scholarly journals The effect of audit firm tenure in artificial rotation on audit quality

2015 ◽  
Vol 17 (3) ◽  
pp. 439
Author(s):  
Junaidi Junaidi ◽  
Harun Pamungkas Apriyanto ◽  
Nurdiono Nurdiono ◽  
Eko Suwardi
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Audit Firm ◽  
Auditor Tenure ◽  
Audit Firms ◽  
Client Relationship ◽  
Going Concern Opinion ◽  
The Relationship

This study aimed to examine the effect of auditor tenure in artificial rotation on audit quality. Tenure shows the relationship between the audit firms and a client that is measured in years. Artificial rotation of auditor (audit firm) indicates a condition that, conceptually, there has been a change of auditors leading to the auditor relationship with the client to be disconnected, whereas substantive auditor-client relationship is ongoing. Formally, the auditor does not violate the rules and is still able to audit for the same client. Yet, in the long-term, it could affect the audit quality. The longer auditor tenure, the closer auditor-client relationship is. Thus, the auditor accommodates the interests of the client at the client's financial statements, including the practice of discretionary accruals as a proxy for audit quality. The samples were selected by purposive sampling method of the companies listed in Indonesia Stock Exchange from the year 2002-2010, with multiple linear regression approach. It shows that tenure, and total assets do not affect the quality of the audit while the size of the audit firm, and debt statistically have significant effect on audit quality. Future studies may extend the period of observation, and using other audit quality measures, such as fraud, and the propensity of auditor to issue going concern opinion..

scholarly journals The relation of auditor tenure to audit quality: Empirical evidence from the German audit market

2013 ◽  
Vol 2 (1) ◽  
pp. 27-43 ◽  
Author(s):  
Patrick Krauß ◽  
Henning Zülch
Keyword(s):  
Audit Quality ◽  
The European Union ◽  
Short Term ◽  
Audit Firm ◽  
Audit Market ◽  
Auditor Tenure ◽  
Client Relationship ◽  
Mandatory Audit Firm Rotation

This study investigates whether and how the length of an auditor-client relationship affects audit quality. Using a sample of 1,071 firm observations of large listed companies for the sample period of 2005 to 2011, the study is one of the first to empirically analyze this auditing issue for the German audit market. The empirical results demonstrate that neither short term nor long term audit firm tenure seems to be a significant factor with regard to audit quality in Germany. In the wake of the ongoing discussion in the European Union regarding the optimal audit tenure length for the quality of the conducted statutory audits, our findings do not support the idea of a mandatory audit firm rotation rule.

scholarly journals Does Auditor Tenure Reduce Audit Quality?

2012 ◽  
Vol 14 (3) ◽  
pp. 303 ◽  
Author(s):  
Junaidi ◽  
Setiyono Miharjo ◽  
Bambang Hartadi
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Financial Statements ◽  
Auditor Independence ◽  
Going Concern ◽  
Auditor Tenure ◽  
Client Relationship ◽  
Going Concern Opinion ◽  
Research Analysis ◽  
Public Accountant

Reduced auditor independence and the rise of corporate accounting manipulations have caused trust of the users in audited financial statements to begin to decline, so users of financial statements are questioning whether public accountants are independent parties. This research issue is related to the Decree of the Minister of Finance No. 17 in 2008 about public accountant services. Giving attestation services, in the form of financial statements about an entity, are conducted by the audit firm for no longer than 6 consecutive fiscal years and by a public accountant for 3 consecutive fiscal years at the longest. The purpose of this research is to examine empirically the influence of auditor tenure on audit quality. Auditor tenure is measured as the length of the auditor-client relationship. Audit quality is measured by the propensity of auditors to issue a going-concern opinion. This study uses a sample of firms listed on the Indonesia Stock Exchange during the 2003-2008 period. Research analysis uses logit model to measure the effect of auditor tenure on the auditors’ propensity to publish a going-concern opinion. The hypothesis which states that the length of auditor tenure influences negatively the propensity of auditors to issue a going-concern opinion is statistically supported. This research is expected to provide empirical evidence about the importance of limiting of the auditor-client relationship.       

scholarly journals The Effect of Audit Quality on the Performance of Listed Companies in Tehran Stock Exchange

2014 ◽  
Vol 21 ◽  
pp. 36-43 ◽  
Author(s):  
Morteza Ziaee
Keyword(s):  
Financial Performance ◽  
Information Asymmetry ◽  
Audit Quality ◽  
Stock Exchange ◽  
Accounting Information ◽  
Audit Opinion ◽  
Audit Firm ◽  
Opinion Shopping ◽  
The Relationship

Audit opinion shopping has been studied extensively in accounting research. A firm engages in opinion shopping by influencing or even manipulating its auditor‟s decision in certain ways to obtain an opinion that is more favorable that that warranted by the quality of its accounting information. If such behavior exists, then it would lead to a higher degree of information asymmetry between managers and investors and weaken auditing‟s protective effect on investors. Many researches have been done to improve the understanding of audit quality to a better understanding This concept can be achieved and the relationship between audit quality and other parameters to be determined. One of Many variables that its relationship with audit quality research, examined. The size of the audit firm. Methods of the research in this field Angelou January 1981 to practice. He stated his Yhay concluded between audit quality and auditor size. There is a positive relationship. This study sought to examine the relationship between audit quality and financial performance of companies in Iran. For this population the financial manager is accepted in Tehran Stock Exchange and 2008 to 2012 have been selected. Distribute and collect the questionnaires they reached the conclusion that audit quality could affect the financial performance of companies.

scholarly journals The Effect of Overvalued Equity on the Relationship between Audit Quality and Earning Quality (Evidence from Iran)

2015 ◽  
Vol 46 ◽  
pp. 119-128
Author(s):  
Seyed Kazem Ebrahimie ◽  
Ali Bahraminasab ◽  
Fatemeh Khorram
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Sample Population ◽  
Industry Specialization ◽  
Audit Firm ◽  
Auditor Industry Specialization ◽  
Auditor Tenure ◽  
Reverse Relationship ◽  
Earning Quality ◽  
The Relationship

The purpose of this article is to investigate the effect of overvalued equity on the relationship between audit quality and earning quality. In this article audit firm size, auditor industry specialization and auditor tenure were used as audit quality variable. The sample population consists of 189 companies listed in Tehran stock Exchange during the period 2008 to 2012. To test the hypotheses, OLS in Eviews has been used and investigation method of data is panel. The results show a reverse relationship between all audit quality variables and absolute discretionary accruals indicating that high audit quality causes higher earning quality. But the existence of overvalued equity cause decreasing or reversing of these relationships, in other words, when a firm is highly valued the accruals’ decreasing effect of high quality auditors is reduced.

scholarly journals ECONOMETRIC APPRAISAL OF AUDITORS’ INDEPENDENT CHARACTERISTICS AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA

2015 ◽  
pp. 66-81
Author(s):  
Sabo Ahmed ◽  
Alfred Kwanti
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Secondary Data ◽  
Sampling Technique ◽  
Audit Fees ◽  
Financial Reports ◽  
Audit Firm ◽  
Audit Firms ◽  
Audit Reports

The study examines the characteristics of auditor’s independence on audit quality of Deposit Money Banks (DMBs) listed on the Nigerian Stock Exchange (NSE) from 2010 to 2019. A sample size of seven Deposit Money Banks was selected using the purposive sampling technique. The study used secondary data, sourced from the audited annual financial reports of the sampled banks. The analysis of the data was done using descriptive statistics, correlation matrix, and panel regression technique. The findings reveal that audit independence and audit firm rotation are positively related to audit quality, whereas audit firm tenure relates negatively to audit quality. The relationship between audit fees and audit quality is positively insignificant. The study recommends that audit firms are to be rotated after three years of service so as to avoid over-familiarity that may jeopardize the quality of audit reports. Also, the regulatory bodies should commence the enforcement of the three years audit tenure requirement proposed by stakeholders to forestall lengthy auditor/client relationship.

An Empirical Investigation of IPO Underpricing and the Change to the LLP Organization of Audit Firms

2004 ◽  
Vol 23 (1) ◽  
pp. 53-67 ◽  
Author(s):  
Steven R. Muzatko ◽  
Karla M. Johnstone ◽  
Brian W. Mayhew ◽  
Larry E. Rittenberg
Keyword(s):  
Initial Public Offering ◽  
Audit Quality ◽  
Limited Liability ◽  
Litigation Risk ◽  
Ipo Underpricing ◽  
Audit Firm ◽  
Legal Structure ◽  
Audit Firms ◽  
Public Offering

This paper examines the relationship between the 1994 change in audit firm legal structure from general partnerships to limited liability partnerships (LLPs) on underpricing in the initial public offering (IPO) market. The change in legal structure of audit firms reduces an audit firm's wealth at risk from litigation damages and reduces the incentives for intrafirm monitoring by partners within an audit firm. Prior research suggests that underpricing protects underwriters from litigation damages, and that the level of underpricing varies inversely with both the amount of implicit insurance provided by the audit firm and the quality of the audit services provided. We hypothesize the change in audit firm legal structure reduced the assets available from audit firms in IPO-related litigation and indirectly reduced audit quality by lowering intrafirm monitoring. As a result, underwriters have incentives as a joint and several defendant with the audit firms to increase IPO underpricing, particularly for high-litigation-risk IPOs, following audit firms' shifts to LLP status. Our findings are consistent with this hypothesis.

UKURAN KANTOR AKUNTAN PUBLIK, DISCRETIONARY ACCRUALS DAN OPINI AUDIT GOING CONCERN

2019 ◽  
Vol 15 (1) ◽  
pp. 11
Author(s):  
Ravaela Amba Masiku ◽  
Christine Novita Dewi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Audit Firm ◽  
Going Concern ◽  
Discretionary Accrual ◽  
Audit Firms ◽  
Going Concern Opinion ◽  
Positive Effect

The purpose of this study is to examine auditor’s concervatism in term of their reaction to client’s earnings management behavior and their limitations to issue the going concern opinions (GCO). The population of this study consists of 672 observations from 69 companies are listed on the Indonesia Stock Exchange (BEI) during 2012-2017. The author used the modified Jones model to measure discretionary accruals as a proxy of earnings management. The results of this study indicate that size of audit firm has a positive effect to discretionary accrual. Companies that have been audited by the Big4 tend to apply discretionary accrual in their financial reporting than companies audited by Non-Big4. Further, to strenghten the first hypothesis, we examine the effect of discretionary accruals and going concern opinion on companies that audited by audit firms Big4 lower than companies that audited by audit firms Non-Big4. We found that the result is consistent with the first hypothesis. Keywords : auditor reputation, discretionary accruals, going concern opinion, audit firm  ABSTRAK Tujuan dari penelitian ini adalah untuk menguji konservatisme auditor dalam hal reaksi auditor terhadap akrual diskresioner yang dilakukan oleh perusahaan dan keterbatasan auditor untuk menerbitkan opini Going Concern (GC). Populasi penelitian terdiri dari 672 pengamatan dari 69 perusahaan yang terdaftar di Bursa Efek Indonesia (BEI) selama tahun 2012-2017. Penulis menggunakan model modifikasi Jones untuk mengukur akrual diskresioner sebagai proksi manajemen laba. Hasil dari penelitian ini menjelaskan bahwa ukuran kantor akuntan publik berpengaruh positif terhadap akrual diskresioner, hal tersebut diperkuat dengan pengaruh akrual diskresioner dan opini audit going concern yang diaudit oleh kantor akuntan publik Big4 lebih rendah dari perusahaan yang tidak diaudit oleh kantor akuntan publik Non-Big4. Kata kunci : reputasi auditor, akrual diskresioner, opini audit going concern, kantor akuntan publik

scholarly journals An Interview Study to Understand the Reasons Clients Change Audit Firms and the Client's Perceived Value of the Audit Service

2013 ◽  
Vol 7 (1) ◽  
pp. A1-A14 ◽  
Author(s):  
Richard Fontaine ◽  
Soumaya Ben Letaifa ◽  
David Herda
Keyword(s):  
Perceived Value ◽  
Value Added ◽  
Interview Study ◽  
Audit Firm ◽  
Auditor Switching ◽  
Audit Firms ◽  
Client Relationship

SUMMARY Audit firms are concerned that clients perceive the audit service as a commodity, with little value added, resulting in clients switching to firms that offer lower fees. However, the auditing literature lacks qualitative insight from clients on the reasons that they change audit firms and their perceptions of the value of audit services. To better understand the client's perspective, we conducted interviews with 20 financial managers who participate in audit firm appointment decisions. Our results suggest that the quality of the auditor-client relationship is the key determinant of auditor switching and audit value. Interestingly, price becomes an important factor only when the auditor-client relationship is mismanaged (e.g., when clients perceive that their auditor is not available to them).

Audit Firm Tenure and Fraudulent Financial Reporting

2004 ◽  
Vol 23 (2) ◽  
pp. 55-69 ◽  
Author(s):  
Joseph V. Carcello ◽  
Albert L. Nagy
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Auditor Independence ◽  
Fraudulent Financial Reporting ◽  
Audit Firm ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Client Relationship ◽  
Mandatory Audit Firm Rotation ◽  
The U.S

The Sarbanes-Oxley Act (2002) required the U.S. Comptroller General to study the potential effects of requiring mandatory audit firm rotation. The General Accounting Office (GAO) concludes in its recently released study of mandatory audit firm rotation that “mandatory audit firm rotation may not be the most efficient way to strengthen auditor independence” (GAO 2003, Highlights). However, the GAO also suggests that mandatory audit firm rotation could be necessary if the Sarbanes-Oxley Act's requirements do not lead to improved audit quality (GAO 2003, 5). We examine the relation between audit firm tenure and fraudulent financial reporting. Comparing firms cited for fraudulent reporting from 1990 through 2001 with both a matched set of non-fraud firms and with the available population of non-fraud firms, we find that fraudulent financial reporting is more likely to occur in the first three years of the auditor-client relationship. We fail to find any evidence that fraudulent financial reporting is more likely given long auditor tenure. Our results are consistent with the argument that mandatory audit firm rotation could have adverse effects on audit quality.

Board attributes and external audit firm choice of Nigerian Non-financial Firms

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Sanyaolu Wasiu Abiodun ◽  
Animasau Rasheed Olatunji
Keyword(s):  
Audit Quality ◽  
Gender Diversity ◽  
Sampling Technique ◽  
Study Data ◽  
Manufacturing Companies ◽  
Audit Firm ◽  
Financial Firms ◽  
Big 4 ◽  
Audit Firms

The paper examined the influence of boards attributes and audit firm choice of Nigerian listed non-financial firms. In an attempt to achieve the objective of this study, data of 21 sampled manufacturing companies were obtained from 2012 to 2017 using purposive sampling technique. Data for the sampled companies were analysed using logit regression analysis.  The result of the study provides evidence for significant influence of board independence, gender diversity and board meetings on audit firm choice while it board size was found to exert positive but no significant effect on audit firm choice. Arising from this, the study recommends that the non-executive directors should be dominated by directors with adequate level of financial directors that will propel them towards appreciating audit quality while choosing audit firm so as to improve quality of audit work. Also, firm should also seek to know whether audit quality of big 4 audit firms always supersedes that of their non-big 4 counterparts.

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