The Association between Audit Office Team Diversity and Audit Quality

2021 ◽  
Author(s):  
Ying (Julie) Huang
Keyword(s):  
Audit Quality ◽  
Positive Association ◽  
Field Studies ◽  
Audit Committees ◽  
Client Characteristics ◽  
Team Members ◽  
Team Diversity ◽  
High Performing ◽  
Selection Decisions ◽  
Audit Team

Surveys and field studies find that high-performing teams are diverse teams. Diverse teams value different perspectives and encourage the participation of team members through psychological safety, leading to higher team performance. This paper argues that team diversity is an office-level characteristic that is distinguishable from other characteristics studied in the prior auditing literature and that has an incremental effect on audit quality. I find a positive association between team diversity and audit quality that is robust to controlling for other audit office and client characteristics. Further, this positive association is stronger for more complex and non-routine audit engagements. These findings should be of interest to regulators who regulate how the auditing industry attracts and retains talent worldwide. In addition, these findings should be informative to audit committees who make auditor selection decisions and to investors and accounting researchers interested in the relation between audit team personnel and audit quality.

Does the Length of the Cooling-off Period Affect Audit Quality?

2021 ◽  
Author(s):  
Rebecca Mattocks ◽  
Ting-Chiao Huang ◽  
Robyn Moroney ◽  
Ashna Lata Prasad
Keyword(s):  
Audit Quality ◽  
Positive Association ◽  
Unintended Consequence ◽  
Negative Association ◽  
Period Length ◽  
Geographic Proximity ◽  
Client Characteristics ◽  
Multiple Measures ◽  
Client Knowledge

This paper examines the association between the length of the cooling-off period and audit quality: (1) when partners rotate back and (2) during the cooling-off period, ahead of an extension to the minimum cooling-off period requirement in Australia. Using multiple measures of audit quality, we find some evidence of a positive association between the cooling-off period length and audit quality when partners rotate back, yet evidence of a negative association between the two, during the cooling-off period. We also find that auditor and client characteristics-such as partner busyness, client knowledge, geographic proximity, and client importance-play important roles in determining the cooling-off period length and whether a partner rotates back onto a client. Overall, we provide timely evidence that extending the cooling-off period only marginally enhances audit quality when a partner rotates back onto a client, and evidence of an unintended consequence of this policy during the cooling-off period.

scholarly journals Does Engagement Partners’ Effort Affect Audit Quality? With a Focus on the Effects of Internal Control System

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 225
Author(s):  
Suyon Kim
Keyword(s):  
Internal Control ◽  
Audit Quality ◽  
Vital Role ◽  
Fiscal Year ◽  
Audit Process ◽  
Client Characteristics ◽  
Audit Firms ◽  
Audit Reports ◽  
It Departments ◽  
Audit Team

An audit team includes engagement partners, CPAs, and staff. Among them, partners play a vital role in performing tasks that require expertise and experience, such as analyzing and understanding the industry, and supervising the overall audit process. In detail, the partners establish an audit plan, determine the overall audit time, provide the audit input ratio of the engagement team, and review the audit reports. This study examines for association between the partner’s audit hour ratio and audit quality depending on the client firms’ characteristics. Although the role of partners is important, the information about partner audit hours is limited. However, the Korean government requires audit firms to disclose the partner hour information in the audit report starting in the 2014 fiscal year. By the disclosure, it is possible to examine the association between partner audit hours and audit quality. In this study, the information on partner audit hour is hand-collected from the firms’ business reports. Using 6340 observations from 2014 to 2017, the partner audit hour ratio is associated with audit quality, under the characteristics of client firms. Firms’ risks are adopted for client characteristics, and we focused on the operation of internal control. The internal control operation level is measured by the following: (1) the ratio of internal control personnel and (2) experience of the internal control personnel in the accounting and IT departments. The result suggests that for the firms where internal control is not effectively operated, partners make more effort to enhance audit quality.

scholarly journals Do Gender Diversity Recommendations in Corporate Governance Codes Matter? Evidence from Audit Committees

2020 ◽  
Vol 39 (1) ◽  
pp. 173-197 ◽  
Author(s):  
Nigar Sultana ◽  
Steven F. Cahan ◽  
Asheq Rahman
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Gender Diversity ◽  
Positive Association ◽  
Data Availability ◽  
Audit Committees ◽  
Women Directors ◽  
Corporate Governance Codes ◽  
Limited Supply ◽  
The Impact

SUMMARY Motivated by two opposing views, the limited supply view and the discrimination view, we examine the impact of gender diversity guidelines on the strength of the association between the presence of female audit committee members and audit quality. The limited supply view predicts that the effect of female audit committee members on audit quality would decrease after the guidelines were issued because they increased the demand for women directors without a commensurate increase in the supply of qualified women directors. The discrimination view predicts this relation would increase after the guidelines were issued since some firms would have abandoned their suboptimal hiring practices that favored men over better qualified women, resulting in higher quality firm-director matches as opportunities for women increase. Consistent with the limited supply view, we find that the positive association between audit committee gender diversity and audit quality weakened after gender diversity guidelines were introduced in Australia. JEL Classifications: G38; M42; M48. Data Availability: Data are available from the databases cited in the text.

scholarly journals Presence of Quality of Audit Committee and Organization’s Monetary Data: An In-depth Analysis

2021 ◽  
Vol 3 (1) ◽  
pp. 77-91
Author(s):  
Ashfaque Ali Banbhan ◽  
Najia Shaikh ◽  
Khalid Hussain Abbasi
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Stock Exchange ◽  
Practical Importance ◽  
Positive Association ◽  
Audit Committees ◽  
Corporate Boards ◽  
Audit Process ◽  
Depth Analysis

All financial regulatory institutions legally bound their listed companies todisclose the information regarding the formulation of their audit committees.This study quantitatively investigates whether the quality of the auditcommittees affects the quality of a firm’s financial information. Using the dataof publicly listed non-financial companies of Pakistan Stock Exchange, thisresearch found a positive association between audit committee qualitymeasures and the firm’s quality of reported earnings. This study extends theunderstanding of measures for audit committee quality to stabilize thefinancial reporting process as it relates to the ongoing discussion byresearchers and financial regulators. Additionally, the study also increasesthe understanding of the concept of external audit quality for various partieswhich are involved in deliverance of good corporate governance practices; forexample, audit committees, external auditors, corporate boards, and topmanagement team. The study also explores the influencing factors, internal aswell as external, in the audit process by constructing its meaning andexplaining its practical importance. This detailed exploration andinvestigation into the procedures of audit quality are vital because auditing isthe process through which numbers in financial reports are checked and reevaluated for any potential clerical errors and omissions

The Relationship between Audit Team Composition, Audit Fees, and Quality

2017 ◽  
Vol 36 (3) ◽  
pp. 115-135 ◽  
Author(s):  
Sarowar Hossain ◽  
Kenichi Yazawa ◽  
Gary S. Monroe
Keyword(s):  
Audit Quality ◽  
Positive Association ◽  
Audit Fees ◽  
Professional Staff ◽  
Data Availability ◽  
Team Composition ◽  
Going Concern ◽  
Going Concern Opinion ◽  
Audit Team ◽  
First Time

SUMMARY Using Japanese data, we investigate whether there is a positive association between audit team composition based on the number of senior auditors, assistant auditors, and other professional staff on the audit team and audit fees and a variety of commonly used measures of audit quality (likelihood of issuing a going concern opinion and a first-time going concern opinion for a sample of financially distressed companies, the absolute value of discretionary and working capital accruals). We find that the number of senior auditors, assistant auditors, and other professional staff on the audit team are positively associated with audit fees. We find that the number of senior auditors on the audit team has a positive association with audit quality. However, the number of assistant auditors and other professional staff on the audit team are not significantly associated with any of our audit quality measures. JEL Classifications: M41; M42. Data Availability: All data are publicly available from the sources indicated in the paper.

Auditors' and Specialists' Views About the Use of Specialists During an Audit

2020 ◽  
Vol 32 (2) ◽  
pp. 15-40 ◽  
Author(s):  
J. Efrim Boritz ◽  
Natalia V. Kochetova ◽  
Linda A. Robinson ◽  
Christopher Wong
Keyword(s):  
Information Technology ◽  
Audit Quality ◽  
Financial Statement ◽  
Regulatory Environment ◽  
Accounting Firms ◽  
Team Members ◽  
Current State ◽  
Client Relationships ◽  
Audit Team ◽  
Jel Classifications

ABSTRACT Auditors often rely on the assistance of specialists from such fields as tax, information technology, valuation, and forensic accounting. Integration of the work of specialists with the work of audit team members is a challenge for both groups. This interview-based study of 34 practitioners from six accounting firms, including 12 auditors (partners and managers) and 22 specialists (tax, IT, valuation, forensic) examines auditors' and specialists' views about the current state of specialist use on audits. The regulatory environment creates pressure for financial statement auditors to use specialists on audits; however, financial statement auditors often seek to limit specialist involvement. Both auditors and specialists are dissatisfied with the current situation, but for different reasons. Auditors are concerned about budget overruns, delays, and harm to client relationships by (overly) meticulous specialists. Specialists are concerned about auditors limiting the scope of specialist involvement, and its effect on audit quality. JEL Classifications: M4; M40; M42.

scholarly journals Dinamika Tim Audit Dan Kualitas Audit

2016 ◽  
Vol 6 (3) ◽  
Author(s):  
Yefta Andi Kus Nugroho ◽  
Dyah Ekasari Sekar Jatiningsih
Keyword(s):  
Survey Research ◽  
Audit Quality ◽  
Team Dynamics ◽  
Audit Report ◽  
Team Members ◽  
Audit Firm ◽  
Use Of Time ◽  
Audit Firms ◽  
Effective Use ◽  
Audit Team

Audit quality is an important outcome of the work performed by audit team. Works of audit firm generally performed by team and teamwork performance will lead to a good audit quality. Good audit quality, in turn, will result in good audit report. Related to the interaction among audit team members, some factors that need to be highlighted is the structure or composition of the team, communication among team members, and effective use of time. This research intend to explore audit team dynamics in constructing audit quality. The test of audit team dynamics effect on audit quality is performed through a survey research toward auditors who work in audit firms. Result shows that significant aspect of audit team dynamics which affect audit quality are communication and effectiveness of audit time.

The Impact of Partners' Economic Incentives on Audit Quality in Big 4 Partnerships

2021 ◽  
Author(s):  
Simon Dekeyser ◽  
Ann Gaeremynck ◽  
W. Robert Knechel ◽  
Marleen Willekens
Keyword(s):  
Audit Quality ◽  
Positive Association ◽  
Economic Incentives ◽  
Negative Association ◽  
Client Characteristics ◽  
Financial Situation ◽  
Audit Firm ◽  
Big 4 ◽  
Audit Firms ◽  
The Impact

Economic incentives are fundamental for understanding auditor behavior. In this paper, we investigate the association between the extent of partners' fee-based compensation, partners' observable net wealth, and audit quality. Using a sample of Belgian Big 4 audit firms and their predominantly private clients, our results suggest a negative association between audit quality and partner fee-based compensation, and a positive association between audit quality and partner observable net wealth. Moreover, our results show that the latter association is most significant when a partner is carrying a lot of debt, which indicates that a partner's financial situation may affect audit quality. The extent of fee-based incentives also varies among partners of the same audit firm. Furthermore, partner and client characteristics differ based on the extent of fee-based compensation. Our findings should be of interest to regulators and audit firms as they suggest that audit partner's economic incentives significantly affect audit quality.

scholarly journals Investigating the backstage of audit engagements: the paradox of team diversity

2019 ◽  
Vol 32 (2) ◽  
pp. 378-400
Author(s):  
Firdaus Amyar ◽  
Nunung Nurul Hidayah ◽  
Alan Lowe ◽  
Margaret Woods
Keyword(s):  
Qualitative Methodology ◽  
Audit Quality ◽  
Team Leaders ◽  
Content Type ◽  
Team Diversity ◽  
Quality Practices ◽  
Data Collection And Analysis ◽  
Paradox Theory ◽  
Audit Team

Purpose There has been very little qualitative “fieldwork” of audit practice. This is especially the case in relation to investigations into how audit engagements proceed. The purpose of this paper is to engage with audit practice in order to explore and explain the internal dynamics and paradoxical conditions within audit engagement teams. Design/methodology/approach The research adopts a qualitative methodology, framed around an intensive case study that involves several methods of data collection and analysis including interviews, observation and document analysis. The authors observe audit team practices, work programmes and organisation including observations of individual and teams involved in audit engagements. Findings Using the lens of paradox theory, the authors explore the backstage of audit work, where audit teams are challenged with recurring contradictory requirements and opposing demands. The authors provide insight on the complexity associated with inadequate resourcing and planning that tend to stimulate the emergence of paradoxes in audit engagement work in a government audit context. As a result, the authors identify the occurrence of cascading reduced audit quality practices (RAQP) as the teams respond to the paradoxes they face. Originality/value The authors reveal the interlinked and cumulative coping strategies, namely, downplaying responsibility and downscaling audit processes. These strategies are performed concurrently by team leaders and audit members to manage paradoxical tensions. The authors also identified superficial audit supervision as another type of RAQP performed by team leaders.

scholarly journals The copycat effect: do social influences allow peer team members' dysfunctional audit behaviors to spread throughout the audit team?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rebecca J Wetmiller
Keyword(s):  
Internal Control ◽  
Audit Quality ◽  
Team Member ◽  
Social Influences ◽  
Sample Selection ◽  
Control Sample ◽  
Content Type ◽  
Team Members ◽  
Team Interactions ◽  
Audit Team

PurposeThis study seeks to identify the role that peer team members' behaviors and superiors' preferences play in influencing the likelihood that staff auditors engage in dysfunctional audit behavior (DAB).Design/methodology/approachThis study uses an experiment that manipulates peer team member behavior (DAB present or DAB absent) and superior preference (efficiency or effectiveness). Students enrolled in a graduate accounting course, proxying for inexperienced staff auditors, receive an internal control sample selection task. Participants assess the likelihood that a typical staff auditor would engage in DAB or non-DAB.FindingsFirst, staff auditors with a peer team member who engages in DAB are more likely to engage in DAB. Second, staff auditors who have a superior with a preference toward efficiency are more likely to engage in DAB. Finally, when considered simultaneously, the effect of the superior's preference on the likelihood of staff auditors engaging in DAB is not different for staff auditors, subject to a peer engaging in DAB versus those subject to a peer who engaged in a non-DAB.Research limitations/implicationsThis study uses a hypothetical audit team, a written script of team member communication, and students proxying for inexperienced staff auditors. As such, future studies might consider improving the realism of the team setting, the manner in which a message is portrayed, and implications at higher levels within the audit team hierarchy.Practical implicationsTeam interactions contribute to the prevalence of DAB within the profession. Specifically, inexperienced auditors are influenced by the behavior of peer and superior team members and this may be one cause of the prevalence of DAB within the profession. As such, future firm considerations could include well-structured mentorship programs and rewards structures.Originality/valueThis study adds to the audit team literature by investigating the influence of audit team dynamics on staff auditors' behaviors. This paper extends the current audit team literature, that is mostly focused on supervisor–subordinate relationships, by investigating social influences from peers and superiors. This study's findings inform public accounting firms of areas in which personnel may negatively affect audit quality through intra-team interactions.

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