact of KAM from the preparers’ perspective. Originality/value This study contributes to the research conducted in this topical area. Although there has been research on KAM focusing on pre-implementation consequences, there is virtually no formal academic research on the impact KAM has had on audit partners and firms in South Africa post implementation. It may also serve as a basis for the IAASB to consider going forward.

The effect of CEO tenure and specialization on timely audit reports of Iranian listed companies

2018 ◽  
Vol 56 (2) ◽  
pp. 311-328 ◽  
Author(s):  
Mahdi Salehi ◽  
Mahmoud Lari Dasht Bayaz ◽  
Mohamadreza Naemi
Keyword(s):  
Significant Relationship ◽  
Design Methodology ◽  
Stock Exchange ◽  
Listed Companies ◽  
Audit Report ◽  
Content Type ◽  
Natural Logarithm ◽  
Ceo Tenure ◽  
Financial Expertise ◽  
Audit Reports

Purpose The purpose of this paper is to examine whether the characteristics of a CEO, that is, tenure and financial expertise, could affect the timeliness of an audit report. Design/methodology/approach Research data gathered from listed companies on the Tehran Stock Exchange during the four-year period 2013-2016. Findings The results obtained from model fittings indicated that there is only a negative and significant relationship between CEO financial expertise and natural logarithm of audit report lag and no significant relationship observed between the former and two other indices of timely audit report. Moreover, no significant relationship was found between the CEO tenure and other three indices of timely audit report. Originality/value This paper is the first study, which developed the literature of timely audit report using CEO tenure effect and financial expertise tests for timely audit reports in Iran.

scholarly journals “A wound that has been festering since 2007”

2017 ◽  
Vol 73 (4) ◽  
pp. 689-699 ◽  
Author(s):  
Brendan Luyt
Keyword(s):  
Design Methodology ◽  
Textual Analysis ◽  
Information Infrastructure ◽  
Point Of View ◽  
Neutral Point ◽  
Nation State ◽  
Multiple Perspectives ◽  
Content Type ◽  
The Creation

Purpose The Burma/Myanmar naming controversy on Wikipedia stands as an exemplary debate at least in terms of the politeness and civility of discourse. It was also one of the longer running debates on Wikipedia beginning almost at the same time as the creation of the article in 2003. But this debate has other lessons for those interested in one of the world’s key pieces of information infrastructure. The paper aims to discuss these issues. Design/methodology/approach The author’s approach to the study of the Wikipedia talk pages devoted to the Burma/Myanmar naming controversy is qualitative in nature and explores the debate over sources through textual analysis. Findings Editors brought to their work a number of underlying assumptions including the primacy of the nation-state and the nature of a “true” encyclopedia. These were combined with a particular interpretation of neutral point of view (NPOV) policy that unnecessarily prolonged the debate and, more importantly, would have the effect, if widely adopted, of reducing Wikipedia’s potential to include multiple perspectives on any particular topic. Originality/value The study clearly shows how editors tend to uncritically reproduce the dominant assumptions of their societies. When combined with positivist readings of NPOV policy, this has grave implications for Wikipedia’s potential to open up representation to a wider set of knowledge producers and perspectives. Much of this potential cannot be realized if the assumptions of editors, especially their flawed understanding of NPOV, cannot be challenged effectively.

Auditors’ judgment subordination and the theory of planned behavior

2020 ◽  
Vol 35 (8) ◽  
pp. 1189-1211
Author(s):  
Dominic Cyr ◽  
Sylvie Héroux ◽  
Richard Fontaine
Keyword(s):  
Theory Of Planned Behavior ◽  
Planned Behavior ◽  
Design Methodology ◽  
Cash Flows ◽  
Content Type ◽  
Audit Firm ◽  
Factors Associated ◽  
Big 4 ◽  
Audit Firms ◽  
Practical Implications

Purpose The purpose of this paper is to examine circumstances under which auditors subordinate their judgment. More specifically, the authors investigate factors associated with auditors’ propensity to accept client-preferred accounting methods that conform to accounting standards but do not faithfully represent the entity’s financial position, financial performance and cash flows. Design/methodology/approach Based on the theory of planned behavior (TPB), the authors developed a survey that was sent to auditors at a non-Big 4 audit firm. Findings Main results suggest that auditors tend to agree with a client’s preferred accounting method when they anticipate little fallout from this decision, they believe they can easily justify the method, and they perceive that colleagues, shareholders and creditors would also agree with the decision. Practical implications Results benefit auditing standard setters and regulators and are relevant for accounting institutes and audit firms because practitioners can learn about circumstances under which auditors subordinate their judgment. Originality/value This study contributes to the audit literature by using the TPB to identify factors associated with auditors’ judgment subordination. In addition, it applies the TPB in a context where a client-preferred accounting method is considered acceptable but is not the most appropriate in light of the audited entity’s specific circumstances.

The effect of changing fiscal year-ends on audit fees and audit quality

2019 ◽  
Vol 12 (3) ◽  
pp. 365-382
Author(s):  
Angel Arturo Pacheco Paredes ◽  
Clark Wheatley
Keyword(s):  
Design Methodology ◽  
Audit Quality ◽  
Audit Fees ◽  
Policy Implications ◽  
Fiscal Year ◽  
Content Type ◽  
Audit Firms ◽  
Negative Effect ◽  
Practical Implications

Purpose This study aims to extend recent research analyzing the effect of auditor busyness on audit quality. Specifically, this study explores the effect on audit quality of a change of fiscal year-end to or from an audit firm’s busy period. Design/methodology/approach Empirical archival. Findings When firms change their fiscal year-end to a period when the auditor is less busy, client firms are rewarded with lower audit fees and auditors are rewarded with a reduction in required effort. This study finds no difference in the level of audit quality after a change in fiscal year-end. Practical implications There are significant implications for audit firms as they may gain cost advantages by successfully promoting off-season fiscal year-ends, and reduce the negative effect on employees associated with “busy season” stress. Similarly, client firms may find that audit costs are reduced when they adopt a less “busy” fiscal year-end. Social implications These results have policy implications for regulators because regulators often dictate the fiscal year-end for certain industries or traded securities. Such dictates may thus introduce inefficiencies into the market for audit services. Originality/value These results should guide regulators in their decisions to dictate fiscal year-ends and firms in their choice of reporting periods.

A critical analysis of ISO audits results

2016 ◽  
Vol 118 (9) ◽  
pp. 2126-2139 ◽  
Author(s):  
Ioannis S. Arvanitoyannis ◽  
Konstantinos Samourelis ◽  
Konstantinos V. Kotsanopoulos
Keyword(s):  
Design Methodology ◽  
Iso 9001 ◽  
Management Systems ◽  
Animal Origin ◽  
Quality And Safety ◽  
Small Companies ◽  
Content Type ◽  
Food Quality And Safety ◽  
Audit Reports ◽  
A Company

Purpose The purpose of this paper is to summarize and analyse the results of several food quality and safety audits (ISO 9001, ISO 22000, ELOT 1416 and Codex Alimetarius) carried out in Greek food companies processing products of animal origin. Design/methodology/approach Specifically, both a quantitative and a qualitative review of the results were carried out. Findings It was revealed that the biggest ratio of non-conformities was recorded within the frame of ELOT 1416 standard (Greek scheme for the certification of HACCP Management Systems), or ELOT 1416 and ISO 9001 where a combination of standards was used. The highest ratio of observations was recorded against ELOT 1416 when used in combination with ISO 9001. The highest average of non-conformities per audit was recorded in meat (red meat and poultry) companies. With regards to the observations recorded, the highest average per audit was recorded in companies processing eggs. Considering the number of workers, the highest average of non-conformities per audit was observed in small companies. Research limitations/implications The limitations of the present study can be summarized into the fact that although a high number of audit reports were taken into account, an audit is an observation of the condition of a company on the day of the audit and the results can also be highly dependent on the skills of the auditors. Originality/value To the best of the authors’ knowledge this is the first paper that analyses a high number of audit reports from Greek food companies and its conclusions can be of significant value to both the auditors and the industry enabling a more focused approach in the conduction of audits and implementation of the standards.

Sign in / Sign up

Export Citation Format

Share Document