CEO Turnover and the Engagement Quality Reviewer’s Audit Effort

2021 ◽  
pp. 0148558X2110549
Author(s):  
Yoo Chan Kim ◽  
Jongkyum Kim ◽  
Inshik Seol
Keyword(s):  
Quality Control ◽  
Earnings Management ◽  
Review Process ◽  
Empirical Investigation ◽  
Financial Statements ◽  
Ceo Turnover ◽  
Detailed Data ◽  
Data Set ◽  
Audit Risk ◽  
Shed Light

Previous literature on the engagement quality (EQ) review argues that EQ reviewers should provide more efforts into the review process when fieldwork auditors’ judgments and conclusions on the financial statements are potentially biased. Little empirical study has been done, however, partly due to the confidentiality of the detailed data on EQ reviewers’ audit hours. The purpose of the article is to shed light on the existing literature by conducting an empirical investigation using a unique actual data set available in Korea. The results show that the EQ review hours are positively associated with CEO turnovers, a proxy for the audit risk, which supports the prediction of the theory on the EQ review. Additional analyses show that such results are stronger under (a) the upward earnings management and (b) the forced CEO turnover. The article extends the existing literature on the EQ review process and enhances the understanding of the engagement-level quality control in the volatile audit environment by providing empirical evidence to the analytic discussions on the EQ review.

scholarly journals MOTIVASI DAN STRATEGI MANAJEMEN LABA PADA ORGANISASI

2019 ◽  
Vol 8 (2) ◽  
pp. 68-80
Author(s):  
Ika Neni Kristanti
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Statements ◽  
Ceo Turnover ◽  
Motivational Factors ◽  
Earning Management ◽  
Political Motivation ◽  
Jones Model ◽  
A Company

Earnings management occurs when managers use valuations in financial reporting and in compiling transactions to change financial statements so as to mislead some stakeholders regarding the underlying results that depend on reported accounting figures or to influence contract outcomes that depend on reported accounting figures. The existence of earnings management in a company is inseparable from the various types or underlying motivational factors, while some of the motivations associated with the implementation of earnings management are bonus motivation, political motivation, tax motivation, CEO turnover motivation, IPO motivation. The models used in measuring earnings management include: Healy Model, DeAngelo Model, Jones Model, Industrial Model, Jones Modification Model, Dechow-Dichev Model, Kothari Model and Stubben Model. Keywords : earning management, motivation, measuring models

Does the IFRS improve earnings quality? A comparison of Turkish GAAP and IFRS

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aydın Karapınar ◽  
Figen Zaif
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Quantitative Research ◽  
Earnings Quality ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Net Income ◽  
Data Set ◽  
Content Type ◽  
Significant Difference

Purpose The purpose of this study is to reveal the effect on earnings quality of switching to International Financial Reporting Standards (IFRS) from Turkish generally accepted accounting principles (GAAP) by comparing two sets of financial statements based on Turkish GAAP and IFRS. Design/methodology/approach This study is based on mathematical modeling. The variables (total assets, net income, total accruals, cash receivables, return on assets and size) in the models are core to the quantitative research that examines the relationship between them. In this study, the total accruals are computed based on the indirect approach, and the prediction error of the model represents discretionary accruals that reflect earnings management. The data set includes financial data prepared under IFRS and Turkish GAAP. The univariate and multivariate analyses are conducted by SPSS. Findings The results of this study indicate that IFRS does not cause any significant differences in total assets, but the net income under IFRS is larger compared to that under the Turkish GAAP. It is also found that while there is no significant difference in total accruals, there is a difference in discretionary accruals. In other words, Turkish firms use income-reducing discretionary accruals when adopting IFRS. Originality/value This study provides more insights into the effect of IFRS on earnings quality. It also provides evidence of the effect of accounting culture on IFRS adoption. As a code-law country in Turkey, publicly traded firms have to prepare financial statements based on both Turkish GAAP, which is rule-based and restricts management decisions with strict rules, and the principle-based IFRS which leaves more room to manipulate. To the authors’ knowledge, this is the first study that reveals the effect of accounting standards on earnings management by comparing two sets of financials of the same period prepared under different standards.

Academic Research in Accounting: A Framework for Quality Reviews

2016 ◽  
Vol 10 (1) ◽  
pp. A34-A46 ◽  
Author(s):  
Denise Dickins ◽  
Douglas K. Schneider
Keyword(s):  
Review Process ◽  
Risk Model ◽  
Peer Review Process ◽  
Academic Research ◽  
Financial Statements ◽  
High Quality ◽  
High Quality Research ◽  
Audit Risk ◽  
Quality Research ◽  
Audit Risk Model

SUMMARY We propose and model how a practitioner-based framework aimed at reducing the likelihood of unidentified misstatements in financial statements—the Audit Risk Model—might be adapted and used in the accounting research peer review process to, in part, address the issue of increasing retractions of academic studies. This proposal is intended to engage both practitioners and academics. Practitioners need to know the importance that the academy places on producing high-quality research; and just as practitioners can learn from the results of high-quality research studies, academics can learn from the activities of practitioners. The discussion that follows is intended to create debate. It is not intended to provide definitive answers.

Short-Term Accruals and the Pricing and Production of Audit Services

2010 ◽  
Vol 29 (1) ◽  
pp. 221-250 ◽  
Author(s):  
Caren Schelleman ◽  
W. Robert Knechel
Keyword(s):  
Earnings Management ◽  
Financial Statements ◽  
Audit Fees ◽  
Profit Margin ◽  
Work Effort ◽  
Short Term ◽  
Audit Pricing ◽  
Data Set ◽  
Audit Firm ◽  
Unique Data

SUMMARY: This study investigates how risk associated with increased levels of accruals that might be indicative of earnings management affects the pricing and production of audit services. Francis and Krishnan (1999) suggest that auditors can deal with the risk of earnings management in five ways: (1) screen out high-risk clients; (2) charge a premium to riskier clients; (3) increase audit effort; (4) negotiate adjustments to the financial statements; and/or (5) report more conservatively (e.g., by issuing a modified report). Using a unique data set, the current study investigates two of these options: charging a fee premium and increasing audit effort. Based on previous research on audit pricing and production, we construct models for audit fees, total audit effort, labor mix (extent of experienced auditor effort), and engagement profit margin including an accruals measure that could indicate earnings management. We test these models on a sample of 119 audit engagements from one Big 6 audit firm in The Netherlands. We find that signed short-term accruals are associated with a significant increase in audit fees as well as total effort, but not with experience mix or profit margin. However, we find secondary evidence that auditors utilize more supervisors, assistants and support personnel and earn smaller profits (returns) when a client has higher levels of short-term accruals. Taken together, these results suggest that auditors are responsive to high levels of short-term accruals that may be indicative of earnings management, and will increase their work effort even if they are unable to recoup all of the related costs.

scholarly journals Analysis of Factors Affecting the Restatement of Financial Statements

2021 ◽  
Vol 2 (4) ◽  
pp. 45-55
Author(s):  
Kusmeylinda Kusmeylinda ◽  
Wahidahwati Wahidahwati ◽  
Titik Mildawati
Keyword(s):  
Earnings Management ◽  
Sampling Method ◽  
Audit Quality ◽  
Stock Exchange ◽  
Financial Statements ◽  
Ceo Turnover ◽  
Financial Accounting ◽  
Manufacturing Companies ◽  
Factors Affecting ◽  
Positive Effect

The convergence of IFRS has brought an impact on the changes of financial accounting standards in Indonesia. The variation provide an opportunity for the restatement of financial statements. Therefore, this study aimed to examine CEO turnover, earnings management, and audit quality on the restatement of financial statements of manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the period of2014 to 2018. In this study, purposive sampling method was carried out to consider samples with predetermined criteria. The obtained data were about 376 and analyzed using logistic regression with the SPPS 24.0 tool. As the results of data analysis, this study indicated that the CEO turnover had a positive effect on restatement; the earnings management had a positive effect on restatement; and the audit quality had no effect on restatement of financial statements.

Timeliness of Tunisian Audit Reports: An Empirical Investigation based on Ownership and Partnership Visions

2015 ◽  
Vol 5 (3) ◽  
Author(s):  
Mondher Fakhfakh
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Empirical Investigation ◽  
Financial Statements ◽  
Qualitative Feature ◽  
Transmission Delays ◽  
Emerging Country ◽  
Audit Reports ◽  
Audit Information

Timeliness of audit reports is a qualitative feature that enhances the usefulness of audited financial statements. As an emerging country, Tunisia has modernized its accounting legislation to enhance the quality of financial reporting. This legislation encourages independent auditors to optimize the transmission delays of audit reports. The authorities assume that the satisfaction of stakeholders is secured by regulating disclosure of audit reports. Our research analyses the date of issue of Tunisian audit reports and timeliness of audit information for shareholders and all users of financial statements (stakeholders). This paper provides new empirical evidence about the timeliness of audit reports in Tunisia. It holds two dates that influence the needs of users of financial statements: the date of signature of the auditors and the date of publication of the audit reports in the financial bulletin. The same article discusses the variability of the timeliness of audit reports and the factors that explain the delay information.

EXPRESS: How Does Bonus Payment Affect the Demand for Auto Loans and Their Delinquency?

2021 ◽  
pp. 002224372110092
Author(s):  
Zhenling Jiang ◽  
Dennis J. Zhang ◽  
Tat Chan
Keyword(s):  
Consumer Products ◽  
Data Set ◽  
Financial Decisions ◽  
Consumer Panel ◽  
Loan Demand ◽  
Bonus Payments ◽  
Base Salary ◽  
Long Term Impact ◽  
Shed Light

This paper studies how receiving a bonus changes the consumers’ demand for auto loans and the risk of future delinquency. Unlike traditional consumer products, auto loans have a long-term impact on consumers’ financial state because of the monthly payment obligation. Using a large consumer panel data set of credit and employment information, the authors find that receiving a bonus increases auto loan demand by 21 percent. These loans, however, are associated with higher risk, as the delinquency rate increases by 18.5 −31.4 percent depending on different measures. In contrast, an increase in consumers’ base salary will increase the demand for auto loans but not the delinquency. By comparing consumers with bonuses with those without bonuses, the authors find that bonus payments lead to both demand expansion and demand shifting on auto loans. The empirical findings help shed light on how consumers make financial decisions and have important implications for financial institutions on when demand for auto loans and the associated risk arise.

scholarly journals Board Structure and Corporate Social Responsibility: Evidence From Developing Economy

SAGE Open ◽  
2021 ◽  
Vol 11 (1) ◽  
pp. 215824402098854
Author(s):  
E. Chuke Nwude ◽  
Comfort Amaka Nwude
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Empirical Investigation ◽  
Developing Economies ◽  
Gender Diversity ◽  
Financial Statements ◽  
Board Independence ◽  
Board Structure ◽  
Disclosure Requirements ◽  
Corporate Social

This article undertakes an empirical investigation on how firm board characteristics relate with corporate social responsibility disclosure (CSRD) in the banking industry of developing economies with a particular interest in Nigeria. The study focuses on a sample of 11 out of the 13 Nigerian listed national commercial banks which provide similar services and are subject to the same regulations and disclosure requirements by the Central Bank of Nigeria (CBN) from 2007 to 2018. Multiple regression analysis was employed on panel data obtained from the banks’ audited financial statements. The findings show that board with large number of persons, low proportion of persons operating outside the bank operations, and higher percentage of feminine directors on the board support higher level of corporate social responsibility (CSR). The results of large number of persons on board and better proportion of feminine administrators support the resource dependency theory and agency theory which offer the broad theoretical underpinnings for this study. The low percentage of nonexecutive administrators negates stand of bank regulators. This implies that banks with an oversized board size, gender diversity, and less board independence are seemingly favorably disposed to improve on CSR.

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