Trade-offs in the relationship between competition and audit quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nam Ho
Keyword(s):  
Audit Quality ◽  
Metropolitan Statistical Area ◽  
New Approach ◽  
Content Type ◽  
Big 4 ◽  
Trade Offs ◽  
Level Data ◽  
The Usa ◽  
The Relationship ◽  
Insight Into

Purpose Fears over public accounting becoming increasingly concentrated have inspired several attempts to study the relationship between competition and audit quality. These studies have yielded conflicting results without a clear reason as to why. This paper aims to propose a new approach and empirically demonstrate a non-monotonic association between competition and audit quality. Design/methodology/approach Using metropolitan statistical area level data from the USA over the period of 2000–2014, the author shows that the effect that changes in the competition will have on audit quality depends upon the current competitive state of the market. Findings Audit quality is at its highest level when competition is neither too high nor too low. In addition, the point of inflection at which competition turns from being helpful to harmful is influenced by the saturation of the Big 4 auditors in the market. Practical implications These findings can help explain the mixed results of the literature and provide insight into the role that regulators can play in modulating competition. Originality/value This is the first paper to document a non-monotonic relationship between competition and audit quality. By introducing and exploring the validity of a non-monotonic component in the audit quality equation, the authors can better determine, which competitive structures generate desired levels of audit quality.

Corporate political connections, agency costs and audit quality

2016 ◽  
Vol 24 (4) ◽  
pp. 357-374 ◽  
Author(s):  
Arifur Khan ◽  
Dessalegn Getie Mihret ◽  
Mohammad Badrul Muttakin
Keyword(s):  
Agency Costs ◽  
Audit Quality ◽  
Agency Cost ◽  
Political Connections ◽  
Political Connection ◽  
Data Set ◽  
Research Attention ◽  
Content Type ◽  
Big 4 ◽  
The Relationship

Purpose The effect of political connections of agency costs has attracted considerable research attention due to the increasing recognition of the fact that political connection influences corporate decisions and outcomes. This paper aims to explore the association between corporate political connections and agency cost and examine whether audit quality moderates this association. Design/methodology/approach A data set of Bangladeshi listed non-financial companies is used. A usable sample of 968 firm-year observations was drawn for the period from 2005 to 2013. Asset utilisation ratio, the interaction of Tobin’s Q and free cash flow and expense ratio are used as alternative proxies for agency costs; membership to Big 4 audit firms or local associates of Big 4 firms is used as a proxy for audit quality. Findings Results show that politically connected firms exhibit higher agency costs than their unconnected counterparts, and audit quality moderates the relationship between political connection and agency costs. The results of this paper suggest the importance of audit quality to mitigate agency problem in an emerging economic setting. Research limitations/implications The findings of this paper could be of interest to regulators wishing to focus regulatory effort on significant issues influencing stock market efficiency. The findings could also inform auditors in directing audit effort through a more complete assessment of risk and determining reasonable levels of audit fees. Finally, results could inform financial statement users to direct investments to firms with lower agency costs. Originality/value To the knowledge of the authors, this study is one of the first to explore the relationship between political connection and agency costs, and the moderating effect of audit quality of this relationship.

The effect of engagement partner workload on audit quality

2021 ◽  
Vol 36 (8) ◽  
pp. 1068-1091
Author(s):  
Yun Cheng ◽  
Christine M. Haynes ◽  
Michael D. Yu
Keyword(s):  
Audit Quality ◽  
Firm Level ◽  
Content Type ◽  
Big 4 ◽  
The Us ◽  
Performance Benchmarks ◽  
Partner Characteristics ◽  
Partner Firm ◽  
The Individual ◽  
The Relationship

Purpose Auditing studies have shifted the research focus from the audit firm level to the individual audit partner level in recent years. Motivated by the call from Lennox and Wu (2018) to explore the effect of audit partners’ characteristics on audit quality in the US, this study aims to develop a new measure of engagement partner workload (EPW), which includes both the size and number of clients audited to test the effect of EPW on audit quality. This study also examines the moderating effect of the partner firm size on audit quality. Design/methodology/approach To test the effect of the EPW on audit quality, this study runs multivariate regressions of EPW on each specific client’s discretionary accruals and audit report delays. This study also runs a logistic regression of EPW on clients’ probability of having small profit increases to meet performance benchmarks. Findings Results of the hypotheses show that partner workload is positively related to audit quality. The results indicate that partners with larger, but fewer, clients conduct higher quality audits. Further analysis indicates that the relationship between partner workload and audit quality only holds for partners from the non-Big 4 firms. Originality/value This study contributes to the literatures of both audit quality and audit partner characteristics, and the results complement initial research aimed at identifying US partner-related characteristics that influence audit quality.

The effect of audit engagement partner professional experience on audit quality and audit fees: early evidence from Form AP disclosure

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chenyong Liu ◽  
Chunhao Xu
Keyword(s):  
Fixed Effects ◽  
Audit Quality ◽  
Early Stage ◽  
Audit Fees ◽  
Least Square ◽  
Professional Experience ◽  
Accounting Firms ◽  
Content Type ◽  
Big 4 ◽  
The Relationship

PurposeThe purpose of this study is to examine the effect of audit engagement partner's professional experience on audit quality. The authors also investigate the relationship between the audit partner's experience and audit fees in both Big 4 and non-Big 4 accounting firms.Design/methodology/approachSince the Public Company Accounting Oversight Board (PCAOB) officially enacted Rule 3211 in 2017, US accounting firms are required to disclose detailed information of engagement partners in Form AP (PCAOB, 2015b). The authors obtained a sample of 2,283 audit partners from Form AP and hand collected their individual professional experience data through Certified Public Accountant (CPA) database, corporate disclosure and social media sites (e.g. Linkedin). Econometric models with fixed effects are used in this study to test our hypotheses. Two-stage least square (2SLS) model is used in the robustness test.FindingsThe authors find that the relationship between audit engagement partner's professional experience and audit quality is concave. It indicates that audit quality is increasing during the early stage of engagement partners' career and then decreases as the partners approaching the late-career phase. Further, the authors find that partner's professional experience is positively associated with audit fees in non-Big 4 accounting firms but not significantly associated with audit fees in Big 4 accounting firms.Practical implicationsThe finding of how auditor experience impacts audit quality can be useful for accounting firms to better plan their staffing in auditing engagements. This study’s results are also helpful for small accounting firms to optimize their pricing strategy.Originality/valueThis study provides new empirical evidence about the relation between auditor professional experience and audit quality. Furthermore, the authors extend the literature of audit fee determinants by testing the joint effects of audit firm-level factors and auditor individual-level professional experience on audit fees.

Dynamic capabilities vs. innovation capability: are they related?

2014 ◽  
Vol 21 (3) ◽  
pp. 368-384 ◽  
Author(s):  
Lidija Breznik ◽  
Robert D. Hisrich
Keyword(s):  
Literature Review ◽  
Design Methodology ◽  
Dynamic Capabilities ◽  
Dynamic Capability ◽  
Future Research ◽  
Innovation Capability ◽  
New Approach ◽  
Content Type ◽  
New Research ◽  
The Relationship

Purpose – The purpose of this paper is to provide insights into the relationship between dynamic capabilities and innovation capabilities. It links dynamic capability with innovation capability and indicates the ways they can be related. Design/methodology/approach – The relationships between dynamic and innovation capability were investigated through a systematic literature review. Findings – The review indicates that common characteristics exist between of the both fields, which demonstrate six relationships. Additionally, findings show some inconsistencies and even contradictions. Originality/value – In this paper, the authors have compared dynamic capabilities, a relatively new approach in the field of strategic management, with innovation capabilities, a widely recognised crucial domain for sustained competitiveness. Since both areas address issues that are essential to today's environment, future research should seek to clarify both concepts, by undertaking some new research and developing comprehensive and unambiguous framework.

Tornadoes, poverty and race in the USA: A five-decade analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Russ D. Kashian ◽  
Tracy Buchman ◽  
Robert Drago
Keyword(s):  
African American ◽  
African Americans ◽  
Study Finding ◽  
Median Income ◽  
Content Type ◽  
Vulnerable Communities ◽  
Long Run ◽  
Level Data ◽  
The Usa

PurposeThe study aims to analyze the roles of poverty and African American status in terms of vulnerability to tornado damages and barriers to recovery afterward.Design/methodology/approachUsing five decades of county-level data on tornadoes, the authors test whether economic damages from tornadoes are correlated with vulnerability (proxied by poverty and African American status) and wealth (proxied by median income and educational attainment), controlling for tornado risk. A multinomial logistic difference-in-difference (DID) estimator is used to analyze long-run effects of tornadoes in terms of displacement (reduced proportions of the poor and African Americans), abandonment (increased proportions of those groups) and neither or both.FindingsControlling for tornado risk, poverty and African American status are linked to greater tornado damages, as is wealth. Absent tornadoes, displacement and abandonment are both more likely to occur in urban settings and communities with high levels of vulnerability, while abandonment is more likely to occur in wealthy communities, consistent with on-going forces of segregation. Tornado damages significantly increase abandonment in vulnerable communities, thereby increasing the prevalence of poor African Americans in those communities. Therefore, the authors conclude that tornadoes contribute to on-going processes generating inequality by poverty/race.Originality/valueThe current paper is the first study connecting tornado damages to race and poverty. It is also the first study finding that tornadoes contribute to long-term processes of segregation and inequality.

Cultural differences in gift recipients’ attitude and behavior toward disliked gifts

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Theeranuch Pusaksrikit ◽  
Sydney Chinchanachokchai
Keyword(s):  
Cultural Differences ◽  
Future Research ◽  
Content Type ◽  
Relationship Closeness ◽  
Marketing Segmentation ◽  
Self Construal ◽  
The Usa ◽  
And Behavior ◽  
Different Cultures ◽  
The Relationship

Purpose The purpose of this paper is to examine the effects of cultural differences and the types of relationship closeness involved in recipients’ emotional and behavioral reactions after receiving disliked gifts. Design/methodology/approach Collecting data from Thailand and the USA, two experiments were conducted in a 2 (self-construal: independent/interdependent) × 2 (relationship closeness: close/distant) between-subjects design. Study 1 explores the recipients’ feelings and reactions upon receipt of a disliked gift. Study 2 explores the disposition process for a disliked gift. Findings The results show that a recipient’s emotions, reaction and disposition process can be affected by cultural differences and relationship closeness: specifically that close and distant relationships moderate the relationship between self-construal and gift-receiving attitudes and behaviors. Research limitations/implications Future research can investigate representative groups from other countries to broaden the generalizability of the findings. Practical implications This understanding can guide gift-givers when selecting gifts for close or distant recipients across cultures. Additionally, it can help retailers develop and introduce new marketing strategies by applying self-construal as a marketing segmentation tool for gift purchase and disposition. Originality/value This research is among the first studies to offer insights into how individuals in different cultures manage disliked gifts they receive from people in either close or distant relationships.

Century plus journeys: using career crafting to explore the career success of pioneer women accountants

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohini P. Vidwans ◽  
Rosalind H. Whiting
Keyword(s):  
New Zealand ◽  
Great Britain ◽  
Organizational Support ◽  
Career Success ◽  
Design Methodology ◽  
Content Type ◽  
The Usa ◽  
Political Economic ◽  
Pioneer Women ◽  
Insight Into

PurposeThe purpose of this study is to explore the struggle for entry and career success of the early pioneer women accountants in Great Britain and its former colonies the USA, Canada, Australia and New Zealand.Design/methodology/approachA career crafting matrix guides the analysis of historical information available on five pioneer women accountants in order to understand their success in gaining entry into the profession and their subsequent careers.FindingsDespite an exclusionary environment, career crafting efforts coupled with family and organizational support enabled these women to become one of the first female accountants in their respective countries. Their struggles were not personal but much broader—seeking social, political, economic and professional empowerment for women.Originality/valueThis is the first paper to utilize the career crafting matrix developed from current female accountants' careers to explore careers of pioneering female accountants. It adds to the limited literature on women actors in accounting and may provide insight into approaching current forms of difference and discrimination.

The moderating effect of culture on the relationship between accountability and professional scepticism

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Medhat Endrawes ◽  
Shane Leong ◽  
Kenan M. Matawie
Keyword(s):  
Cultural Values ◽  
Design Methodology ◽  
Middle Eastern ◽  
Cognitive Effort ◽  
Planning Stage ◽  
Content Type ◽  
Big 4 ◽  
Prior Literature ◽  
The Impact ◽  
The Relationship

Purpose This study aims to examine whether accountability and culture have an impact on auditors’ professional scepticism. It also examines whether culture moderates the effect of accountability on auditors’ professional scepticism. Design/methodology/approach Three of the Big 4 firms in Australia and Egypt participated in an audit judgement experiment, which required them to indicate their beliefs about the risk of fraud and error at the planning stage of a hypothetical audit and evaluate the truthfulness of explanations provided by the client management. The authors examined whether their professional scepticism was influenced by accountability. Findings The results indicate professional scepticism differs significantly between cultures in some situations. The fact that culture influences scepticism suggests that even when auditors use the same standards (such as ISA 240 and ISA 600), they are likely to be applied inconsistently, even within the same firm. The authors, therefore, recommend that international bodies issue additional guidance on cultural values and consider these cultural differences when designing or adopting auditing standards. Originality/value To the best of the authors’ knowledge, this is the first study that examines whether culture moderates the impact of accountability on auditors’ professional scepticism using Egyptian and Australian (Middle Eastern and Western) auditors. Prior literature suggests that individuals subject to accountability pressure increase their cognitive effort and vigilance to detect fraud and error. As the authors find evidence that culture moderates accountability pressure and as accountability affects scepticism, they add to the literature suggesting that culture can influence professional scepticism.

How far are we from understanding corruption? The effect of cultural distance on corruption perception

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mike Szymanski ◽  
Ivan Valdovinos ◽  
Evodio Kaltenecker
Keyword(s):  
Cultural Differences ◽  
International Business ◽  
Design Methodology ◽  
Cultural Distance ◽  
State Level ◽  
Generalized Least Squares ◽  
Content Type ◽  
The Usa ◽  
Corruption Perception ◽  
The Relationship

Purpose This study aims to examine the relationship between cultural distances between countries and their scores in the Corruption Perception Index (CPI), which is the most commonly used measure of corruption in international business (IB) research. Design/methodology/approach The authors applied fixed-effect (generalized least squares) statistical modeling technique to analyze 1,580 year-country observations. Findings The authors found that the CPI score is determined to a large extent by cultural distances between countries, specifically the distance to the USA and to Denmark. Research limitations/implications CPI is often used as a sole measure of state-level corruption in IB research. The results show that the measure is significantly influenced by cultural differences and hence it should be applied with great caution, preferably augmented with other measures. Originality/value To the best of the authors’ knowledge, this is the first study to look at cultural distances as determinants of CPI score. The authors empirically test whether the CPI is culturally biased.

Efforts to globalize a national food

2016 ◽  
Vol 28 (10) ◽  
pp. 2310-2330 ◽  
Author(s):  
Seongseop (Sam) Kim ◽  
Ja Young Choe ◽  
Aejoo Lee
Keyword(s):  
Success Factors ◽  
Food Services ◽  
Korean Culture ◽  
Content Type ◽  
Strategic Approach ◽  
The Usa ◽  
Korean Food ◽  
Cluster 2 ◽  
Practical Implications ◽  
Insight Into

Purpose This paper aims to gain insight into the preferences of US customers regarding Korean food, and to categorize these customers according to the reasons for their preferences. Design/methodology/approach The study was conducted with a sample of customers in Korean restaurants in the USA. Findings Cluster 1 was a group whose members were attracted to Korean culture; Cluster 2 was a group whose members were passionate about Korean food; Cluster 3 was a group seeking healthy and exotic food; and Cluster 4 was a low-interest group. Each cluster had a different socio-demographic profile, favored a different Korean menu, identified different success factors for Korean restaurants, described different expectations and experiences of Korean restaurants and had different preferences regarding Korean food services. Practical implications Active promotion of Korean food and Korean culture may be appropriate for Cluster 1, while developing a healthy and exotic menu may attract Cluster 3. Maintaining Cluster 2 is deemed important, while a strategic approach is necessary to appeal to Cluster 4. Originality/value This study will contribute theoretically and practically to understanding food globalization, ethnic restaurants and segmentation by preference reasons.

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