scholarly journals Effects Of Rotation On Auditor Independence And Quality Of Audit Service In Malaysian Banking Industry

2012 ◽  
Vol 6 (2) ◽  
pp. 249 ◽  
Author(s):  
Kabiru Isa Dandago ◽  
Nur Diyana Binti Zamro
Keyword(s):  
Audit Quality ◽  
Banking Industry ◽  
Auditor Independence ◽  
Primary Data ◽  
Auditor Rotation ◽  
Mandatory Requirement ◽  
Banking Institutions ◽  
Mandatory Rotation ◽  
The Impact

This study highlights the nature of auditor rotation in the Malaysian banking industry and its effects on auditor independence and quality of audit service in the industry. To generate primary data for analysis, interviews were conducted on officials of two banking institutions and one accounting/audit firm. The study finds that there have not been significant changes in the annual appointment of auditors in the Malaysian banking institutions over the last ten years, suggesting that there is a good working relationship between the auditors (especially the Big4) and the banks. This allows room for continuous debate on the need for mandatory rotation as a<br />means for ensuring auditor independence and high audit quality in the Malaysian banking industry. In the absence of statutory/mandatory requirement for auditor rotation, it is recommended that the Malaysian banking institutions should be carefully evaluating the impact auditor rotation would have on the quality of audit work on their current and future financial statements, as they decide whether to rotate their auditors or not.

scholarly journals A theoretical approach to auditor independence and audit quality

2020 ◽  
Vol 17 (2) ◽  
pp. 124-141
Author(s):  
Rahman Yakubu ◽  
Tracey Williams
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Audit Fees ◽  
Auditor Independence ◽  
Accounting Scandals ◽  
Audit Firms ◽  
Mandatory Audit Firm Rotation ◽  
The Impact ◽  
Insight Into

Auditor independence and the quality of audit report is of growing concern to regulators, institutional investors and stakeholders as a series of accounting scandals have undermined the professionalism of auditors. The findings from this study produced an insight of how auditor’s independence improve audit quality and that abnormal audit fees is as a result of additional effort for auditor to carry out rigorous audit engagement as a result of wider audit scope; that mandatory audit firm rotation will enhance auditor independence, and that audit committee with nonexecutive independence will promote audit quality. The study also finds that in terms of auditor size, smaller audit firms that belong to professional bodies will provide higher audit quality. The main conclusion of this research is that where an auditor is fully independent in carrying out audit engagement with strong resistance to fees pressure will enhance audit quality. This research provides insight into the impact of IFRS adoption on audit fees.

Tax services, consequence severity, and jurors' assessment of auditor liability

2013 ◽  
Vol 29 (1) ◽  
pp. 50-75 ◽  
Author(s):  
John M. Thornton ◽  
Michael K. Shaub
Keyword(s):  
Audit Quality ◽  
Auditor Independence ◽  
Tax Planning ◽  
Court Case ◽  
Content Type ◽  
Auditor Liability ◽  
Audit Failure ◽  
The Impact ◽  
Independence In Appearance

Purpose – The purpose of this research is to determine whether the type of tax services provided by a public accounting firm to its audit client and the consequence severity of an audit failure impact jurors' assessment of audit quality and auditor liability. Design/methodology/approach – The authors administer a court case to 168 jurors manipulating three levels of tax services provided to an audit client (none, tax preparation, and aggressive tax planning services); two levels of consequence severity of the alleged audit failure, observing the impact on jurors' assessment of audit quality, auditor responsibility for audit failure; and damages awarded the plaintiff. Findings – Consistent with recent US regulations, jurors perceive the quality of the audit to be lower when auditors provide aggressive tax planning services, but not for tax preparation services. Damages are greater when auditors provide aggressive tax planning services across both levels of consequence severity. Research limitations/implications – The results indicate that the type of tax services provided may impact jurors' views of audit quality and damage assessments against auditors. The questionnaire uses previously validated measures, but the results may not be generalizable to jurors in all jurisdictions. Practical implications – Though empirical evidence is mixed at best about the impact of auditors providing non-audit services on auditor independence in fact, auditor independence in appearance, and thus audit quality, such impacts may affect the way jurors perceive the situation. Originality/value – The study directly tests the implications for auditor liability of new restrictions on tax services and more accurately measures the impact of consequence severity, using actual jurors.

Are There Adverse Consequences of Mandatory Auditor Rotation? Evidence from the Italian Experience

2013 ◽  
Vol 34 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Mara Cameran ◽  
Jere R. Francis ◽  
Antonio Marra ◽  
Angela Pettinicchio
Keyword(s):  
Audit Quality ◽  
Earnings Quality ◽  
The United States ◽  
First Year ◽  
The European Union ◽  
Auditor Rotation ◽  
Italian Experience ◽  
Auditor Tenure ◽  
Mandatory Rotation

SUMMARY Mandatory auditor rotation was recently proposed for the European Union and is also under consideration in the United States. There has been little research into either the benefits or costs of rotation in a true mandatory setting that could inform intelligent policy making. Our paper helps fill this gap by examining Italy, where mandatory rotation of auditors has been required since 1975. We find that outgoing auditors do not shirk on effort (or quality), but final-year fees are 7 percent higher than normal, which may indicate opportunistic pricing. The fees of incoming auditors are discounted by 16 percent even though they have abnormally higher engagement hours in the first year (17 percent), which is suggestive of lowballing. However, subsequent fees are abnormally higher and exceed the initial fee discount. Thus, the costs of mandatory rotation are nontrivial. Higher costs could be acceptable if rotation improves audit quality, but we find evidence of the opposite. Namely, the quality of audited earnings is lower in the first three years following rotation, relative to later years of auditor tenure. Since rotation is costly and earnings quality improves with longer auditor tenure, the evidence from Italy does not support the case for mandatory rotation.

scholarly journals MANDATORY AUDITOR ROTATION: THE PERCEIVED BENEFITS AND DRAWBACKS (A CASE STUDY IN BPK)

2020 ◽  
Vol 6 (1) ◽  
pp. 35
Author(s):  
Putri Anggraini
Keyword(s):  
Primary Data ◽  
Perceived Benefits ◽  
Statistical Assessment ◽  
The Public ◽  
Auditor Rotation ◽  
Rotation Scheme ◽  
Mandatory Rotation ◽  
The Impact ◽  
Independence In Appearance

After years of implementation of the policy, there is an inconclusive opinion of whether a mandatory auditor rotation could improve the independence of auditors, including those working within the public sector, such as BPK. This study intends to empirically test the impact of mandatory rotation towards auditors' independence in fact and in appearance. Additionally, the study examines how auditor satisfaction towards the policy affects their perceived benefits and drawbacks of the scheme. Following a statistical assessment of primary data using the independent-samples t-test, findings show that independence in appearance of auditors would be enhanced as a result of mandatory rotation. The rotation policy, however, could not by itself improve auditors’ independence in fact. Consequently, complementary schemes are needed to preserve the independence in fact of auditors. Further, auditors who have a favorable view of mandatory rotation would assume that the mechanism offers more advantages than disadvantages. On the other hand, unhappy employees would perceive that mandatory rotation brings more adverse effects than positive ones. The vast majority of respondents also believe that the rotation mechanism is necessary to be implemented in BPK. Lastly, a number of valuable respondent inputs aimed to improve the rotation scheme are elaborated in this study.

scholarly journals An Analysis of Mandatory Auditor Rotation Requirements in South Africa in light of International Legislative Trends

Obiter ◽  
2019 ◽  
Vol 40 (2) ◽  
Author(s):  
Vela Madlela
Keyword(s):  
South Africa ◽  
Financial Markets ◽  
Audit Quality ◽  
The United States ◽  
Auditor Independence ◽  
Company Law ◽  
The European Union ◽  
External Audit ◽  
Auditor Rotation ◽  
Mandatory Rotation

An independent and objective external audit of companies is an integral element of sound corporate governance and of functional financial markets. The issues relating to auditor independence and objectivity have attracted considerable regulatory and public scrutiny in many leading jurisdictions. This is partly due to a general decrease in audit quality over the years as evidenced by high-profile accounting scandals and audit failures, both locally and internationally, as well as the vital role that an external audit is expected to play in ensuring transparency, accuracy and efficiency in the financial markets. In an attempt to restore confidence in the audit profession and to strengthen the independence of the external audit function for companies, legislatures in some leading jurisdictions have introduced a variety of regulatory strategies, including mandatory rotation of auditors in the form of mandatory audit partner rotation (MAPR) and/or mandatory audit firm rotation (MAFR). In this article, the author examines the adequacy of the current provisions of section 92 of the Companies Act 71 of 2008 regarding MAPR and the recently promulgated rule of the Independent Regulatory Board for Auditors (IRBA) on MAFR (the MAFR rule) in addressing the issue of mandatory auditor rotation in South Africa. The author considers whether the provisions of the Companies Act 71 of 2008 regarding MAPR and the MAFR rule are adequate to promote an independent and objective external audit function for companies, as well as transparency, efficiency and accountability, while providing certainty for companies and auditors. The author first examines some of the key principles and policy considerations relating to the external audit of companies – namely, the significance of audits and auditors in the financial markets as well as the value of auditor independence and objectivity. This is followed by an examination of the provisions of section 92 of the Companies Act 71 of 2008 regarding MAPR and the recently promulgated MAFR rule in light of legislative developments in the United States, Canada, the European Union, Australia and India regarding mandatory rotation of auditors and audit partners. Based on the lessons to be drawn from the experiences of the above jurisdictions, the author then makes recommendations for appropriate reforms for South Africa in this important area of company law. This is followed by some concluding remarks.

scholarly journals Assessing the Impact of Service Quality Dimensions on Customer Satisfaction in Commercial Banks of Mauritius

2019 ◽  
Vol 14 (1) ◽  
pp. 259-270 ◽  
Author(s):  
Lomendra Vencataya ◽  
Sharmila Pudaruth ◽  
Roubina TD Juwaheer ◽  
Ganess Dirpal ◽  
Nabeelah Meh Zabeen Sumodhee
Keyword(s):  
Customer Satisfaction ◽  
Service Quality ◽  
Banking Industry ◽  
Quality Factors ◽  
International Banks ◽  
Banking Institutions ◽  
Quality Dimensions ◽  
Service Quality Dimensions ◽  
The Impact

AbstractIn today’s hyper competitive banking arena, banking institutions are focusing on improving service quality. Providing excellent quality of service is important in creating and sustaining competitive advantage in the banking industry of Mauritius due to intense competition between local and international banks. Hence, the paper explores the impact of Service Quality (SQ) Dimensions on customer satisfaction. Using the SERVQUAL model, the paper seeks to examine the impacts of reliability, responsiveness, assurance, empathy and tangible aspects on customer satisfaction in banks of Mauritius. A sample of 200 banking customers was randomly selected and data were analyzed through SPSS version 22. The SERVQUAL model has been found as reliable factors and appropriate tool to measure, evaluate, support, and improve the quality of services in banking industry. Results indicated that all five service quality factors have significantly positively influenced customer satisfaction in banks. Regression analysis was also conducted and depicted that empathy is a significant predictor of customer satisfaction among the five SQ dimensions.

Developments in France regarding the mandatory rotation of auditors: Do they enhance auditors’ independence?

2016 ◽  
Vol 22 (1) ◽  
pp. 44-66 ◽  
Author(s):  
Christine Fournès Dattin
Keyword(s):  
Research Evidence ◽  
Audit Quality ◽  
A Priori ◽  
Auditor Independence ◽  
Audit Firms ◽  
French Case ◽  
The Subject ◽  
Mandatory Rotation ◽  
Mandatory Audit Firm Rotation ◽  
The Impact

Mandatory rotation of auditors or of audit firms has been the subject of extensive debate among academics, professionals, and regulators, especially since the financial crisis of the 2000s. Does rotation enhance auditors’ independence and audit quality? The research evidence on the impact of mandatory audit firm rotation on audit quality and auditor independence is inconclusive. This article offers a historical approach to understanding the implementation of mandatory rotation, based on the French case. The auditing profession in France is strongly regulated, with four main provisions designed to reinforce auditors’ independence: prohibitions on a priori and a posteriori incompatibilities, a 6-year audit tenure, a ban on non-audit services, and the use of joint audit. The rotation of auditors was merely an additional and non-compulsory tool. However, in 2014, the European Commission decided to implement the mandatory rotation of audit firms despite the opposition of the French accounting profession and regulators. Does this suggest that the French model was ineffective? It probably does not. In this specific context of France, a mandatory rotation of audit firms would seem unlikely to enhance audit quality.

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 Impact of auditor and audit firm rotation on accounting and audit quality: A critical analysis of the EC regulation draft

2012 ◽  
Vol 1 (3) ◽  
pp. 7-13 ◽  
Author(s):  
Patrick Velte ◽  
Markus Stiglbauer
Keyword(s):  
Audit Quality ◽  
Rotation Period ◽  
Auditor Independence ◽  
Financial Accounting ◽  
Audit Firm ◽  
Positive Effects ◽  
Auditor Rotation ◽  
Mandatory Rotation ◽  
Mandatory Audit Firm Rotation ◽  
A Current

In a current regulation draft of 2011, the European Commission (EC) plans the mandatory audit firm rotation principally after six years and with regard to a cooling off period of four years to increase auditor independence. This could complement the internal mandatory rotation (auditor rotation) by the 8th EC directive. The present paper gives a state of the art analysis of the empirical research results with regard to auditor and audit firm rotation. In contrast to the perception of the EC, the majority of the empirical results doesn’t find evidence for increased financial accounting and audit quality by audit firm rotation. Furthermore, the positive effects of the internal rotation period of seven years and the cooling off period of two years by the 8th EC directive are not empirically proved yet.

scholarly journals Electronic Banking and Profitability in the Nigerian Banking Industry

2020 ◽  
Vol 12 (2(I)) ◽  
pp. 20-37
Author(s):  
Uchenna Aduaka ◽  
Olawumi Dele Awolusi
Keyword(s):  
Business Strategy ◽  
Banking Industry ◽  
Secondary Data ◽  
Internet Banking ◽  
Primary Objective ◽  
Primary Data ◽  
Electronic Banking ◽  
The Impact ◽  
Nigerian Banking

The primary objective of this study was to assess the impact of electronic banking on profitability in the Nigeria banking industry. An inferential survey research design was adopted. Primary data were collected through questionnaires from both staff and customers of the surveyed bank. It was complemented with secondary data sourced from the company’s audited financial statements for the period 2010 to 2017. Data collected were analyzed using both descriptive and inferential statistics while testing of the hypotheses was done using multiple regression analysis. The study revealed that cards play a significant role more than other channels and immediately followed by ATM. Also, it was observed that E-Banking channels contributed to Bank's profitability, that E-banking services (EBS) had an influence on the retention and loyalty of bank's customers and that the quality of service, security, reliability and efficiency have a definite impact on the usage of the services of e-banking. It was recommended that the Nigerian banking industry should invest more in card products, followed by ATM amongst other electronic channels; as they generate more revenues for the bank. The study also recommended further development of other channels (Mobile, Corporate Payments, POS and internet banking) to further enhance their contribution to the bank's profitability. Nigerian banks should also create a business strategy that is customer-centric by being continuously innovative in identifying the needs of their customers and improving on their products offering while developing new ones, to retain and keep the loyalty of their existing customers while attracting new ones.

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