The Influence of Earnings Quality for Restatements and Auditor’s Qualified Opinion

2020 ◽  
Vol 3 ◽  
pp. 53-68
Author(s):  
Adriano Antonio Siqueira ◽  
Fernando Caio Galdi
Keyword(s):  
Regulatory Agency ◽  
Earnings Quality ◽  
Financial Statements ◽  
Audit Report ◽  
Audit Firms ◽  
Independent Auditors

The objective of the present study was to raise the cases of restatements and to evaluate whether these events were associated with the low earnings quality and with the provision of advice with a qualified opinion by audit firms. The results obtained with the analysis indicate that the low earnings quality increases the chances of republishing the financial statements. Additionally, the results indicate that there is no evidence that lower earnings quality increases the chances of issuing a qualified audit report or disapproval of the financial statements by the independent auditors. These results point to a divergence regarding the understanding of earnings quality by the auditors and by the regulatory agency.

Additional Evidence on Audit Report Lag

2001 ◽  
Vol 20 (1) ◽  
pp. 137-146 ◽  
Author(s):  
W. Robert Knechel ◽  
Jeff L. Payne
Keyword(s):  
Earnings Quality ◽  
Financial Statements ◽  
Financial Statement ◽  
Fiscal Year ◽  
Sources Of Information ◽  
Audit Report ◽  
The Public ◽  
Time Period ◽  
Audit Team ◽  
Available Information

The process for providing accounting information to the public has not changed much in the last century even though the extent of disclosure has increased signifi-cantly. Sundem et al. (1996) suggest that the primary benefit of audited financial statements may not be decision usefulness but the discipline imposed by timely confirmation of previously available information. In general, the value of information from the audited financial statement will decline as the audit report lag (the time period between a company's fiscal year end and the date of the audit report) increases since competitively oriented users may obtain substitute sources of information. Furthermore, the literature on earnings quality and earnings management suggests that unexpected reporting delays may be associated with lower quality information. The purpose of this paper is to extend our understanding about the determinants of audit report lag using a proprietary database containing 226 audit engagements from an international public accounting firm. We examine three previously uninvestigated audit firm factors that potentially influence audit report lag and are controllable by the auditor: (1) incremental audit effort (e.g., hours), (2) the resource allocation of audit team effort measured by rank (partner, manager, or staff), and (3) the provision of nonaudit services (MAS and tax). The results indicate that incremental audit effort, the presence of contentious tax issues, and the use of less experienced audit staff are positively correlated with audit report lag. Further, audit report lag is decreased by the potential synergistic relationship between MAS and audit services.

scholarly journals Signing Auditor-Specific Characteristics And Audit Report Lag: A Research From Turkey

2018 ◽  
Vol 34 (2) ◽  
pp. 277-294 ◽  
Author(s):  
Murat Ocak ◽  
Evrim Altuk Ozden
Keyword(s):  
Educational Level ◽  
Financial Statements ◽  
Education Level ◽  
Audit Report ◽  
Firm Age ◽  
Audit Opinion ◽  
Gender And Education ◽  
Big 4 ◽  
Audit Firms ◽  
Positive Effect

The purpose of this paper is to examine the effect of signing auditor-specific characteristics on the audit report lag using 968 firm-year observations from Borsa İstanbul in the period 2008-2013. The main findings indicate that the gender and education level of signing auditor have a positive effect on audit report lag. Also big4 audit firms in Turkey encourage auditees to present financial statements timely and they play a substantial role in the reporting. Audit opinion directly affects audit report lag. Firm performance and firm age inversely affect audit report lag. Moreover, big 4’s female signing auditors lead to more audit delay. The higher educational level of signing auditors leads to more audit report lag. Signing auditors who hold master’s or Ph.D. degrees and also female signing auditors are associated with more audit report lag in firms audited by big4 and non-big4 firms.

scholarly journals PENGARUH PROFITABILITAS, LIKUIDITAS, SOLVABILITAS, DAN UKURAN PERUSAHAAN TERHADAP AUDIT REPORT LAG PADA PERUSAHAAN YANG TERDAFTAR DI BURSA EFEK INDONESIA

2018 ◽  
Vol 11 (1) ◽  
pp. 64-70
Author(s):  
Justita Dura
Keyword(s):  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Sampling Technique ◽  
Financial Statements ◽  
Multiple Linear Regression Analysis ◽  
Manufacturing Companies ◽  
Audit Report ◽  
Audit Process ◽  
Audit Firms ◽  
Analysis Technique

This study aims to determine the effect of profitability, solvency and size of the company to the audit report lag in manufacturing companies listed in Indonesia Stock Exchange 2010-2013. The samples used as many as 105 companies with purposive sampling technique. The analysis technique used is multiple linear regression analysis. The results showed that (1) the profitability  affect audit report lag indicates that companies that get a big profit tends to make the process shorter than audit firms experienced a small profit. (2) the liquidity affect audit report lag, (3) the solvency effect indicates that the high amount of debt of the company will lead the audit process is relatively long, and (4) the size of the company does affect indicating that a large or small amount of assets owned by the company does affect the length or in short the process of preparing the financial statements of the company.

Pengaruh Profitabilitas, Umur Perusahaan, Ukuran Perusahaan, Kualitas Audit, Dan Struktur Modal Terhadap Kualitas Laba

2014 ◽  
Vol 6 (1) ◽  
pp. 27-42
Author(s):  
Keshia Anjelica ◽  
Albertus Fani Prasetyawan
Keyword(s):  
Firm Size ◽  
Stock Prices ◽  
Audit Quality ◽  
Earnings Quality ◽  
Secondary Data ◽  
Financial Statements ◽  
Firm Age ◽  
Construction Companies ◽  
Auditor Switching ◽  
Testing Method

The objective of this research is to examine the effect of profitability, firm age, firm size, audit quality, and leverage both partially and simultaneously towards earnings quality. The testing method used in this research is multiple regressions. The objects of this study are property, real estate and construction companies which were listed at Kompas 100 for the period 2010-2012. The samples are 15 companies determined based on purposive sampling. The data used in this study are secondary data such as financial statements and historical stock prices. The results of this study are (1) firm age has a negative significant effect on earnings quality, meanwhile firm size has a positive significant effect on earnings quality (2) profitability, audit quality, and leverage partially have an insignificant effect towards earnings quality (3) profitability, firm age, firm size, audit quality, and leverage simultaneously have a significant effect towards voluntary auditor switching. Keywords: ERC, earnings quality, profitability, firm age, firm size, audit quality, leverage.

scholarly journals The Determinants of Audit Expectation Gap: An Empirical Study from Kingdom of Bahrain

2018 ◽  
Vol 7 (3) ◽  
pp. 54 ◽  
Author(s):  
Sayed Ali Ahmed Alawi ◽  
Rami Mohammad Abu Wadi ◽  
Gagan Kukreja
Keyword(s):  
Financial Reporting ◽  
Quantitative Research ◽  
Financial Statements ◽  
International Standards ◽  
Kingdom Of Saudi Arabia ◽  
The Public ◽  
Financial Reporting Standards ◽  
Expectation Gap ◽  
Audit Firms ◽  
National Bank

The research aims at identifying the determinants of audit expectation gap between the auditors and the users of financial statements in the Kingdom of Bahrain. This issue is noticed in many frauds or errors or illegal matters by the general public after every scam whether Enron and WorldCom from United States or Satyam and Punjab National Bank from India or Tesco and BHS from United Kingdom or Mobily from Kingdom of Saudi Arabia. As per International Standards on Auditing (ISAs), auditors are not responsible to detect each and every fraud or error or illegal act as it is the responsibility of management. However, auditors are expected to assess the possibility of an error or fraud to occur and assess risks of material misstatement due to error or fraud and they are supposed to express their independent and objective opinion on financial statements whether financial statements are prepared in accordance to suitable criteria (International Financial Reporting Standards in the case of Bahrain).This quantitative research and its descriptive design aims empirically to analyze determinants that may impact the audit expectation gap in the Kingdom of Bahrain. The study used a detailed questionnaire as a measuring instrument across the sample group to measure 4 determinants that are expected to have a significant impact on the level of the audit expectation gap. Those determinants are the efforts of auditors, the skills of auditors, the knowledge of the public about the audit profession and the users’ needs from auditors. The research inferred that identified factors found to have a significant impact on the level of audit expectation gap. It is recommended that audit firms should provide training to the audit staff that how to utilize the required efforts in conducting an audit engagement and go extra miles to fill the gap. Furthermore, the auditors should keep themselves updated about the latest frauds and the best audit practices. 

scholarly journals The impact of Key Audit Matters (KAMs) on financial information quality: Evidence from Lebanon

2021 ◽  
Vol 19 (2) ◽  
pp. 135
Author(s):  
Joelle Matta ◽  
Khalil Feghali
Keyword(s):  
Value Creation ◽  
Information Quality ◽  
Investment Decision ◽  
Financial Statements ◽  
Financial Information ◽  
Audit Report ◽  
External Auditors ◽  
Expectations Gap ◽  
Expectation Gap ◽  
The Impact

<p>The purpose of this study is to discover the impact of Key Audit Matters (KAMs) on financial information quality and their value for Lebanese auditors. The value creation of KAMs is determined by its financial information quality, its ability to help during investment decision and its effect on the audit expectation gap. The research is conducted through a survey that was filled by external auditors who audit Lebanese banks exclusively, and are involved in the new audit report. The main results show that reporting by using Key Audit Matters adds value to the audit report from the perspective of Lebanese external auditors, and can reduce information asymmetry, increase trust in accounting and reduce the expectation gap. Moreover, the results marked that KAM improves the auditee's understanding in the audited entity, builds confidence in the audited financial statements, and helps to reduce the audit expectations gap.</p>

scholarly journals Ethics and auditing: Setting the bar too low

2015 ◽  
Vol 12 (4) ◽  
pp. 549-561
Author(s):  
Keith Hooper ◽  
Jenny Wang
Keyword(s):  
Professional Ethics ◽  
Conceptual Analysis ◽  
Social Values ◽  
Financial Statements ◽  
Social Darwinism ◽  
Duty Of Care ◽  
Accounting Firms ◽  
The Public ◽  
Audit Firms ◽  
Empirical Perspective

Purpose - from a philosophical and empirical perspective this paper seeks to show how the big audit firms have managed to set the bar low so that they offer only opinions on whether financial statements meet accounting standards. It is argued that while the concepts of virtue ethics have now largely disappeared, ethical legitimacy has moved beyond consequential ethics to a form of social Darwinism. It is a Social Darwinism that is legalistic and technical as evidenced by the audit firms’ widespread use of the Bannerman clause attached to their opinions. Design - to illustrate the shift of ethical positions, the paper is informed illustrations of a failure to discharge a duty of care to the public. Findings – the shift in underlying social values contributes to what the Economist Journal describes as a steady decline in professional ethics. This arguable conclusion is supported by various illustrations and cites the shift in combinations of cognitive, moral and pragmatic legitimacy as drivers employed by accounting firms. Research Limitations – the paper uses secondary and documentary data and is informed by conceptual analysis which necessarily in the realm of ethics may be contentious. Originality – the paper seeks to link the changing social values with changes in legitimisation and to show shifts in accounting practices like the recent practice of issuing disclaimers.

scholarly journals The use of analytical procedures by Yemeni auditors

2015 ◽  
Vol 12 (2) ◽  
pp. 17-25
Author(s):  
Shamharir Abidin ◽  
Mohammed Abobaker Baabbad
Keyword(s):  
Financial Statements ◽  
Audit Firms ◽  
Analytical Review ◽  
Analytical Procedures

This study sets out to investigate the extent to which Yemeni auditors use analytical review procedures during the audit of client’s financial statements. It also examines the stage of auditing procedure in which Yemeni auditors implement analytical review procedures. Moreover, the study determines the relationships between the importance’s factors and the use of analytical review procedures. The findings of the study have indicated that the Analytical Procedures were utilized on high percentage by audits in larger and high experienced audit firms compared to small and low experienced audit firms where the results have shown low percentage. Nevertheless, the role of auditors’ perception towards Analytical Procedures has proved to have a significant effect of usage of Analytical Procedures

Auditor Tenure Disclosure and Shareholder Ratification Voting

2021 ◽  
Author(s):  
Paul N. Tanyi ◽  
Dasaratha V Rama ◽  
K Raghunandan
Keyword(s):  
Academic Research ◽  
Public Disclosure ◽  
Audit Report ◽  
Shareholder Voting ◽  
Auditor Tenure ◽  
Audit Firms ◽  
The Impact

The PCAOB mandated, over the objections of the large audit firms and others, that for fiscal years ending on or after December 15, 2017, the audit report shall include information about auditor tenure. In this paper we answer the call for academic research about “the impact and usefulness of the auditor tenure disclosure as it becomes implemented” from Franzel (2017). We use data from 2,718 firms in our analyses. We find that in the case of clients with long (short) auditor tenure, the proportion of shareholder votes not ratifying the auditor increased (decreased) after public disclosure of auditor tenure. Thus, it appears that public disclosure of auditor tenure influenced shareholder voting and sensitized shareholders to longer audit tenures.

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