Information Technology Capability, Internal Control Effectiveness, and Audit Fees and Delays

2014 ◽  
Vol 28 (2) ◽  
pp. 149-180 ◽  
Author(s):  
Yunhao Chen ◽  
Antoinette L. Smith ◽  
Jian Cao ◽  
Weidong Xia
Keyword(s):  
Internal Control ◽  
Risk Premium ◽  
Audit Fees ◽  
Audit Process ◽  
It Capability ◽  
Control Effectiveness ◽  
Audit Fee ◽  
Information Technology Capability ◽  
The Impact

ABSTRACT We examine the role of firm IT capability in contributing to internal control and external audit in the post-SOX environment. Specifically, we measure the effectiveness of both the overall internal control and the five components of internal control as defined by the Committee of Sponsoring Organizations of the Treadway Commission's Internal Control—Integrated Framework (COSO 1992). Our findings support the concern that accounting professionals have regarding the impact of the use of IT on business risks and controls relevant to the audit. Specifically, IT capability directly mitigates audit fee increases, but not audit delay increases, indicating high IT capability signals lower business risks associated with the use of IT and reduces the auditor's risk premium. Further, IT capability has pervasive impacts on both the effectiveness of internal control and the components of effective internal control, which in turn further restrain audit fee and audit delay increases. Overall, our results suggest that a firm's IT capability has the additional benefits of supporting the functioning of internal control and the efficiency of the audit process.

Mandatory Corporate Governance Rules and Auditor Behavior: The Case of Greece

2019 ◽  
Vol 54 (04) ◽  
pp. 1950015
Author(s):  
Konstantina Michalopoulou
Keyword(s):  
Corporate Governance ◽  
Risk Premium ◽  
Audit Quality ◽  
Audit Fees ◽  
Business Risk ◽  
Audit Opinion ◽  
Quality Audit ◽  
Audit Fee ◽  
The Impact ◽  
Of Greece

This study examines the impact of the first mandatory corporate governance regulation in the Greek environment on audit quality. Audit quality is operationalized with the number of audit qualifications, the monetary amount of audit qualifications, audit hours, and audit fees. It also utilizes the full content of the Greek audit report and constructs new audit quality proxies while it is the first that examines the association between corporate governance and actual audit hours. The findings suggest that following the implementation of the new regulation, auditors became more independent during the audit opinion process. Furthermore, the audit fee increases without audit hours showing a respective increase. It is concluded that the audit fee increase does not reflect differentiation in the delivered audit quality, as auditors do not exert more audit effort. The audit fee increase could reflect a risk premium due to the increase in auditors’ perceived business risk as a result of the increased spending and additional liability of listed companies under the new regulation.

The Effect of Auditing Standard No. 5 on Audit Fees

2011 ◽  
Vol 30 (4) ◽  
pp. 1-27 ◽  
Author(s):  
Jagan Krishnan ◽  
Jayanthi Krishnan ◽  
Hakjoon Song
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Cost Savings ◽  
Audit Fees ◽  
Audit Efficiency ◽  
Material Weaknesses ◽  
Audit Fee ◽  
The Impact ◽  
First Time ◽  
General Reduction

SUMMARY In June 2007, the PCAOB issued Auditing Standard No. 5 (AS5), superseding Auditing Standard No. 2 (AS2). AS5 significantly changed the rules relating to audits of internal control over financial reporting (ICFR). Policymakers expected AS5 to lead to improvements in audit efficiency and thus a general reduction in audit costs, and specifically a reduction in fees for smaller and less complex companies that were disproportionately affected by AS2. We investigate the impact of the change from AS2 to AS5 on audit fees. We restrict our analysis to stable client-auditor combinations to ensure that auditors had prior AS2 experience with the client before the transition to AS5. We find that, after controlling for other factors, audit fees were lower in the first two years of implementation of AS5 relative to the last year of AS2. The decrease in fees was the highest for companies that had remediated material weaknesses in their internal control and thus moved from an adverse opinion under AS2 to a clean opinion under AS5. Further, firms that received first-time adverse opinions on their internal control in the AS5 period paid lower fee premiums (relative to firms with clean opinions) than did firms with adverse reports in the last AS2 year. Finally, in contrast to policymakers' expectations that AS5 would generate cost savings by allowing the ICFR audits to be “scaled” for small and less complex firms, there is no evidence that the smallest firms benefited. Specifically, audit fee savings were found only for relatively more complex firms (measured by multiple segments and international operations).

Impact of firm’s specific factors on audit fee of quoted consumer goods firms

2020 ◽  
Vol 4 (1) ◽  
pp. 47-55
Author(s):  
Wasiu Ajani Musa ◽  
Ramat Titilayo Salman ◽  
Ibrahim Olayiwola Amoo ◽  
Muhammed Lawal Subair
Keyword(s):  
Consumer Goods ◽  
Audit Quality ◽  
Audit Fees ◽  
Ordinary Least Squares ◽  
P Value ◽  
Chi Square ◽  
Ifrs Adoption ◽  
Audit Fee ◽  
Specific Factors ◽  
The Impact

Greater pricing presume on audit service has been put by the regulations of the auditing and accounting practices for the disclosure of audit fees, since audit fee is directly related to audit quality. However, the audit fees perceived by the client is often different from the amount charged by the auditors. Hence, this study investigated the impact of firm-specific characteristics on audit fees of quoted consumer goods firms in Nigeria using a purposive sampling technique. Secondary data were obtained from annual reports of the companies for the period from 2009-2016. The empirical result from Breusch-Pagan Lagrange Multiplier Test (BP-LM) produced a chi-square value of 13.94 with p-value of 0.0001 indicating that pooled ordinary least squares (OLS) will not be appropriate for the study. The Hausman test showed a chi-square of 23.55 with a p-value of 0.001 indicating that the null hypothesis is strongly rejected. Thus, the only estimate from the fixed effect model was interpreted to explain the relationship between firm-specific characteristics and audit fees of quoted consumer goods firms in Nigeria. The result revealed that auditee size, auditee risk, auditee profitability and IFRS adoption are the firm specific characteristics that impact on audit fees with only auditee size and IFRS adoption being positively related to audit fees while the other factors are negatively related to audit fees. Based on this finding, this study concluded that the firm’s specific factors are the major drivers of audit fees in Nigeria consumer goods firms. This study recommends among others that companies should implement corporate governance principles that address issues relating to board independence and committee sizes to guide activities in the consumer goods sector since profitability behave negatively with audit fees.

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

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.

scholarly journals The Role of Internal Control in Firms’ Coping with the Impact of the COVID-19 Pandemic: Evidence from China

2021 ◽  
Vol 13 (11) ◽  
pp. 6294
Author(s):  
Peiqing Zhu ◽  
Jianbo Song
Keyword(s):  
Internal Control ◽  
Manufacturing Industry ◽  
Firm Heterogeneity ◽  
Negative Impact ◽  
Risk Prevention ◽  
High Tech ◽  
Obvious Effect ◽  
The Difference ◽  
The Impact

Internal control plays a role in risk prevention for firms when dealing with serious emergencies, which ensures the sustainable development of firms during a crisis. Based on the rapid outbreak of COVID-19 in China, this paper empirically tests whether internal control alleviates the negative impact of the pandemic on firm performance. Using a sample of Chinese listed firms from the first quarter of 2019 to the third quarter of 2020 and employing the difference-in-difference (DID) method, we find that the firms with a higher quality of internal control achieve better financial performance during the pandemic period; the more serious the pandemic is, the more obvious effect internal control plays. Furthermore, we consider the industry heterogeneity and firm heterogeneity of the risk resistance effect of internal control. In the manufacturing industry, which is a “disaster zone” of the pandemic, and the non-high-tech industry with a low degree of digitization, internal control can play a more important role in firms’ performance. Moreover, for state-owned enterprises, and firms with strong financing constraints, the role of internal control is more prominent. The above results provide empirical evidence for the risk prevention function of internal control and shed new light on the measures for firms to resist emergencies in the future.

scholarly journals The Effect of Independence and Integrity on Audit Quality: Is There A Moderating Role for E-Audit?

2021 ◽  
Vol 23 (3) ◽  
Author(s):  
Diza Dianeke Budi Prabowo ◽  
Dwi Suhartini
Keyword(s):  
Industrial Revolution ◽  
Audit Quality ◽  
Practical Implication ◽  
Financial Statements ◽  
Auditor Independence ◽  
Audit Process ◽  
Accounting Firms ◽  
Audit Reports ◽  
The Impact

The financial statements must be reliable and become a benchmark in considering an audit decision on the financial statements. In order for this to be achieved, independence and integrity is required in carrying out the audit process. E-Audit helps overcome challenges in the industrial revolution 4.0 and prevent fraud. This research aims of testing and analyzing the role of e-audit in moderating the impact of auditor independence and integrity on audit quality. The data was collected through a questionnaire distributed to auditors at Public Accounting Firms in Surabaya. There are 36 respondents involved. The data were analyzed using SmartPLS. The results showed that auditor independence positively effect audit quality, auditor integrity positively effect audit quality; e-audit does non moderate the effect of auditor independence on audit quality; ande-Audit negatively moderates the effect of auditor integrity on audit quality. The practical implication of this research is that when determining high audit quality, independent auditors should at least increase their independence and integrity so that the resulting audit reports are of high quality and can be a reference for decision makers.

Information Technology Capability, Knowledge Assets and Firm Innovation

2013 ◽  
pp. 169-188
Author(s):  
Avimanyu Datta
Keyword(s):  
Knowledge Networks ◽  
Future Research ◽  
Firm Level ◽  
Firm Innovation ◽  
Innovation Development ◽  
Knowledge Assets ◽  
Mediating Role ◽  
It Capability ◽  
Information Technology Capability

In this paper, the author presents a theoretical framework that establishes an indirect link between IT capabilities and firm innovation by characterizing the mediating role of knowledge assets: knowledge networks and knowledge capabilities. Firm innovation itself is characterized as innovation development and innovation commercialization. The search on literature of IT capability and innovation revealed a very lukewarm recognition towards firm level variables in knowledge networks, knowledge capabilities, and distinction between innovation development and commercialization. Backed up by detailed reviews of literature on innovation, strategy, and entrepreneurship, the author posits propositions linking the aforementioned constructs, and proposes a framework for future research linking IT Capability with Firm Innovation.

Investigating the impact of audit features on money laundering

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.

scholarly journals The Role of Internal Control Components in the Maintenance of Public Funds: Applied Study on the Jordanian Ministry of Justice – North Province as Perceived by the Workers of Internal Control and Accounting Departments

2017 ◽  
Vol 10 (5) ◽  
pp. 189
Author(s):  
Hani Ali Aref Al-Rawashdeh
Keyword(s):  
Internal Control ◽  
Arithmetic Mean ◽  
Public Funds ◽  
The Public ◽  
Applied Study ◽  
Medium Level ◽  
Study Population ◽  
Female Employees ◽  
The Impact

This study aims at identifying the internal control components at the Jordanian Ministry of Justice (North Province) as well as identifying the role of those components in maintaining public funds and measuring the impact of said role. The study population consisted of all the workers of the accounting and internal control departments at the Jordanian Ministry of Justice (North Province) who counted (81) employees. The study sample was chosen from that population where (70) questionnaires were distributed, (66) questionnaires were retrieved and (3) questionnaires were excluded for the reason of short information which made the study sample reach at (63) male and female employees at the rate of (%90) of the study population. Of the most prominent results of the study is that there is a role of the internal control components at the Jordanian Ministry of Justice (North Province) in the maintenance of public funds in a medium level. Moreover, the internal control context received the highest arithmetic mean in maintaining public funds as a component of internal control at the Jordanian Ministry of Justice (North Province); monitoring, as an internal control component, attained the highest effect in comparison with the other internal control components, while the least effect was for the component of the internal control environment. The study produced several recommendations most significantly the importance of concentrating on internal control in general to elevate its efficiency in maintaining the public funds at the Jordanian Ministry of Justice (North Province).

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