Audit quality: what’s important to users of audit services

2014 ◽  
Vol 29 (9) ◽  
pp. 776-799 ◽  
Author(s):  
Alan Kilgore ◽  
Graeme Harrison ◽  
Renee Radich
Keyword(s):  
Conjoint Analysis ◽  
Audit Committee ◽  
Audit Quality ◽  
Relative Importance ◽  
Content Type ◽  
Audit Firm ◽  
Fund Managers ◽  
Audit Team ◽  
Adaptive Conjoint Analysis ◽  
Firm Attributes

Purpose – This paper aims to investigate the relative importance of audit-team and audit-firm attributes in perceptions of audit quality by two groups of users of audit services: audit committee chairs/members (“insiders”) and financial analysts/fund managers (“outsiders”). Design/methodology/approach – Using a survey questionnaire, data are gathered from 39 audit committee chairs/members and 42 financial analysts/fund managers and analysed using adaptive conjoint analysis. Findings – The findings reveal that both groups perceive audit-team attributes as relatively more important than audit-firm attributes. This is consistent with expectations for “insiders”, but inconsistent with expectations for “outsiders”. Differences are also found in the internal ratings of some of the attributes, with “insiders” and “outsiders” placing different relative importance on some attributes. Research limitations/implications – The usual set of limitations that are present in a survey method also apply in this study, i.e. surveys rely on reports of behaviours rather than observations and are therefore susceptible to measurement error. A further limitation is that, in using adaptive conjoint analysis, the number of attributes that may be included in the survey is restricted and, consequently, the attributes selected may not be comprehensive or fully representative. Originality/value – The study extends the scope of prior studies by examining the relative importance of audit-team and audit-firm attributes in perceptions of audit quality. In using conjoint analysis, the study makes a unique and innovative contribution by providing direct evidence on the relative importance of attributes in perceptions of audit quality for different users of audit services. The findings have implications for regulators and the accounting profession concerned with improving confidence in corporates and for audit firms in monitoring and promoting the quality of their audit services.

Mandatory audit firm rotation: a critical composition of practitioner views from an emerging economy

2020 ◽  
Vol 35 (7) ◽  
pp. 861-896
Author(s):  
Michael Harber ◽  
Warren Maroun
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Unintended Consequences ◽  
Policy Implications ◽  
Chief Financial Officers ◽  
Structured Interviews ◽  
Design Data ◽  
Content Type ◽  
Audit Firm ◽  
Mandatory Audit Firm Rotation

Purpose This study aims to address an acknowledged gap in the literature for the analysis of experienced practitioner views on the effects and implications of mandatory audit firm rotation (MAFR). Design/methodology/approach Using an exploratory and sequential design, data was collected from South African regulatory policy documents, organisational comment letters and semi-structured interviews of practitioners. These findings informed a field survey, administered to auditors, investors, chief financial officers (CFOs) and audit committee members of Johannesburg Stock Exchange (JSE) listed companies. Findings Practitioners expressed considerable pushback against the potential efficacy of MAFR to improve audit quality due to various “switching costs”, notably the loss of client-specific knowledge and expertise upon rotation. In addition, the cost and disruption to both the client and audit firm are considered significant and unnecessary, compared to audit partner rotation. The audit industry may suffer reduced profitability and increased strain on partners, leading to a decline in the appeal of the profession as a career of choice. This is likely to have negative implications for audit industry diversity objectives. Furthermore, the industry may become more supplier-concentrated amongst the Big 4 firms. Practical implications The findings have policy implications for regulators deciding whether to adopt the regulation, as well as guiding the design of policies and procedures to mitigate the negative effects of adoption. Originality/value The participants are experienced with diverse roles concerning the use, preparation and audit of financial statements of large exchange-listed multinational companies, as well as engagement in the auditor appointment process. The extant literature presents mixed results on the link between MAFR and audit quality, with most studies relying on archival and experimental designs. These have a limited ability to identify and critique the potential’s witching costs and unintended consequences of the regulation. Experienced participants responsible for decision-making within the audit, audit oversight and auditor appointment process, are best suited to provide perspective on these effects, contrasted against the audit regulator’s position.

Voluntary audit committees, auditor selection and audit quality: evidence from Taiwan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mao-Feng Kao ◽  
Min-Jeng Shiue ◽  
Chien-Hao Tseng
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Audit Committees ◽  
Firm Level ◽  
Content Type ◽  
Audit Firm ◽  
Empirical Results ◽  
Initial Stage ◽  
Auditor Selection ◽  
The Individual

Purpose This study aims to examine the Taiwan setting, where audit partners’ names are presented in the audit report and where audit committee formation is voluntary in the initial stage of audit committee reform. This paper investigates the effects of the formation of voluntary audit committees on the selection of individual audit partners, and, in turn, the audit quality. This contrasts with previous studies investigating the relationship between audit committees and auditor selection at the audit firm level. Design/methodology/approach This paper samples all of Taiwan’s publicly listed firms for the period 2007–2012 and uses Heckman’s (1979) two-stage estimation model to achieve our objectives. Findings Using different characteristics of individual engagement partners as proxies for a higher quality auditor, the main empirical results show that voluntary audit committee formation is positively related to an industry specialist lead partner and a lead partner that has a larger number of clients. In addition, this paper also finds that voluntary audit committee formation has a positive impact on audit quality (proxied by discretionary accruals). The results suggest that the voluntary formation of an audit committee contributes positively to both auditor selection and audit quality. Furthermore, an additional test shows that the main empirical results are robust to a validity threat that firms that have good corporate governance prior to the formation of voluntary audit committees tend to select high-quality audit partners. Originality/value The paper contributes to the audit committee literature in the following ways: this paper takes advantage of Taiwan’s unique setting, where forming an audit committee is not compulsory in the initial stage of audit committee reform, to investigate the voluntary audit committee, auditor selection and audit quality; this paper expands on Abbott and Parker’s (2000) study of audit committee characteristics and auditor selection at the audit firm level by examining this relationship at the individual audit partner level; this paper responds to the call by Church et al. (2008) and DeFond and Francis (2005) who propose more studies on audit quality at the individual engagement partner level.

The associations between audit firm attributes and audit quality-specific indicators

2019 ◽  
Vol 34 (1) ◽  
pp. 6-43 ◽  
Author(s):  
Bahaaeddin Ahmed Alareeni
Keyword(s):  
Legal System ◽  
Audit Quality ◽  
Meta Analysis ◽  
Firm Reputation ◽  
Industry Specialization ◽  
Content Type ◽  
Audit Firm ◽  
Auditor Industry Specialization ◽  
Analysis Technique ◽  
Firm Attributes

PurposeThis study aims to investigate the associations between audit firm attributes (i.e. audit firm size, non-audit services, auditor industry specialization and auditor-client tenure) and specific indicators of audit quality. It also aims to test whether these relationships are moderated by a set of other factors like legal system and US versus non-US settings.Design/methodology/approachThe method of Hunter et al. (1982) is used as a meta-analysis technique to test the study hypotheses and achieve the study aims. A total of 71 published papers from 1992 to 2017 are included.FindingsThere are significant positive relationships between all audit firm attributes and audit quality. Additionally, the associations between all audit firm attributes and audit quality are moderated by proxies for audit quality. Furthermore, these associations are moderated by other variables, such as US and non-US studies, pre-SOX and post-SOX periods, the legal system, the strength of auditing and reporting standards and country classification (developed or developing country).Research limitations/implicationsThe number of studies is insufficient for some variables, and therefore, the results should be interpreted with caution. In addition, the analyzed studies include several proxies, and thus, the number of studies is inadequate for the incorporation of other factors in the meta-analysis (e.g. audit firm experience and audit firm reputation).Originality/valueThis study contributes to audit quality research by providing empirical evidence of the associations between a specific set of audit firm attributes and audit quality using the meta-analysis method. More importantly, the study provides evidence on factors that moderate these associations.

Leaving a joint audit system: conditional fee reductions

2014 ◽  
Vol 29 (2) ◽  
pp. 131-152 ◽  
Author(s):  
Claus Holm ◽  
Frank Thinggaard
Keyword(s):  
Audit Quality ◽  
Theory Development ◽  
Future Research ◽  
Research Approach ◽  
Content Type ◽  
Audit Firm ◽  
Audit System ◽  
Interaction Terms ◽  
Audit Firms ◽  
Audit Fee

Purpose – The authors aim to exploit a natural experiment in which voluntary replace mandatory joint audits for Danish listed companies and analyse audit fee implications of using one or two audit firms. Design/methodology/approach – Regression analysis is used. The authors apply both a core audit fee determinants model and an audit fee change model and include interaction terms. Findings – The authors find short-term fee reductions in companies switching to single audits, but only where the former joint audit contained a dominant auditor. The authors argue that in this situation bargaining power is more with the auditors than in an equally shared joint audit, and that the auditors' incentives to offer an initial fee discount are bigger. Research limitations/implications – The number of observations is constrained by the small Danish capital market. Future research could take a more qualitative research approach, to examine whether the use of a single audit firm rather than two has an effect on audit quality. The area calls for further theory development covering audit fee and audit quality in joint audit settings. Practical implications – Companies should consider their relationship with their auditors before deciding to switch to single auditors. Fee discounts do not seem to reflect long-lasting efficiency gains on the part of the audit firm. Originality/value – Denmark is the first country to leave a mandatory joint audit system, so this is the first time that it is possible to study fee effects related to this.

scholarly journals Which cues cause consumers to perceive brands as more global? A conjoint analysis

2015 ◽  
Vol 32 (6) ◽  
pp. 606-626 ◽  
Author(s):  
Sarah De Meulenaer ◽  
Nathalie Dens ◽  
Patrick De Pelsmacker
Keyword(s):  
Cluster Analysis ◽  
Conjoint Analysis ◽  
Consumer Culture ◽  
Design Methodology ◽  
Product Category ◽  
Relative Importance ◽  
Brand Name ◽  
High Involvement ◽  
Content Type ◽  
Practical Implications

Purpose – The purpose of this paper is to investigate how the globalization (vs localization) of different cues (advertising copy, brand name, spokesperson, brand logo) influences consumers’ perceived brand globalness. Design/methodology/approach – The authors conducted conjoint analyses for two products differing in product category involvement (chocolates vs computer) with 200 consumers from the Netherlands. Additionally, based on cluster analysis, the authors divide respondents into two groups: local vs global consumer culture individuals, and the authors compare the results of the conjoint analysis for these two clusters. Findings – Advertising copy is most important in determining perceived brand globalness. The spokesperson and the brand logo determine perceived brand globalness more strongly for a low-involvement product, whereas the brand name is more important for a high-involvement product. Further, the spokesperson and the brand logo are relatively more important for global consumer culture individuals, while local consumer culture individuals find the brand name and advertising copy relatively more important. Practical implications – The most important cue to position a brand as global is the advertising copy. Brand managers of a low-involvement product and/or targeting global-minded consumers should concentrate on the spokesperson and the brand logo to position their brand. Managers of a high-involvement product and/or targeting local-minded people should focus on the brand name. Originality/value – While a number of researchers have emphasized the importance of perceived brand globalness for international consumer behavior, the present study is the first to the authors’ knowledge to investigate the relative importance of different cues in creating perceptions of brand globalness.

The impact of audit committee characteristics on internal audit professionalization: empirical evidence from Greece

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Christina Vadasi ◽  
Michalis Bekiaris ◽  
Andreas G. Koutoupis
Keyword(s):  
Empirical Evidence ◽  
Audit Committee ◽  
Audit Quality ◽  
Research Question ◽  
Internal Audit ◽  
Audit Committees ◽  
Annual Reports ◽  
Substantial Impact ◽  
Content Type ◽  
The Impact

Purpose This paper aims to provide empirical evidence of the association between audit committee characteristics and internal audit quality through internal audit professionalization. Design/methodology/approach The investigation of the research question was based on 45 usable responses that were received from a survey of chief audit executives from firms listed on the Athens Stock Exchange and combined with publicly available information from annual reports. Findings The results indicate that audit committee characteristics (independence, diligence through frequent meetings and interaction with internal audit through valuation) influence internal audit professionalization. In addition, they demonstrate that internal audit professionalization is also influenced by CEO duality and firm’s external auditor. Practical implications The findings of this study have implications for audit committees wishing to improve their overall effectiveness, by identifying areas with substantial impact on internal audit quality. Moreover, regulators of corporate governance bodies can also benefit from the results to strengthen audit committee’s efficiency regarding internal audit function oversight. Originality/value The results add to the literature on the discussion of internal audit professionalization and complement the work of other researchers in the field of audit committee’s impact on internal audit quality/effectiveness. This study attempts to fill a gap in the literature on the effect of audit committee characteristics on internal audit professionalization, an element introduced from an institutional theory perspective.

scholarly journals Pengaruh Ukuran Perusahaan Dan Corporate Governance Terhadap Manajemen Laba Di Industri Perbankan Indonesia

2021 ◽  
Vol 9 (1) ◽  
pp. 111-120
Author(s):  
Karina Karina ◽  
Sutarti Sutarti
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Banking Sector ◽  
Audit Quality ◽  
Stock Exchange ◽  
Governance Mechanisms ◽  
Audit Firm ◽  
Corporate Governance Mechanisms ◽  
Size Firm

The purpose of this research is to provide empirical evidence of the affect of ownership concetration, firms size, and corporate governance mechanisms on earnings management. Ownership concetration was measure by the biggest stock of individual or organization, firms size was measure by natural logaritma of net assets, and corporate governance mechanisms were measure by three variabels (composition of board of commisioner, audit quality were measure by industry specialize audit firm, and composition of audit committee). Earnings management was measure by discretionary accruals use Modified Jones Method. The population of this research is 41 companies in the banking sector which were listed in Indonesian Stock Exchange (IDX). The research data were collected from banking companies financial statement for the period of 2016 to 2018. Based on purposive sampling method. The reseacrh hypotesis were tested using multiple regression analysis. The results of this research show that firm size, firm of commissioner and proportion of commissioner have significant relationships with earnings management. Next, variables composition of board of commissioner, ownership concetration and specialize audit firm have no significant relationship with earnings management. Keywords: ownership concetration, firms size, corporate governance, earnings management

scholarly journals Which cues influence the perceived usefulness and credibility of an online review? A conjoint analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ana Isabel Lopes ◽  
Nathalie Dens ◽  
Patrick De Pelsmacker ◽  
Freya De Keyzer
Keyword(s):  
Conjoint Analysis ◽  
Product Category ◽  
Online Reviews ◽  
Perceived Usefulness ◽  
Online Review ◽  
Large Set ◽  
Relative Importance ◽  
Writing Quality ◽  
Content Type ◽  
Argument Strength

PurposeThis study aims to assess the relative importance of the argument strength, argument sidedness, writing quality, number of arguments, rated review usefulness, summary review rating and number of reviews in determining the perceived usefulness and credibility of an online review. Additionally, the authors use insights from the elaboration likelihood model (ELM) to explore the effect of consumers' product category involvement on the cues' relative importance.Design/methodology/approachA conjoint analysis (N = 287) is used to study the relative importance of the seven previously mentioned attributes. A balanced orthogonal design generated eight cards that correspond to individual reviews. Respondents scored all eight cards in a random order for perceived usefulness and credibility.FindingsOverall, argument strength is the most important cue, while summary review rating and the number of reviews are the least important for perceived review usefulness and credibility. The number of arguments is more important for people who are more highly involved with the product, while writing quality and rated review usefulness are relatively more important for the low-involvement group.Originality/valueThis study provides a comprehensive test of how consumers perceive online reviews, as it the first to the authors’ knowledge to simultaneously investigate a large set of cues using conjoint analysis. This method allows for the implicit valuation (utility) of the individual cues, revealing the cues' relative importance, in a setting that comes close to a real-life context. Besides, insights of the ELM are used to understand how the relative importance of cues differs depending on the level of review readers' product category involvement.

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 committee effectiveness, audit quality and earnings management: a meta-analysis

2016 ◽  
Vol 58 (2) ◽  
pp. 179-196 ◽  
Author(s):  
Zgarni Inaam ◽  
Halioui Khamoussi
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Audit Quality ◽  
Good Governance ◽  
Meta Analysis ◽  
Negative Relationship ◽  
Real Earnings Management ◽  
Institutional Setting ◽  
Content Type

Purpose – Many researchers, in several contexts, have investigated the influence of audit committee effectiveness and audit quality variables on reducing the extent of earnings management, and empirical evidence is rather inconsistent. Design/methodology/approach – The aim of this paper is to meta-analyze the results of 58 prior studies that examined whether differences in results are related to moderating effects associated with corporate governance mechanisms or measures of earnings management. Findings – The findings show that the meta-analysis identifies many significant relationships. The independence of the audit committee, its size, expertise and the number of meetings have a negative relationship with earnings management. Similar negative relationships exist between auditor size, specialization and earnings management. Research limitations/implications – This study contributes to the corporate governance literature. Further, recognizing the function of an audit committee and audit quality shows the value of considering an institutional setting in governance research. This study is significant to academic and practitioner literatures, policy makers and professional accounting bodies as it shows that governance reforms promote companies to adopt good governance practices. The results also give useful information to investors in examining the effect of audit committee characteristics and audit quality on earnings quality. Originality/value – This study extends existing research on audit committee and audit quality to oversee both accrual and real earnings management using meta-analysis. Thus, this study has the potential to help stakeholders, board of directors, regulators and auditors, who are related with enhancing the supervision of firms and reducing the opportunities given to managers, to engage in earnings management.

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