Investor Sentiment and Audit Opinion Shopping

2021 ◽  
Author(s):  
Keval Amin ◽  
John Daniel Eshleman ◽  
Peng Guo
Keyword(s):  
Internal Control ◽  
Investor Sentiment ◽  
Institutional Ownership ◽  
Audit Fees ◽  
Shopping Behavior ◽  
Audit Opinion ◽  
Big 4 ◽  
Opinion Shopping

The purpose of this study is to examine whether investor sentiment influences clients’ propensity to engage in audit opinion shopping. Using the opinion shopping framework of Lennox (2000), we document that internal control opinion shopping is more prevalent when investor sentiment is high. This effect is concentrated among firms with low institutional ownership. We also find that clients are more likely to undertake downward switches (i.e., Big 4 to non-Big 4 auditor) when sentiment is high. Additional tests reveal that clients who engage in opinion shopping during high sentiment periods have a higher risk of material restatements and higher audit fees. As well, the market-penalty associated with opinion shopping is reduced when sentiment is high. Overall, the results suggest that firms’ opinion shopping behavior during high sentiment periods is more prevalent and opportunistic.

Determinants Of Audit Report Lag: Evidence From Korea - An Examination Of Auditor-Related Factors

2011 ◽  
Vol 24 (2) ◽  
Author(s):  
Ho-Young Lee ◽  
Geum-Joo Jahng
Keyword(s):  
Internal Control ◽  
Audit Fees ◽  
Audit Report ◽  
Font Size ◽  
Related Factors ◽  
Audit Opinion ◽  
Negatively Associated ◽  
Auditor Tenure ◽  
Big 4 ◽  
Earnings Releases

<p class="MsoNormal" style="text-justify: inter-ideograph; text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: Times New Roman;"><span style="font-size: 10pt; mso-bidi-font-style: italic;">This study examines whether audit report lag (ARL) is </span><span style="font-size: 10pt; mso-fareast-font-family: Batang; mso-bidi-font-style: italic; mso-fareast-language: KO;">determined</span><span style="font-size: 10pt; mso-bidi-font-style: italic;"> by </span><span style="font-size: 10pt; mso-fareast-font-family: Batang; mso-bidi-font-style: italic; mso-fareast-language: KO;">certain auditor-related factors</span><span style="font-size: 10pt; mso-bidi-font-style: italic;">. </span><span style="font-size: 10pt; mso-fareast-font-family: Batang; mso-bidi-font-style: italic; mso-fareast-language: KO;">Understanding the determinants of ARL is important as ARL is the single most important factor in determining the timing of earnings releases and, therefore, improving the timeliness of companies&rsquo; announcements of earnings. Unlike prior studies, we are particularly interested in examining various auditor-related factors including audit and non-audit fees received from clients, auditor tenure, type of auditor and audit opinion. Using a recent Korean sample, w</span><span style="font-size: 10pt; mso-bidi-font-style: italic;">e find that ARL </span><span style="font-size: 10pt; mso-fareast-font-family: Batang; mso-bidi-font-style: italic; mso-fareast-language: KO;">is negatively associated with non-audit fees paid to incumbent auditors, consistent with &ldquo;knowledge spillover&rdquo; from the provision of non-audit services. We also find that ARL is negatively associated with the use of Big 4 auditors and unqualified audit opinions. We are, however, not able to find significant associations between ARL and auditor tenure, or abnormal audit fees paid to incumbent auditors.</span><span style="font-size: 10pt; mso-bidi-font-style: italic;"> </span><span style="font-size: 10pt; mso-fareast-font-family: Batang; mso-bidi-font-style: italic; mso-fareast-language: KO;">Additional analyses provide evidence that abnormal audit hours and the provision of tax services, and services relating to the design of internal control systems, significantly reduce ARL.</span></span></p>

scholarly journals PENGARUH PENERAPAN GOOD CORPORATE GOVERNANCE, OPINION SHOPPING, KUALITAS AUDIT, DAN AUDIT CLIENT TENURE TERHADAP PENERIMAAN OPINI AUDIT GOING CONCERN AUDITING

2019 ◽  
Vol 2 (2) ◽  
Author(s):  
Panggah Wira Angkasa ◽  
Dewi Indriasih ◽  
Baihaqi Fanani
Keyword(s):  
Logistic Regression ◽  
Research Result ◽  
Institutional Ownership ◽  
Audit Opinion ◽  
Quality Audit ◽  
Going Concern ◽  
Opinion Shopping ◽  
Going Concern Opinion ◽  
Infrastructure Services ◽  
The Impact

The Impact of Good Governance, Opinion Shopping, Quality Audit and Audit Client Tenure Application towards Going Concern Opinion Audit Acceptance (Empirical Studies on Infrastructure Services Company, Utility, and Transportation which Registered at Indonesian Stock Exchange (ISE) during 2013 – 2017 Period). Essay. Tegal: Economic & Business Faculty, Pancasakti University Tegal. 2018. The aim of this research is to finding out the impact of institutional ownership, independent commissioner, committee audit, opinion shopping, quality audit, audit client tenure towards going concern’s opinion audit on infrastructure services company, utility, and transportation which registered at ISE during 2013 – 2017 period. The population in this research are infrastructure services company, utility, and transportation which registered at ISE during 2013 – 2017 period and the sample determination by using purposive sampling method, so within the result obtained 15 company’s samples. The data analysis method used is logistic regression analysis. Based on logistic regression analytic, the research result concluded that institutional ownership (0,109), audit committee (0,429), opinion shopping (0,607), and quality audit (0,998) are not affecting the going concern opinion audit. Meanwhile, the independent commissioner (0,006), and audit client tenure (0,004) are affecting the going concern opinion audit. Keywords: going concern, opinion audit, institutional ownership, independent commissioner, committee audit, opinion shopping, quality audit, audit client tenure

SOX 404, Auditor Effort, and the Prevention of Financial Report Misstatements

2017 ◽  
Vol 36 (4) ◽  
pp. 151-177 ◽  
Author(s):  
Yuping Zhao ◽  
Jean C. Bedard ◽  
Rani Hoitash
Keyword(s):  
Internal Control ◽  
Lower Incidence ◽  
Audit Fees ◽  
Data Availability ◽  
Section 404 ◽  
Financial Report ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Jel Classifications

SUMMARY Prior research shows that the Sarbanes-Oxley Act (SOX) Section 404(b) integrated audit is associated with a lower incidence of misstatements. We predict that under 404(b), the auditor's ability to detect misstatements increases relative to other internal control regimes when greater resources are exerted during the engagement. Supporting this prediction, we find that the benefits of 404(b) versus other regimes (including SOX 404(a)) in reducing misstatements increase with incremental audit effort (proxied by abnormal audit fees). We find no benefit of 404(b) in misstatement reduction when abnormal audit effort is low. This implies that the value of 404(b) testing is not uniform, but rather is greater when sufficient resources are available to thoroughly understand client controls. In contrast, we find no benefit of abnormal audit effort under other regulatory regimes. We further examine the conditions under which knowledge gained from auditor internal control testing is more valuable. We find that the benefits of increased audit effort under 404(b) do not vary across internal control regimes under AS2 versus AS5, and are more pronounced for engagements with shorter auditor tenure, non-Big 4 auditors, and industry-specialist auditors. JEL Classifications: M49. Data Availability: Data used in this study are available from public sources.

scholarly journals Evidence on the Impact of Internal Control over Financial Reporting on Audit Fees

2019 ◽  
Vol 9 (3) ◽  
pp. 1
Author(s):  
Mohamed Gaber ◽  
Samy Garas ◽  
Edward J. Lusk
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Public Information ◽  
Audit Fees ◽  
Stock Trading ◽  
Audit Opinion ◽  
The Public ◽  
Public Company ◽  
Effective Group ◽  
The Impact

Introduction: Circa 1992, the dot.com sector created an irrational stock-trading market where the usual “financial” profiles of: Liquidity, Cash Flow from Operations, and Revenue generation were replaced by Ponzi-esque mayhem. To stabilize the markets, the Public Company Accounting Oversight Board [PCAOB] required a second audit opinion: the COSO Opinion on the adequacy of management’s system of Internal Control over Financial Reporting: [ICoFR].Study Focus: Three COSO-[ICoFR] designations are now required as public information: (i) A “clean” opinion [Is Effective], (ii) Deficiencies are noted, and (iii) Weaknesses reported. Our research interest is to determine, for a panel of randomly selected firms traded on the S&P500 for a eleven-year period: 2005 to 2015, the nature of the effect that the COSO deficiency reporting protocol has on (i) Audit Fees and (ii) the Market Cap of traded firms.Method: To this end we collected, using the Audit Analytics Ô[WRDSÔ] database, various categories of reported Audit Fees and also Market Cap information. This random sample was classified into two sets: the first group: Is Effective SEC 302 Designation and No COSO issues & the second group: Is Not 100% Effective for which there were SEC 302 Deficiencies or Weaknesses noted.Results: Inferential testing indicates that failure to attend to the PCAOB-COSO imperatives results in a relational where there are higher Audit Fees and a slippage of the firm’s Market Cap compared to the Is Effective Group. The PCAOB’s protocol to require the Audit of the firm’s ICoFR system and make that evaluation public information seems to be an excellent corrective “Carrot and Stick”.

Spatial Competition in Local Audit Markets and the Fallout on Deloitte from the 2007 PCAOB Censure

2016 ◽  
Vol 36 (2) ◽  
pp. 1-19 ◽  
Author(s):  
Jeff P. Boone ◽  
Inder K. Khurana ◽  
K. K. Raman
Keyword(s):  
Market Power ◽  
Audit Quality ◽  
Spatial Competition ◽  
Spatial Location ◽  
Audit Fees ◽  
Audit Market ◽  
Big 4 ◽  
Audit Fee ◽  
The Face ◽  
Market Leader

SUMMARY We examine whether Deloitte's spatial location in local audit markets affected the firm's adverse fallout—in terms of decreased ability to retain new clients and maintain audit fees—from the 2007 PCAOB censure. We motivate our inquiry by the notion that auditor-client alignment and auditor-closest-competitor distance can help differentiate the incumbent Big 4 auditor from other Big 4 auditors and thus provide market power, i.e., inhibit clients from shopping for another supplier because of the lack of a similar Big 4 provider in the local audit market. Consequently, it seems reasonable that the increase in switching risk and loss of fee growth suffered by Deloitte following the 2007 PCAOB censure will be lower in local markets where Deloitte was the market leader and its market share distance from its closest competitor was greater. Our findings suggest that the decline in Deloitte's audit fee growth rate following the 2007 PCAOB censure was concentrated in the pharmaceutical industry, although the client loss rate appears to have occurred more broadly (across all cities and industries). Collectively, our findings suggest that audit quality issues override auditor market power, i.e., differentiation does not provide Big 4 firms market power in the face of adverse regulatory action. JEL Classifications: G18; L51; M42; M49.

Did the 2005 Deferred Prosecution Agreement Adversely Impact KPMG's Audit Practice?

2018 ◽  
Vol 38 (1) ◽  
pp. 77-102 ◽  
Author(s):  
Matthew Baugh ◽  
Jeff P. Boone ◽  
Inder K. Khurana ◽  
K. K. Raman
Keyword(s):  
Service Provider ◽  
Audit Quality ◽  
Spillover Effect ◽  
Audit Fees ◽  
Data Availability ◽  
Department Of Justice ◽  
Big 4 ◽  
Tax Shelters

SUMMARY We examine the consequences of misconduct in a Big 4 firm's nonaudit practice for its audit practice. Specifically, we examine whether KPMG's audit practice suffered a loss of audit fees and clients and/or a decline in factual audit quality following the 2005 deferred prosecution agreement (DPA) with the Department of Justice for marketing questionable tax shelters. We find little evidence that the DPA adversely impacted KPMG's audit practice by way of either audit fees or the likelihood of client gains/losses, suggesting little or no harm to KPMG's audit reputation. We also find that the DPA had no effect on the firm's factual audit quality, even for those audit clients that dropped KPMG as their tax service provider. Collectively, our findings suggest that there was no spillover effect from the DPA to KPMG's audit practice. Data Availability: All data are publicly available.

KESEJAHTERAAN MASYARAKAT, FAKTOR POLITIK, DAN MANAJEMEN RISIKO ORGANISASI TERHADAP OPINI AUDIT LAPORAN KEUANGAN PEMERINTAH DAERAH

2021 ◽  
Vol 07 (01) ◽  
Author(s):  
Luky Arjun Darmawan ◽  
◽  
Kuwat Slamet
Keyword(s):  
Control System ◽  
Internal Control ◽  
Local Governments ◽  
Financial Statements ◽  
Public Welfare ◽  
Political Factors ◽  
Audit Opinion ◽  
Purposive Sampling ◽  
Financial Accountability ◽  
Internal Control System

Abstrak: Penelitian ini bertujuan untuk meneliti seberapa besar pengaruh kesejahteraan masyarakat, faktor politik, dan manajemen risiko organisasi terhadap pertanggungjawaban keuangan daerah yang diwakilkan oleh opini audit. Populasi penelitian ini adalah seluruh pemerintah daerah yang ada di Indonesia sebanyak 542 pemerintah daerah. Sampel penelitian dipilih menggunakan metode purposive sampling dan diperoleh 435 pemerintah daerah. Data penelitian berupa data sekunder yang diperoleh melalui lembaga-lembaga terkait pada periode tahun 2017—2019. Analisis data menggunakan metode regresi linear berganda. Hasil penelitian menunjukkan bahwa kesejahteraan masyarakat dan sistem pengendalian internal memiliki pengaruh positif terhadap opini audit laporan keuangan Pemerintah Daerah, sedangkan faktor politik, berupa jangka waktu terhadap pemilu dan politik dinasti, dan audit internal tidak memiliki pengaruh signifikan terhadap opini audit laporan keuangan Pemerintah Daerah. Berdasarkan hasil penelitian ini, pemerintah daerah pada periode selanjutnya untuk melakukan evaluasi yang akurat terhadap faktor yang perlu diprioritaskan dalam mendorong pertanggungjawaban kinerja dan keuangannya dengan meningkatkan kesejahteraan masyarakat dan sistem pengendalian internal. Abstract: This study aims to examine how much influence public welfare, political factors, and organizational risk management have on local financial accountability represented by audit opinion. The population of this study is all local governments in Indonesia as many as 542 local governments. This study use purposive sampling method and obtained 435 local governments. Research data in the form of secondary data obtained through related institutions in the period 2017-2019. Data analysis using multiple linear regression method. The results showed that public welfare and the internal control system had a positive influence on the audit opinion of the local government's financial statements, while political factors, in the form of a period of time on elections and dynastic politics, and internal audit did not have a significant effect on the audit opinion of the local government's financial statements. Based on the results of this research, the local government in the next period to conduct an accurate evaluation of the factors that need to be prioritized in encouraging performance and financial accountability by improving the welfare of the community and the internal control system.

scholarly journals PENGARUH OPINI AUDIT, SOLVABILITAS DAN KEPEMILIKAN INSTITUSIONAL TERHADAP KETEPATAN WAKTU PENYAMPAIAN LAPORAN KEUANGAN (Studi Kasus pada Perusahaan Industri Dasar dan Kimia yang Terdaftar di Bursa Efek Indonesia)

2019 ◽  
Vol 2 (1) ◽  
Author(s):  
Afifah Kurniati ◽  
Mr. Tabrani ◽  
Dien Noviany R
Keyword(s):  
Institutional Ownership ◽  
Audit Opinion

Penelitian ini dilakukan untuk meneliti pengaruh opini audit, solvabilitas dan kepemilikan institusional baik secara parsial maupun secara simultan terhadap ketepatan waktu penyampaian laporan keuangan pada perusahaan industri dasar dan kimia yang terdaftar di Bursa Efek Indonesia selama periode tahun 2014-2016. Metode penelitian pada penelitian ini menggunakan metode kuantitatif. Teknik pengambilan sampel dalam penelitian ini menggunakan pusrposive sample dan menghasilkan 38 perusahaan. Analisis yang digunakan dalam penelitian menggunakan regresi logistik karena variabel dependen pada penelitian ini menggunakan dummy. Hasil dari penelitian ini menunjukkan bahwa opini audit dan solvabilitas secara parsial tidak mempengaruhi ketepatan waktu. Sedangkan, kepemilikan intitusional secara parsial berpengaruh tehadap ketepatan waktu. Secara Simultan, variabel opini audit, solvabilitas dan kepemilikan institusional berpengaruh terhadap ketepatan waktu penyampaian laporan keuangan.  Kata Kunci :  Ketepatan waktu (timeliness), opini audit (audit opinion), solvabilitas (slovability), kepemilikan institusional (institutional ownership).

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