Audit-Firm Tenure and the Quality of Financial Reports*

2002 ◽  
Vol 19 (4) ◽  
pp. 637-660 ◽  
Author(s):  
E. Johnson ◽  
Inder K. Khurana ◽  
J. Kenneth Reynolds
Keyword(s):  
Financial Reports ◽  
Audit Firm

scholarly journals Organizational Principles of the Financial Reporting Audit in Ukraine

2019 ◽  
Vol 85 (2) ◽  
pp. 92-97
Author(s):  
O. E. Lubenchenko ◽  
М. М. Vasiliuk
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Time Budget ◽  
The Body ◽  
Task Completion ◽  
Financial Reports ◽  
Audit Firm ◽  
The Law ◽  
And Task

The steps to organize the work of an audit firm on performing the task of obligatory audit of financial reporting are defined: (i) appoint the key partner in the audit considering the criteria of audit quality, independence and competency; (ii) record the revealed non-compliances with the Law of Ukraine “Audit of Financial Reporting and Auditing Activities” in the work of an audit firm; (iii) make up personal records of audit customers; (vi) make up working documents, including the ones confirming independence of an audit firm and its staff, conclusions made in time of audit, to produce the audit report; (v) consider the specifics of actions of the key partner in audit in checking the consolidated financial report, the interactions with the Inspection on Quality Assurance, which is a part of the Body charged with public supervision of auditing and the Audit Chamber of Ukraine. It is found that more than one key partner can be appointed according to the Ukrainian law. This situation is fully acceptable when financial reports of high structured economic entities making up consolidated reporting are audited. It is substantiated that the key partner in audit and task teams members are appointed by an administrative document (the order) of an audit firm. The latter are appointed after the assessment of resources (human and technical) necessary for the task completion at the phase of client acceptance, which can be subject to subsequent review at the phases of planning and task performing, with the respective change in the team staff. An example of calculating the time budget for the audit task completion is provided. It is emphasized that a change of the key partner in time of audit would not be reasonable, because it is stipulated in the law that such partner must be personally involved in checking and sign the auditor report when the check is over. A change of the key partner will decline the quality of financial reporting audit due to the lack of permanent supervision over the checking process and control of task team members, especially when contradictory issues have to be dealt with. An audit firm can reveal non-compliances of its practices with the requirements of the Law of Ukraine “Audit of Financial Reporting and Auditing Activities” and introduce the procedures of recording the revealed non-compliances. These non-compliances are systematized in the article. A format of the personal records of audit customers and sources of making up personal records are specified. A format of the book for analysis of complaints coming from customers and regulatory bodies is proposed to audit firms. The recommended measures can help assure the quality of financial reporting audit in Ukraine.  

scholarly journals Audit tenure and financial reporting in Oman: Does rotation affect the quality?

2016 ◽  
Vol 6 (3) ◽  
pp. 18-29 ◽  
Author(s):  
Saeed Rabea Baatwah
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Discretionary Accruals ◽  
Financial Reports ◽  
Public Companies ◽  
Audit Opinion ◽  
Audit Firm ◽  
Governance Practices

The purpose of this study is to provide an empirical result concerning the quality of audit under a rotation policy in the Gulf Cooperation Council (GCC). Currently, countries from GCC tend to require the audit firms of public companies to be rotated within four or five consecutive years. This policy received worldwide criticisms which asserted it deteriorates the quality of financial reports – instead of increasing their quality. To achieve this purpose, we use 573 observations from companies listed in the Omani capital market implementing audit firm rotation because Oman is the leading country in GCC. Using discretionary accruals and modified audit opinion to proxy financial reporting quality, we find that audit firm tenure is not significantly associated with low quality financial reports. We also found that audit partner tenure is not positively and significantly associated with high discretionary accruals while it is positively and significantly associated with modified audit opinion. We classify our audit tenure into short and long tenure and find similar findings. Additionally and contrary to previous findings in Oman, we report that audit committee characteristics such as independence, size, financial expertise and number of meetings are not associated with high quality financial reports. Thus, our study contains several contributions to audit tenure debates in general and corporate governance practices in GCC in particular.

scholarly journals Are Audits of Financial Statements Born Unequal?

2017 ◽  
Vol 2 (3) ◽  
pp. 16
Author(s):  
Manh Dung Tran ◽  
Van Anh Doan ◽  
Thi Thuy Bui ◽  
Manh Cuong Nguyen
Keyword(s):  
Hong Kong ◽  
Audit Quality ◽  
Financial Statements ◽  
Financial Reports ◽  
Audit Firm ◽  
Listed Firms ◽  
Goodwill Impairment ◽  
Audit Firms ◽  
Arthur Andersen

Audit is getting more and more importance in assuring the reliability of financial information including financial statements for all parties. Commonly, quality of an audit is viewed as probability that financial reports are free from material irregularities. In the previous literature, there is a positive relationship between size of audit firm and audit quality that has long been understood. This has resulted in many publications to gather evidence of differential audit quality relating to audit firm size. In consequence, the conclusion has been focused that bigger audit firms produce higher audit quality than smaller ones. However, the collapse of many big international audit firms, typically Arthur Andersen has reduced the statement that large audit firms have higher audit quality than small ones. Therefore, this study looks into audit quality basing on the extent of compliance with disclosure requirements pertaining to goodwill impairment of large listed firms in Hong Kong context in the second year transition to IFRS. We found that audit firm identity appears to be a substantial variation, in which compliance levels changed significantly among auditors in the context of Hong Kong.

scholarly journals The impact of audit rotation on the comparability of financial reports,

2021 ◽  
Author(s):  
Allison Manoel de Sousa ◽  
Alex Mussoi Ribeiro ◽  
Ernesto Fernando Rodrigues Vicente
Keyword(s):  
Regulatory Environment ◽  
Financial Reports ◽  
Audit Firm ◽  
Auditor Rotation ◽  
Client Relationships ◽  
Regulatory Bodies ◽  
Market Practices ◽  
Mandatory Rotation ◽  
The Impact

Abstract This study aims to assess the effect of the rotation and tenure of audit firm and audit partner on the comparability and consistency of financial reports. Several studies have addressed the effect of auditor rotation on the quality of financial reports, but none of them focused specifically on the impact on the comparability and consistency of financial reports. Around the world, the impact of mandatory rotation of audit partner and audit firm is being discussed in academia and regulatory bodies. The peculiarity of the Brazilian regulatory environment allows us to contribute to the discussions on the effects of implementing mandatory auditor rotation. Our sample included 50 companies for which we analyzed data from 2012 to 2018. To measure comparability, we used the similarity of the accounting function model by DeFranco, Kothari and Verdi (2011), and to measure consistency we used the adaptations to this model proposed by Ribeiro (2014). For data analysis, we used descriptive statistics and multivariate panel analysis. Our results suggest that the rotation (mandatory and voluntary) of audit firm and audit partner does not affect the comparability and consistency of financial reports. Results also suggest that auditor-client relationships of up to three years contribute to a significant increase in comparability and consistency, indicating that mandatory rotation does not impair investors’ ability to compare the information concerning their investments. In addition, regulators are shown that a possible reduction in the mandatory rotation term (from five to three years, as in Italy) would be in line with market practices and would imply an increase in the comparability and consistency of financial information.

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.

Effect Technology Information On Quality Financial Statement With Internal Control As Moderating Variable

2021 ◽  
Vol 2 (1) ◽  
pp. 9-13
Author(s):  
Aris Eddy Sarwono ◽  
Asih Handayani
Keyword(s):  
Information Technology ◽  
Control System ◽  
Financial Reporting ◽  
Internal Control ◽  
Local Governments ◽  
Sampling Technique ◽  
Financial Statement ◽  
Financial Reports ◽  
Internal Control System

The problem with the low quality of financial reports in local governments is the reason this research was conducted. This research was conducted with the aim of analyzing the use of information technology on the quality of financial reports by considering the internal control system (SPI) factor. The location of this research is in the Karisidenan Surakarta area which includes 6 districts and 1 city. The population of this research is all state civil servants (ASN) in local governments who work in accounting. The sampling technique was using purposive sampling method. The results showed that the use of information technology had a positive effect on the quality of financial reporting in local governments, while the internal control system moderated the effect of the use of information technology on the quality of financial reporting in local governments.

scholarly journals KEMAMPUAN AUDIT TENURE MEMODERASI PENGARUH PENGALAMAN DAN SKEPTISISME AUDITOR DENGAN KUALITAS AUDIT

2017 ◽  
Vol 2 (1) ◽  
Author(s):  
I Gusti Ayu Nyoman Budiasih ◽  
Ketut Budiartha
Keyword(s):  
Data Analysis ◽  
Audit Quality ◽  
Total Sample ◽  
Financial Reports ◽  
Auditor Quality ◽  
Sample Data ◽  
Client Pressure ◽  
Relationship Of ◽  
The Relationship

ABSTRAKPentingnya laporan keuangan bagi banyak pihak, menyebabkan laporan tersebut harus disajikan secara relevan dan reliabel. Kualitas audit yang baik dapat menyebabkan laporan keuangan semakin dipercaya keasliannya. Kualitas audit tergantung pada independensi dan kompetensi auditor. Independensi dan kompetensi seorang auditor tergantung pada pengalaman maupun sikap skeptis yang dimiliki auditor tersebut. Pengalaman auditor akan meningkat dikarenakan telah terbiasa dengan pekerjaannya sehingga auditor akan bekerja secara efisien dan lebih tahan terhadap tekanan klien. Sampel yang dipilih menggunakan teknik sampel jenuh dengan jumlah sampel sebanyak 85 auditor. Pengumpulan data dilakukan dengan menyebarkan kuesioner kepada auditor yang menjadi sampel penelitian. Teknik analisis datanya menggunakan analisis regresi tanpa dan dengan variabel moderasi. Berdasarkan hasil analisis data dan pembahasan yang telah dilakukan, maka dapat disimpulkan bahwa kualitas audit di KAP Provinsi Bali memiliki hubungan secara positif dengan pengalaman dan skeptisisme auditor, audit tenure tidak mampu memoderasi hubungan pengalaman auditor dengan kualitas audit auditor di KAP Provinsi Bali, dan audit tenure mampu memoderasi hubungan skeptisisme auditor dengan kualitas audit auditor di KAP Provinsi Bali.Kata Kunci: audit tenure, pengalaman , skeptisisme auditor, kualitas audit  ABSTRACTThe importance of financial statements for many, causing the report to be presented in a relevant and reliable manner. A good audit quality can lead to more authentic financial reports. The quality of the audit depends on the independence and competence of the auditor. The independence and competence of an auditor depends on the experience and skepticism of the auditor. The experience of the auditor will increase due to the familiarity with the work so that the auditor will work efficiently and more resistant to client pressure. The samples were selected using a sample saturated technique with a total sample of 85 auditors. Data collection was done by distributing questionnaires to the auditor who became the research sample. Data analysis techniques use regression analysis without and with moderation variables. Based on the results of data analysis and discussion that have been done, it can be concluded that the audit quality in KAP Bali Province has a positive relationship with the experience and skepticism of auditors, audit tenure unable to moderate the relationship of auditor experience with audit auditor quality in KAP Bali Province and audit tenure able to moderate the relationship of auditor skepticism with audit auditor quality in KAP Bali Province.Keywords: audit tenure, experience, auditor skepticism, audit quality 

scholarly journals The Improving Model of the Quality of Financial Statements and Successful Implementation of Local Financial Information Systems

2020 ◽  
Vol 1 (2) ◽  
pp. 128-144
Author(s):  
Irfan Irfan ◽  
◽  
Eka Nurmala Sari ◽  
Muhyarsyah Muhyarsyah ◽  
Siti Irafah ◽  
...  
Keyword(s):  
Information System ◽  
Internal Audit ◽  
Financial Statements ◽  
Financial Information ◽  
Successful Implementation ◽  
City Governments ◽  
Financial Reports ◽  
Financial Report

his study aims to (1) examine and analyze the influence of Human Resource (SDM) competence and the role of internal audit on the successful implementation of the Local Financial Information System (SKID) partially and simultaneously, (2) examine and analyze the competence of SDM and the role of internal audit on the quality of financial report partially and simultaneously,(3) examine and analyze the influence of SDM competence and the role of internal audit on the quality of financial reports on the successful implementation of the SKID. The object of this study is all provincials and district / city governments throughout North Sumatera. The sample of this study was 34 (thirty four). The data was collected by questionnaire, documentation, and interview methods. The analysis method used was path analysis using SPSS Program. The results of this study indicate that (1) SDM competence and the role of internal audit have no partial effect on the successful implementation of SKID (2) SDM competence, the role of internal audit doesn’t simultaneously affect the successful implementation of SKID (3) SDM competence and the role of internal audit have a significant effect partially to the quality of financial reports (4) the successful implementation of SKID has no effect on the quality of financial reports (5) SDM competence, the role of internal audit, the successful implementation of SKID simultaneously affects the quality of financial reports (6) SDM competence and the role of internal audit have no effect on quality financial reports through the successful implementation of the local financial information system.

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