Investors' Perceptions of Earnings Quality, Auditor Independence, and the Usefulness of Audited Financial Information

2003 ◽  
Vol 17 (s-1) ◽  
pp. 37-48 ◽  
Author(s):  
Frank D. Hodge
Keyword(s):  
Earnings Quality ◽  
Auditor Independence ◽  
Financial Information

scholarly journals Dilema Auditor: Faktor Internal dan Eksternal Independensi

2021 ◽  
Vol 18 (2) ◽  
pp. 137-155
Author(s):  
Martdian Ratna Sari ◽  
Alhamdi Zuhri ◽  
Paulina Millennia Natalia Wijaya
Keyword(s):  
Sampling Method ◽  
Financial Statements ◽  
Population Based ◽  
Auditor Independence ◽  
External Factors ◽  
Financial Information ◽  
Primary Data ◽  
Large Size ◽  
Audit Period ◽  
Internal And External Factors

The need for financial information is an important component of economic development. The auditor is the party that guarantees that the financial statements are maintained credibility. However, many cases show the misuse of financial statements. This study aims to determine the effect of internal and external factors on auditor independence. This study used a Purposive Sampling as the sampling method, which is by taking a sample from the population-based on certain criteria (Sugiyono, 2013). This study used a sample of the auditor who has experience working in the KAP for at least 1 year. The type of data used is primary data in the form of a questionnaire. This study proves that the length of the auditor's relationship influences auditor independence. While this study does not prove that the provision of non-audit services, Competition among KAP, Large size of KAP, Audit period, and Relativism influence the independence of auditors.

Audit and Nonaudit Fees and the Market's Reaction to Earnings Announcements

2006 ◽  
Vol 25 (1) ◽  
pp. 1-26 ◽  
Author(s):  
Julia L. Higgs ◽  
Terrance R. Skantz
Keyword(s):  
Earnings Quality ◽  
Earnings Announcements ◽  
Positive Association ◽  
Audit Fees ◽  
Continuous Variable ◽  
Auditor Independence ◽  
Negative Association ◽  
Forecast Errors ◽  
Unexpected Earnings ◽  
Nonaudit Services

Effective February 05, 2001, publicly traded companies are required to disclose audit and nonaudit fees paid to their external auditors. These fee data have been used to test whether auditor independence is impaired when the external auditor provides nonaudit services to a client, usually by examining whether certain earnings characteristics are related to nonaudit fees in ways that suggest impairment. This paper follows in that tradition by testing whether the earnings response coefficient (ERC), a proxy for earnings quality, is associated with engagement profitability. Residual fees derived from a two-stage regression model that prices audit and nonaudit services simultaneously are used to proxy for engagement profitability. If the market perceives abnormally profitable engagements as a threat to auditor independence, then we would expect the ERC to be lower for firms with positive fee residuals. The paper examines the residual fee-ERC relation for annual earnings announcements immediately before and after first-time fee disclosure. We report results for alternative measures of unexpected earnings (I/B/E/S forecast errors and deviations from a seasonal random walk), different formulations of residual fees (as a dichotomous and continuous variable) and different samples. For total fees and audit fees, there is a positive association between ERCs and the level of residual fees. For nonaudit fees, there is only one combination of unexpected earnings and residual fee formulation where we observe a significantly negative association between ERCs and residual fees. The findings for audit fees are consistent with a market that interprets abnormally high audit fees as a signal of a firm's commitment to high earnings quality. The restrictive conditions under which we find a negative association between nonaudit fees and ERCs provide limited support for the contention that perceived auditor independence is impaired by abnormally high nonaudit fees.

A Historical Assessment of a Key Auditor Independence Policy: Auditing Your Own Work

2020 ◽  
Vol 47 (2) ◽  
pp. 11-20
Author(s):  
John D. Keyser
Keyword(s):  
Financial Statements ◽  
Auditor Independence ◽  
Securities And Exchange Commission ◽  
Financial Information ◽  
Financial Statement ◽  
Accounting Profession ◽  
The Subject

ABSTRACT In 1973, the AAA's Committee on Basic Auditing Concepts distinguished the respective roles of management and auditors (AAA 1973). Management is responsible to record, summarize, and communicate financial information to financial statement users. Auditors are responsible to communicate to users an opinion regarding the reliability of the financial information provided by management. The view of the Securities and Exchange Commission (SEC) regarding bookkeeping services, held since June 1940, is consistent with this division of responsibility. In contrast, the accounting profession took the position in 1949 that auditors can objectively audit financial statements with which they assisted in the preparation, and continues to hold that position to the present day. The evolution of these divergent positions regarding the respective roles of management and auditors is the subject of this paper.

Earnings Quality and Auditor Independence: An Examination Using Non-audit Fee Data

2002 ◽  
Author(s):  
Carol Callaway Dee ◽  
Ayalew A. Lulseged ◽  
Tanya S. Nowlin
Keyword(s):  
Earnings Quality ◽  
Auditor Independence ◽  
Audit Fee

scholarly journals Impact of corporate board and external audit attributes on earnings quality: Experience from Nigeria quoted foods and beverages firms

2021 ◽  
Vol 12 (3) ◽  
pp. 612-623
Author(s):  
Oladejo M.O ◽  
Akintunde A.O ◽  
Yinus S.O ◽  
Akanbi T.A ◽  
Olowokere J.K
Keyword(s):  
Firm Size ◽  
Audit Committee ◽  
Earnings Quality ◽  
Sampling Technique ◽  
Auditor Independence ◽  
Annual Reports ◽  
Panel Regression ◽  
Corporate Board ◽  
External Audit ◽  
Audit Firm

The recent audit failures has pointed to weaknesses in financial report and give occasion of doubt to users about the reliability of earnings declared by firms. This study examines the effects of corporate board and external audit attributes on earnings quality of listed foods and beverages firms in Nigeria. Secondary data were employed through audited annual reports and accounts of eight (8) selected foods and beverages firms listed on the Nigerian Stock Exchange using judgmental sampling technique. Data collected were analyse using descriptive statistics like table, percentage and inferential statistics such as panel regression analysis. All Analysis were tested at 5% level of significance. The results revealed that audit firm size (β=14485.32, P=0.000) which is external audit attribute and board size (β=-2741.887, P=0.000), audit committee presence (β= -8225.11, P=0.044) and company size (β= 5454.20, P=0.000) were the significant determinants of external audit and corporate board attributes of listed foods and beverages firms in Nigeria. Also, the result of panel regression revealed that audit independence (β= -6.57e-06, P=0.035) and audit firm size (β=0.1141479, P= 0.018) were the external audit attributes that had significant effect on discretionary accruals. The study therefore concluded that corporate board attributes (audit committee) and external audit attributes (auditor independence, audit firm size) had significant effect on earnings quality as measured by earnings management of selected foods and beverages firms in Nigeria. The study recommends that in order to enhance auditor’s independence, uniform audit fee should be formulated, and also, disclosure should be made on other corporate board attributes like board members’ year of experience and gender and for effective monitoring system.

Auditor Independence

2018 ◽  
Vol 37 (1) ◽  
pp. 45-66
Author(s):  
Jim Peterson ◽  
Keyword(s):  
Auditor Independence ◽  
Financial Information ◽  
First Century ◽  
Structural Constraints ◽  
Public Companies ◽  
Public Company ◽  
Fit For Purpose ◽  
Conflicting Interests ◽  
The Stability ◽  
Big Four

The concept of “auditor independence”—that the provider of assurance on financial information should be free of conflicting interests—is deeply embedded in the world’s capital markets. This paper examines stresses on the global model of Big Audit that call into question both the basis and the ongoing usefulness of auditor independence: The threats to the stability of the model, based on the dominance of the Big Four international accounting networks in providing audit services to the world’s large public companies. The balance between benefits and detriments of the independence requirements, and standards that are difficult to articulate and enforce. The implications for the continued value of independent assurance emerging from the evolution in Big Data tools and analytics, including the structural constraints of regulation. A broad re-examination is called for, in aide of the design of a sustainable public-company assurance model that is fit for purpose in the twenty-first century.

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