The impact of auditor rotation, audit firm rotation and non-audit services on earnings quality, audit quality and investor perceptions: a literature review

This literature review evaluates 103 empirical research studies on the link between rotation and non-audit services on the one hand and their influence on earnings quality, audit quality and investor perceptions on the other hand. After the financial crisis 2008/09, regulators all over the world are aware of decreased stakeholder trust in earnings and audit quality. As a reaction, stricter rules on rotation and non-audit services by public interest entities (PIEs) have been implemented (e.g. in the European Union). However, the impact of these regulations on earnings and audit quality is still controversial. We briefly introduce the theoretical, normative and empirical audit framework that comprises an adequate structure of the state-of-the-art of empirical research in this field. We summarize the findings in each research area, while we split our rotation analysis in an audit firm and audit partner rotation and tenure and our dependent variables in earnings quality, audit quality and investor perception measures. Most of the cited studies are linked to earnings-related measures, especially abnormal accruals models. The mixed results can be explained by the different theoretical impacts of agency- and resource-based view. Finally, we will discuss the current limitations of the studies and give useful recommendations for future empirical research activities on this topic.

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What do we know about empirical joint audit research? A literature review

Accounting and Financial Control ◽

10.21511/afc.01(1).2017.01 ◽

2017 ◽

Vol 1 (1) ◽

pp. 4-14 ◽

Cited By ~ 2

Author(s):

Patrick Velte

Keyword(s):

Literature Review ◽

Empirical Research ◽

Audit Quality ◽

State Of The Art ◽

Empirical Studies ◽

International Perspective ◽

Economic Effects ◽

Audit Market ◽

Research Activities ◽

Output Factors

This literature review evaluates empirical studies which concentrate on economic effects on joint audits from an international perspective. We briefly introduce the theoretical and empirical joint audit framework that comprises an adequate structure of the state-of-the-art of empirical research in this field. This is followed by a discussion of the following output factors of joint audits: (1) audit quality; (2) audit costs and (3) audit market concentration. We will summarize the key findings in each area, and provide a description of the analyzed proxies. Finally, we will discuss the current limitations of the studies and give useful recommendations for future empirical research activities in this topic.

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The Effect of Office Changes within Audit Firms on Clients' Audit Quality and Audit Fees

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-52591 ◽

2020 ◽

Vol 39 (1) ◽

pp. 71-99

Author(s):

Carl W. Hollingsworth ◽

Terry L. Neal ◽

Colin D. Reid

Keyword(s):

Audit Quality ◽

Audit Fees ◽

Additional Analysis ◽

Audit Firm ◽

Audit Firms ◽

Audit Fee ◽

The Impact ◽

Audit Partner Rotation

SUMMARY While prior research has examined audit firm and audit partner rotation, we have little evidence on the impact of within-firm engagement team disruptions on the audit. To examine these disruptions, we identify a unique sample of companies where the audit firm issuing office changed but the audit firm did not change and investigate the effect of these changes on the audit. Our results indicate that companies that have a change in their audit firm's issuing office exhibit a decrease in audit quality and an increase in audit fees. In additional analysis, we partition office changes into two groups—client driven changes and audit firm driven changes. This analysis reveals that client driven changes are more likely to result in a higher audit fee while audit quality is unchanged. Conversely, audit firm driven changes do not result in a higher audit fee but do experience a decrease in audit quality.

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Clients' Expectations on Audit Judgments: A Note

Behavioral Research in Accounting ◽

10.2308/bria.2004.16.1.63 ◽

2004 ◽

Vol 16 (1) ◽

pp. 63-74 ◽

Cited By ~ 39

Author(s):

Venkataraman M. Iyer ◽

Dasaratha V. Rama

Keyword(s):

Audit Quality ◽

Financial Statements ◽

Early Years ◽

Relative Power ◽

Client Perceptions ◽

Audit Firm ◽

Auditor Tenure ◽

Start Up ◽

Nonaudit Services ◽

The Impact

Audited financial statements can be viewed as the product of negotiations between a company's management and its auditor. Relative power of these two parties is a major factor that determines the outcome of the negotiation. This study examines the impact of auditor tenure, importance of a client to an audit partner, nonaudit purchases, and prior audit firm experience of client personnel on client perceptions about their ability to persuade the auditor in the context of an accounting disagreement. We obtained responses to a survey from 124 CPAs in industry who are employed as CEOs, CFOs, controllers, or treasurers. Our results indicate that respondents from companies with short auditor tenures were somewhat more likely to indicate that they could persuade the auditor to accept their (client's) position in case of a disagreement. This finding is consistent with the argument that auditors are susceptible to influence in the early years as they are still in the process of recouping start-up costs, but is not consistent with concerns expressed by legislators and others that long auditor tenures will adversely affect audit quality. Respondents who believed their business was more important for the audit partner were also more likely to believe that they could persuade the auditor. However, the purchase of nonaudit services and prior audit experience were not related to client's perceptions about their ability to persuade the auditor.

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Competitiveness Determinants of Moroccan Exports: Quantity-Based Analysis

International Journal of Economics and Finance ◽

10.5539/ijef.v8n7p140 ◽

2016 ◽

Vol 8 (7) ◽

pp. 140 ◽

Cited By ~ 5

Author(s):

Bilal Lotfi ◽

Mohamed Karim

Keyword(s):

European Union ◽

Literature Review ◽

Econometric Analysis ◽

External Factors ◽

The European Union ◽

Export Competitiveness ◽

Main Determinants ◽

Internal And External Factors ◽

The Impact ◽

Relative Concept

The term competitiveness is a relative concept whose perception changes with the level of conducted analysis (nation, sector, company). Thus, a variety of internal and external factors can have deep effects on the competitiveness of a given entity. This paper aims to evaluate the competitiveness of Moroccan exports by identifying the main determinants that explain their performance. This is particularly dealing with the impact of customs’ tariff, the tariff of import, foreign demand, the share of the non-residents in the capital of domestic enterprises and the investment rate compared to the value of exporters.Moreover, this paper presents a literature review on competitiveness and examines the main results of our econometric analysis regarding the determinants of export competitiveness applied to the top ten branches most exporters in Morocco. The gained results allow confirming the sensitivity of exports by branch to the situation of Morocco’s main trading partner namely the European Union while emphasizing, quantitatively, on the role played by the investment effort undertaken by Moroccan exporting companies in improving the competitiveness of national exports.

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Sustainability of Biosimilars in Europe: A Delphi Panel Consensus with Systematic Literature Review

Pharmaceuticals ◽

10.3390/ph13110400 ◽

2020 ◽

Vol 13 (11) ◽

pp. 400

Author(s):

Arnold G. Vulto ◽

Jackie Vanderpuye-Orgle ◽

Martin van der Graaff ◽

Steven R. A. Simoens ◽

Lorenzo Dagna ◽

...

Keyword(s):

Health Care ◽

Literature Review ◽

Systematic Literature Review ◽

Health Care Systems ◽

Delphi Panel ◽

The European Union ◽

Modified Delphi ◽

Care Systems ◽

Supply Risks ◽

The Impact

Introduction: Biosimilars have the potential to enhance the sustainability of evolving health care systems. A sustainable biosimilars market requires all stakeholders to balance competition and supply chain security. However, there is significant variation in the policies for pricing, procurement, and use of biosimilars in the European Union. A modified Delphi process was conducted to achieve expert consensus on biosimilar market sustainability in Europe. Methods: The priorities of 11 stakeholders were explored in three stages: a brainstorming stage supported by a systematic literature review (SLR) and key materials identified by the participants; development and review of statements derived during brainstorming; and a facilitated roundtable discussion. Results: Participants argued that a sustainable biosimilar market must deliver tangible and transparent benefits to the health care system, while meeting the needs of all stakeholders. Key drivers of biosimilar market sustainability included: (i) competition is more effective than regulation; (ii) there should be incentives to ensure industry investment in biosimilar development and innovation; (iii) procurement processes must avoid monopolies and minimize market disruption; and (iv) principles for procurement should be defined by all stakeholders. However, findings from the SLR were limited, with significant gaps on the impact of different tender models on supply risks, savings, and sustainability. Conclusions: A sustainable biosimilar market means that all stakeholders benefit from appropriate and reliable access to biological therapies. Failure to care for biosimilar market sustainability may impoverish biosimilar development and offerings, eventually leading to increased cost for health care systems and patients, with fewer resources for innovation.

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The impact of audit reforms on objectivity during the performance of non-audit services

Managerial Auditing Journal ◽

10.1108/maj-06-2013-0888 ◽

2014 ◽

Vol 29 (3) ◽

pp. 222-236 ◽

Cited By ~ 2

Author(s):

Richard G. Brody ◽

Christine M. Haynes ◽

Craig G. White

Keyword(s):

Audit Quality ◽

Content Type ◽

Auditor Liability ◽

Internal Auditors ◽

External Auditors ◽

Regulatory Perspective ◽

External Auditor ◽

The Impact ◽

Practical Implications ◽

Non Audit Services

Purpose – This research aims to explore whether recent audit reforms have improved auditor objectivity when performing non-audit services. Design/methodology/approach – In two separate experiments, the authors tested whether external and internal auditors' inventory obsolescence judgments are influenced by their client's (or company's) role as the buyer or seller in an acquisition setting. Findings – External auditors assessed the likelihood of inventory obsolescence objectively, regardless of their consulting role in the acquisition setting. Internal auditors assessed the likelihood of inventory obsolescence as higher when consulting for the buyer than when consulting for the seller, consistent with the supposition that the buyer would prefer to write-down inventory and negotiate a lower purchase price, whereas the seller would prefer the inventory not be written down. Practical implications – From a regulatory perspective, external auditors may be relying too much on the work of internal auditors if internal auditors' lack of objectivity as consultants extends to their assurance role. Originality/value – This paper extends prior research in the area of internal and external auditor objectivity and is the first paper to include both subject groups in the same experiment. It also addresses the current policy issues that may have a significant effect on audit quality and auditor liability.

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KOMITE AUDIT SEBAGAI PEMODERASI PENGARUH WORKLOAD DAN MASA PERIKATAN AUDIT PADA KUALITAS AUDITe

Jurnal Ilmiah Akuntansi dan Bisnis ◽

10.24843/jiab.2016.v11.i01.p06 ◽

2016 ◽

Author(s):

Theresia Julina Rusli ◽

I Dewa Nyoman Wiratmaja

Keyword(s):

Audit Committee ◽

Sampling Method ◽

Audit Quality ◽

Negative Impact ◽

Positive Impact ◽

Stock Exchange ◽

Manufacturing Companies ◽

Quality Audit ◽

Final Sample ◽

The Impact

This research aims to find empirical evidence about the impact of workload and audit tenure on audit quality and using audit committee as a moderating variable. This research focused on manufacturing companies that listed on the Indonesia Stock Exchange. Sample was collected using purposive sampling method and resulted 31 companies as a final sample. The data are analyzed by using Moderated Regression Analysis (MRA). The results of this research indicate that the workload has a negative impact on audit quality. Audit tenure has a positive impact on audit quality. Audit committee reduces the negative impact of workload on audit quality. And audit committee reduces the positive impact of audit tenure on audit quality.

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DETERMINAN KUALITAS AUDIT DAN FAKTOR-FAKTOR YANG BERPENGARUH TERHADAP AUDITEE SATISFACTION (STUDI EMPIRIS PADA AUDITOR INTERNAL BANK UMUM SYARIAH DI INDONESIA)

Media Riset Akuntansi Auditing & Informasi ◽

10.25105/mraai.v14i1.1752 ◽

2017 ◽

Vol 14 (1) ◽

pp. 27

Author(s):

Hermi ,

Keyword(s):

Structural Equation ◽

Audit Quality ◽

Primary Data ◽

Validity And Reliability ◽

Cross Sectional ◽

Firm Reputation ◽

Quality Audit ◽

Audit Firm ◽

Work Ethics ◽

Service Portfolio

The purpose of this study is to analyze the influence of Independence, Competence and Islamic work Ethics partially and simultaneously to the Audit Quality . The next purpose is to analyze the influence of Audit Quality, Audit Services Portfolio and Audit Firm Reputation partially and simultaneously against Auditee Satisfaction on Islamic Banks in Indonesia. This study is expected to provide benefit to the development of knowledge, particularly in the field of accounting and auditing, Government, Islamic Bank, Indonesian Institute of Accountants (IAI ), Indonesian Institute of Certified Public Accountants (IAP ), the auditors and the Audit Firm (KAP). The results are expected to provide information for various parties accurately and meaningfully as a solution to determine the variables that affect the Auditee Satisfaction and Audit Quality at Islamic Bank in Indonesia. Limitations of the study include: (1) The extent of the problem which studied in determining the factors that can affect the Audit Quality and Auditee Satisfaction in Islamic Bank in Indonesia , (2) Limitation of the study lies in the data acquisition, (3) This study only emphasized the perception of the factors that may affect Audit Quality and Auditee Satisfaction. This study used primary data through questionnaires with the population of internal auditors of Islamic Banks in Indonesia. This study used a quantitative approach and in terms of the type of investigation, this study is causal. Based on the time horizon the study is cross-sectional (one - shot ) because the data was collected only once . Before using the data to test hypothesis, the validity and reliability test should be done first.Data analysis uses Structural Equation Model (SEM) supported by AMOS software. Based on the test results, it shows that Independence, Competence and Islamic work Ethics partially or simultaneously affect the Audit Quality significantly. The next stage of testing Audit Quality partially has no significant effect on the Auditee Satisfaction. While Audit Service Portfolio and Audit Firm Reputation either partially or simultaneously have significant effect on the Auditee Satisfaction. Simultaneously the three variables Audit Quality, and Audit Services Portfolio and Reputation of Audit Firm have significant effect on the Auditee Satisfaction. . Keywords: Independence, Competence, Islamic Work Ethics, Audit Quality, Audit Services Portfolio, Audit Firm Reputation and Auditee Satisfaction.

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Investigating the impact of audit features on money laundering

Journal of Money Laundering Control ◽

10.1108/jmlc-09-2019-0072 ◽

2020 ◽

Vol 23 (4) ◽

pp. 913-930

Author(s):

Shaban Mohammadi ◽

Nader Naghshbandi ◽

Zahra Moridahmadibezdi

Keyword(s):

Money Laundering ◽

Audit Quality ◽

Screening Method ◽

Audit Fees ◽

Statistical Population ◽

Content Type ◽

Quality Audit ◽

Auditor Tenure ◽

Audit Fee ◽

The Impact

Purpose The purpose of the present study is to investigate the impact of audit features, including audit quality, audit fees and auditor tenure on money laundering in Iranian stock companies. Design/methodology/approach This research is descriptive-correlational and applied in terms of purpose. To evaluate the audit features, variables including audit quality, audit fee and auditor tenure were used. The statistical population of this study includes all companies listed in Tehran Stock Exchange and the research period from 2012 to 2018. A sample of 150 companies was selected by the screening method. In this study, logistic regression and Eviews 10 software were used for data analysis and hypothesis testing. Findings The results showed that variables including audit quality, normal audit fee and auditor tenure have a significant effect on money laundering. Originality/value Observing money laundering rules and regulations for businesses involves is a critical issue. In auditing the financial statements of the business units subject to these laws, the auditor reviews their actions to obtain reasonable assurance of guaranteeing the money laundering laws, evaluates their effectiveness and gains approval of managers regarding observing laundering regulations. In this regard, the auditor is required to report definitive or suspected money-laundering cases or its certain or suspected evidence to the relevant authorities. Although the law prohibits the auditor from disclosing such matters to the client, it is not necessary. It seems that even if the auditors perform non-audit functions, they should report money laundering or suspicious operations and transactions.

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Do chief sustainability officers and CSR committees influence CSR-related outcomes? A structured literature review based on empirical-quantitative research findings

Journal of Management Control ◽

10.1007/s00187-020-00308-x ◽

2020 ◽

Author(s):

Patrick Velte ◽

Martin Stawinoga

Keyword(s):

Corporate Governance ◽

Literature Review ◽

Empirical Research ◽

Quantitative Research ◽

Research Field ◽

Management Control ◽

Csr Reporting ◽

Upper Echelons Theory ◽

Research Perspectives ◽

The Impact

AbstractAlthough an increasing amount of empirical research has been linked to the impact of management control and governance on corporate social responsibility (CSR) issues since the financial crisis of 2008/09, heterogeneous results have characterised this research field. Regarding the group level of corporate governance, the efficacy of board committees (e.g., audit, compensation or CSR committees) has been included in recent research designs. However, analyses of corporate governance at the individual level are related to the effects of top management members [e.g., chief executive officer (CEO), chief financial officer (CFO) or chief sustainability officer (CSO)] on CSR outcomes. This paper aims to convey a detailed understanding of sustainable management control’s impact as CSR-related board expertise. In more detail, we focus on the influence of both CSR committees and CSOs on three CSR measures mainly analysed in empirical-quantitative research: (1) CSR reporting; (2) CSR assurance (CSRA); and (3) CSR performance. We motivate our analysis with increased relevance from practical, regulatory and research perspectives, and we employ a systematic literature review of the symbolic vs. substantive effects of sustainability-related board composition. Based on our theoretical model (legitimacy theory, stakeholder theory and upper-echelons theory), we selected 48 quantitative peer-reviewed empirical studies on this research topic. Our analysis shows that CSR committees positively influence CSR reporting and performance. Thus, there are indications that the implementation of a CSR committee is not a symbolic act, but instead substantively contributes to CSR activities. However, in light of inconclusive empirical research results and a lack of studies that have analysed CSO-related effects, a notable research gap has been identified. Moreover, we note the main limitations of prior research in this review and develop an agenda with useful recommendations for future studies.

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