scholarly journals What Drives Auditor Selection?

2014 ◽  
Vol 8 (1) ◽  
pp. A26-A42 ◽  
Author(s):  
Elizabeth Dreike Almer ◽  
Donna R. Philbrick ◽  
Kathleen Hertz Rupley
Keyword(s):  
Audit Committee ◽  
Selection Process ◽  
Information Source ◽  
Audit Committees ◽  
Policy Makers ◽  
External Auditors ◽  
Public Company ◽  
Selection Decision ◽  
Auditor Selection ◽  
View Management

SUMMARY This study provides evidence on the factors that currently impact audit committee members' selection of external auditors. Using a two-stage approach, we survey and interview public company audit committee members (ACMs), and find evidence that management continues to provide input into the decision process even as SOX regulations require audit committees to take responsibility for the auditor selection decision. ACMs view management as an important information source when they assess the proposing audit partner's reputation for accessibility, timeliness, and ability to liaise with the firm's national technical office, as well as the proposing audit firm's technical and industry expertise. Results of this study can help firms be more competitive in the audit bidding process, inform policy makers when considering whether to impose further audit committee regulations, and aid academics in ensuring an up-to-date understanding of the audit committee's role in the auditor selection process.

scholarly journals Determinants of Audit Firm Selection Decision: A Qualitative Study of Firms Listed on Pakistani Stock Exchange (PSX)

2020 ◽  
Vol 9 (4) ◽  
pp. 212-222
Author(s):  
MUHAMMAD NAVEED ◽  
ALIA QADIR ◽  
MUHAMMAD UMER
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Stock Exchange ◽  
Information Source ◽  
Audit Committees ◽  
External Audit ◽  
Audit Firm ◽  
External Auditors ◽  
Selection Decision ◽  
Main Determinants

The objective of this study is to offer detailed and updated overview of the factors perceived by the audit committee members to select external auditors. Moreover, the study aims to explore that what are the main determinants perceived by the clients from their external auditors. Qualitative research design is used, and open-ended interviews has been conducted to explore the phenomena under investigation. The contextual setting of the study is provided by financial firms listed on Pakistan stock exchange (PSX-100). The study finds that management continues to provide input into the selection decision of external auditors because the audit committees view management as an important information source. Audit committee seeks input from management to assess the external audit accessibility, reputation, firm’s industry knowledge and technical expertise. The result of the study suggests that more regulations are required to liable the audit committees for selecting external audit firm. The management input raises the audit risk and mitigate the audit independence. The findings remain robust for audit firms and companies looking for an independent and transparent relationship. Also, the study has implications to build transparent financial disclosure practices. Keywords: Audit Quality, Pakistan Stock Exchange, Clients Perceived Value.

scholarly journals The Effects of Manager-Auditor Affiliation and PCAOB Inspection Reports on Audit Committee Members' Auditor Selection

2016 ◽  
Vol 11 (1) ◽  
pp. P1-P10 ◽  
Author(s):  
Veena L. Brown
Keyword(s):  
Audit Committee ◽  
Auditor Independence ◽  
Audit Committees ◽  
Public Companies ◽  
Sarbanes Oxley ◽  
Management Measures ◽  
Selection Decisions ◽  
Public Company ◽  
Selection Decision ◽  
Auditor Selection

SUMMARY This article summarizes the “The Effects of Prior Manager-Auditor Affiliation and PCAOB Inspection Reports on Audit Committee Members' Auditor Recommendations” (Abbott, Brown, and Higgs 2016), who investigate the extent to which audit committee members (ACM) of small public companies consider auditors' Public Company Accounting Oversight Board (PCAOB) inspection reports and/or the auditors' prior affiliation with management in their auditor hiring decisions. The authors find participants (the study's proxy for ACM) incorporate the inspection report, as well as the auditor's prior affiliation with management into their selection decision. Specifically, an auditor's prior affiliation with management negatively impacts his/her chances of being selected by the audit committee. To the extent inspection results measure auditors' competence and prior affiliation with management measures auditor independence, the authors find auditor independence influences auditor selection decisions only when an auditor is deemed competent. In this paper, I discuss the implications of Abbott et al.'s (2016) findings for auditors, public companies, audit committees, and regulators/policymakers interested in understanding whether and how major aspects of the Sarbanes-Oxley Act of 2002 are being implemented within corporate governance.

Does Audit Committee Disclosure of Partner-Selection Involvement Signal Greater Audit Quality?

2021 ◽  
Author(s):  
Jimmy F. Downes ◽  
Michelle A. Draeger ◽  
Abbie E. Sadler
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Selection Process ◽  
Partner Selection ◽  
Analyst Forecasts ◽  
Securities And Exchange Commission ◽  
Audit Committees ◽  
Voluntary Disclosures ◽  
Level Of Involvement ◽  
Selection Of

We investigate whether audit committees use voluntary disclosures to signal the committees’ higher level of involvement in the audit partner-selection process, which contributes to higher levels of audit quality. Audit committees more involved in the partner-selection process should ensure the selection of a more rigorous partner. We test this conjecture by first identifying partners new to audit engagements. We then compare audit quality for companies whose audit committees disclose involvement in the selection of the new partner to those without this disclosure. We find that this disclosure is positively associated with audit quality (measured using discretionary accruals, misstatements, and meeting consensus analyst forecasts by a very small margin). Our results are more salient for complex companies and those with powerful audit committees. These findings highlight that audit committees use their disclosures to signal involvement in the partner-selection process and are relevant to the Securities and Exchange Commission.

scholarly journals The Impact of Audit Committees on US Nonprofit Organizations’ Governance

2020 ◽  
Vol 27 (1) ◽  
pp. 30
Author(s):  
Husam Abu-Khadra
Keyword(s):  
Nonprofit Organizations ◽  
Audit Committee ◽  
Nonprofit Sector ◽  
The United States ◽  
Preliminary Evidence ◽  
Securities And Exchange Commission ◽  
Audit Committees ◽  
Public Companies ◽  
Policy Makers ◽  
The Impact

All public companies in the United States are required by the securities and exchange commission (SEC) to have an audit committee. Such enforcement can be attributed to high-profile corporate failures and their connections to nonexistence, ineffective or weak audit committees and governance. Despite the efforts to establish a similar argument and enforcement structure for the nonprofit sector, the internal revenue service (IRS) has not pursued legislation, and no empirical evidence has been established to support any public policy changes. This paper contributes to the literature in this field by being the first study to examine 124,980 nonprofit organizations during the period of 2010 to 2015 to test the association between governance in nonprofit organizations and audit committees. We included fifteen measures from these organizations’ IRS Form 990 filings to formulate the study variables. We found significant evidence that the existence of audit committees improves the governance scores of nonprofit organizations. Our study findings have significant implications for nonprofit executives, policy makers and any other interested parties; these findings act as preliminary evidence to support more proactive policies regarding mandatory audit committees for nonprofit organizations. 

Enhancing Perceived and Actual Audit Committee Effectiveness through Financial Expert Certification

2012 ◽  
Vol 6 (2) ◽  
pp. A15-A25 ◽  
Author(s):  
Jonathan Grenier ◽  
Brian Ballou ◽  
Seth Philip
Keyword(s):  
Best Practices ◽  
Audit Committee ◽  
Potential Method ◽  
Audit Committees ◽  
Certification Program ◽  
Audit Process ◽  
External Auditors ◽  
Strong Signal ◽  
Financial Expert ◽  
Role Sharing

SUMMARY:  The purpose of this paper is to generate and inform academic, practitioner, and regulatory discussion on means to promote perceived and actual audit committee effectiveness. As one potential method, we propose that the SEC initiate a CPE-driven certification program for audit committee members designated as financial experts. Our proposal addresses many of the challenges that post-SOX audit committees face (cf. Beasley et al. 2009; Cohen et al. 2010) by emphasizing their oversight role, sharing audit committee best practices, enhancing the accountabilities of external auditors, and sending a strong signal to stakeholders that the audit committee owns the audit process.

scholarly journals Gender Diversity of Audit Committees and Audit Fees: Evidence from Chinese Listed Companies

2015 ◽  
Vol 7 (2) ◽  
pp. 239 ◽  
Author(s):  
Rui Xiang ◽  
Meng Qin ◽  
Craig A Peterson
Keyword(s):  
Audit Committee ◽  
Gender Diversity ◽  
Audit Fees ◽  
Listed Companies ◽  
Audit Committees ◽  
Men And Women ◽  
Public Company ◽  
Chinese Listed Companies ◽  
State Enterprises ◽  
The Relationship

<p>This paper investigates whether women, who serve on the audit committee of the board, can have a significant impact in reducing audit fees paid by China's A-share listed companies during the period 2004 to 2007. We show that audit committees composed of both men and women pay significantly smaller audit fees. The relationship is significantly greater in non-state enterprises than that exhibited by state-owned enterprises and significantly greater in companies deemed to have weak management vis-à-vis strong management. Further analysis shows that the composition of the committee is irrelevant when management is strong, regardless of whether it provides guidance for a state-owned enterprise or a strictly public company. When management is deemed weak, however, gender diversity is associated with smaller fees.</p>

Audit committee ownership and audit report lag: evidence from Australia

2020 ◽  
Vol 28 (1) ◽  
pp. 96-125
Author(s):  
Md. Borhan Uddin Bhuiyan ◽  
Mabel D’Costa
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Financial Statements ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Audit Report ◽  
Content Type ◽  
External Auditors ◽  
Using Data

Purpose This paper aims to examine whether audit committee ownership affects audit report lag. Independent audit committees are responsible for overseeing the financial reporting process, to ensure that financial statements are both credible and released to external stakeholders in a timely manner. To date, however, the extent to which audit committee ownership strengthens or compromises member independence, and hence, influences audit report lag, has remained unexplored. Design/methodology/approach This paper hypothesizes that audit committee ownership is associated with audit report lag. Further, the author hypothesize that both the financial reporting quality and the going concern opinions of a firm mediate the effect of audit committee ownership on audit report lag. Findings Using data from Australian listed companies, the author find that audit committee ownership increases audit report lag. The author further document that financial reporting quality and modified audit opinions rendered by external auditors mediate this positive relationship. The results are robust to endogeneity concerns emanating from firms’ deliberate decisions to grant shares to the audit committee members. Originality/value The study contributes to both the audit report timeliness and the corporate governance literatures, by documenting an adverse effect of audit committee ownership.

scholarly journals Does Internal Audit Function Quality Deter Management Misconduct?

2014 ◽  
Vol 90 (2) ◽  
pp. 495-527 ◽  
Author(s):  
Matthew S. Ege
Keyword(s):  
Internal Control ◽  
Audit Committee ◽  
Internal Audit ◽  
Audit Committees ◽  
Regulatory Requirements ◽  
Difference In Differences ◽  
External Auditors ◽  
Internal Audit Function ◽  
Auditor Quality ◽  
External Auditor

ABSTRACT Standard-setters believe high-quality internal audit functions (IAFs) serve as a key resource to audit committees for monitoring senior management. However, regulators do not enforce IAF quality or require disclosures relating to IAF quality, which is in stark contrast to regulatory requirements placed on boards, audit committees, and external auditors. Using proprietary data, I find that a composite measure of IAF quality is negatively associated with the likelihood of management misconduct even after controlling for board, audit committee, and external auditor quality. This result is robust to a variety of other specifications, including controlling for internal control quality and separate estimation during the pre- and post-SOX time periods. A difference-in-differences analysis indicates that misconduct firms have low IAF quality and competence during misconduct years and improve IAF quality and competence in the post-misconduct years. These findings suggest that regulators, audit committees, and other stakeholders should consider ways to improve IAF quality.

Academic Research on Communications Among External Auditors, the Audit Committee, and the Board: Implications and Recommendations for Practice

2008 ◽  
Vol 2 (1) ◽  
pp. A1-A8 ◽  
Author(s):  
Jeffrey Cohen ◽  
Lisa Milici Gaynor ◽  
Ganesh Krishnamoorthy ◽  
Arnold M. Wright
Keyword(s):  
Financial Reporting ◽  
Boards Of Directors ◽  
Audit Committee ◽  
Academic Research ◽  
Reporting Quality ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
External Auditors ◽  
Research Findings ◽  
Recommendations For Practice

SUMMARY: This article provides a summary of the academic research findings on the attributes of effective audit committees and potential threats to financial reporting quality that should lead to heightened auditor and audit committee sensitivity. The practice implications of this research are then discussed in terms of appropriate communications among auditors, audit committees, and boards of directors.

The Effect of Audit Committee and Board of Director Independence on Auditor Resignation

2004 ◽  
Vol 23 (2) ◽  
pp. 131-146 ◽  
Author(s):  
Ho Young Lee ◽  
Vivek Mande ◽  
Richard Ortman
Keyword(s):  
Audit Committee ◽  
Audit Committees ◽  
Board Independence ◽  
Negative Consequences ◽  
External Auditors ◽  
Board Of Director ◽  
Time Period ◽  
Auditor Resignation ◽  
Director Independence ◽  
Independent Audit

This study examines the relationship between audit committee and board independence and auditor resignations. Independent audit committee and board members, who are concerned about incurring legal liability and harming their reputations, support the external auditors in accomplishing their assurance duties. We use a logit model to compare audit committee and board independence between two types of auditor switches: 190 auditor-initiated switches versus 190 matched client-initiated switches during the time period 1996 to 2000. Our results show that audit committee and board of director independence are both negatively associated with the likelihood of an auditor resignation. Our results also show that audit committee independence is positively related to the quality of the firm's successor auditor. This suggests that independent audit committees also play a mitigating role in reducing the negative consequences associated with an auditor resignation.

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