Aspects Regarding the Structure of the Financial Audit Market in the European Union from Fees Perspective

The audit market, developed out of the need to strengthen the credibility and the quality of financial reporting, has led since the 1980s to a concentration around large audit firms, the dominance effect being marked on the one hand by the auditor’s increasing reputation and notoriety, and on the other hand by the client’s association with a reputed auditor, which contributes to improving the company’s image on the market. In this context, a major issue is represented by the level of the fees charged, as they represent key elements that may affect the auditor’s independence. Moreover, a sensitive aspect is the relationship between the fee charged for financial audit services and the one for non-audit services and the compensation practices between them. The European Commission wants to facilitate competition in an overly concentrated market and also provide the opportunity for small and medium-sized audit firms to become active players in the large corporate audit market through joint audit, in which at least one of the audit firms is not part of the Big4 group. The mandatory audit firm rotation and the limitation on the non-audit services provided are the main aspects of the recent audit reform that directly influences the fee level. The main purpose of this study is to analyse whether there is a pattern of audit costs at the community level. In this context, this paper aims to assess the uniformity of audit costs, namely to determine the structure of the audit market in the European Union. The research involves data set comparison methods, by analysing a sample of 2,896 firms listed on the stock exchange in 35 different states over the period 2013-2021.

Factors Influencing KAM Reporting: A Structured Literature Review

The disclosure of KAMs contribute to the increase of financial-reporting quality, the value of the audit report and implicit interest in it. Moreover, KAM’s disclosure has a positive influence over the expectation gap between the auditors and other users of the audit report and financial statements. This study aims to identify relevant drivers influencing the Key Audit Matters (KAMs) disclosed in the audit report, based on a review of the articles published in top accounting journals. Our results reveal the fact that the audited company itself especially influences the disclosure of the KAMs, emphasizing the size of the company, the complexity of the business, the applicable regulation of the industry in which the company operates, all of which impact the overall client-risk level. Other relevant factors are the accounting standards with which the company must comply and on which it must report, the audit company (‘Big Four’ or not) and the audited company’s location.

Can the Audit Opinion Influence the Portfolio Investment Decisions? The Case of Listed companies

As a part of their strategic transactions, corporations often acquire stakes in other companies that do not grant them control, but allow them to use their resources to increase their profitability, access technological progress and innovation, develop products, or obtain dividends. The main objective of this paper is to identify the factors influencing the behavior of acquirers who buy securities in the capital of the target companies, listed on Bucharest Stock Exchange, without intending to control them. The study aims to describe two dimensions of the buyers' behavior, when they buy shares that do not lead to the control of the target companies (below 50%). The first dimension refers to the buyer's decision to invest in a certain share of capital, influenced by the profitability of the target company and its market capitalization (dimensions of their performance), but also by the audit opinion on the annual financial statements. The relationship is positive and significant. The second dimension focuses on the decision of the acquirers to invest or not in a blue-chip company (top companies, considered the most efficient and stable on the financial market), with the main purpose of obtaining dividends or trading the respective securities on the capital market, in order to generate cash flows. The result shows that investors buy small shares in blue chip companies, compared to other companies, taking into account their performance and the audit opinion on the annual financial statements.

Digitalization in the Accounting and Auditing Profession through ERP Systems

The objective of this paper is to observe the possibility of digitizing the accounting and auditing profession by implementing ERP systems, as a result of massive changes in technology over time. The purpose of this paper is to add value to the literature, given the positive or negative aspects of the digitization of the accounting and auditing profession using information systems such as ERP. ERP systems such as information systems have a key role in managing and conducting accounting and auditing, providing support to professional accountants and auditors. The research method used to identify the possibility of digitizing the accounting and auditing profession through ERP information systems is based on the analysis of the archive (literature review), collecting data and information from selected articles from different databases. Following the study, the authors concluded that the accounting and auditing profession can be digitized through the use of ERP information systems, as it allows the automation of a large number of tasks, and the information processed with these systems is much more transparent and accurate.

Regulation of the Romanian Accountancy Profession – 100 Years Celebration. A History Lesson for Today’s Professionals

On July 15th 1921, the Official Journal of Romania witnessed the publication of the Law on the organization of the Body of Licensed and Expert Accountants. The longtime wish of higher school of business graduates thus became true, they established their first association in 1888. Since then, until the law was published, the regulation of the accountancy profession was the main topic of various discussions and attitudes, of several pleadings addressed to public authorities and debates held at the meetings of a multitude of institutes representing these graduates’ interests, grouped within the Union of Business Schools Graduates, subsequently the Body of Higher Schools of Business Graduates, which acquired legal personality in 1916. There were also other subjects, directly related to accountants’ activity, that drew the graduates’ attention, both before and after the law was published, such as: censors’ statute, accounting expertise, visas on trade registers; business education reform; the Body’s relations with authorities. A number of public figures linked their faith to asserting the accountancy profession, its regulation and the ongoing representation of its interests. We should mention here, among many other, Nicolae Butculescu, I. St. Rasidescu, Vasile M. Ioachim, Petru Drăgănescu-Brateş, Grigore Trancu-Iaşi, George Alesseanu, Spiridon Iacobescu, Alexandru Sorescu. An important activity of the Body was the organisation of congresses. They began taking place every two years, uninterruptedly, starting 1923 until 1939. The activity of the Body of Expert and Licensed Accountants was influenced by the political and social events of its time, especially since 1935. Beginning with 1940, its activity saw a significant decrease.

Valences of Financial Reporting According to IFRS. Up-to-Date Challenges for Financial Auditors

Through this paper, the authors want to mark the centenary of the accounting profession in our country (1921-2021). They aim to analyze the evolution of financial reporting, at the national level, in the last three decades, parallel to the natural development of the accounting profession and to bring into the spotlights: – how developments at the national level have kept pace with the ever-changing European and international financial reporting requirements; – the current challenges for the accounting profession in general and financial auditors, in particular, generated by the frequent and particularly complex changes of international standards in the field, changes generated precisely by the need to strengthen the quality of the information provided by financial reporting; – the natural steps to be taken to strengthen professional cooperation and collaboration within and in the interest of the accounting profession, to respond effectively to the expectations of all stakeholders in the development of financial reporting.

Considerations on the Advantages of Using Leasing in Small and Medium-Sized Enterprises

Throughout the evolution of our society, accounting has played an important and sometimes decisive role in making or influencing certain decisions. Accounting research can provide social and cultural studies with important insights into how society and culture is produced and shaped by calculations, technologies and management control practices. An exciting challenge and opportunity for young researchers is to explore the role and impact of accounting in companies as well as in non-governmental organizations, given the many times when the issue of further reform has arisen because of sensitive events in the lives of companies. Increasing quality criteria as well as lowering costs by using leasing as a form of financing has generated part of the evolution of modern society. Thus, the management of companies has constantly had to establish new and new strategies to bring companies to our reputation and esteem through higher performance indicators than in previous periods. The main objective of the article is to understand the concept of leasing financing, to get familiar to the use of leasing, also to validate the hypothesis that leasing means a good manner of financing for small and medium enterprises using a variety of different strategy of economic development and obtaining economic benefits, having as a start point a right interpretation of accounting politics highlighting the true and fair view of the company. In order to validate the hypothesis that leasing is a factor of economic growth, the authors conducted a questionnaire consisting of nine questions in which respondents expressed their opinion on leasing as a form of financing. Following the study, the authors concluded, within the sample analyzed, that the use of leasing is a factor of economic growth, having as a start point the company development strategy, and also, the risk appetite of the shareholders. Also, using the leasing as a manner of finance offered the opportunity for a quickly technological growth and real appearing of the modern historical challenge - globalization.

Teleworking in the Field of Financial Audit in the Context Generated by the COVID-19 Pandemic

In the sensitive socio-economic context generated by the COVID-19 pandemic, teleworking was, in many fields, a way to continue the activity while complying to the measures imposed by law in order to fight the spread of the new Coronavirus. On the one hand, teleworking offers flexibility in setting the work schedule, eliminates travelling time to and from the worksite and allows to attract competent employees from all over the world, by means of digitalisation. On the other hand, working from home is a challenge. The time required to transfer the activity in the virtual space, and the additional training necessary for the use of innovative information technologies can reduce efficiency and affect the work-life balance. This paper focuses on the audit profession, which had to rethink remote auditing so as to comply with the restrictive measures, but at the same time to avoid affecting the quality of audit missions. The questionnaire distributed among professional practitioners, members of the CFAR, helped us identify the perception of Romanian financial auditors on the variables influencing the efficiency of the audit work carried out in the “new normal” and the extent to which teleworking could become a practice in future financial audit missions.

Performance Audit of Public Revenues of the Administrative Territorial Units

The financial indicators reported in the budget execution accounts of the local public administrations have implications in the assessment of the level of performance regarding the achievement of the own revenues of these public entities. The objective of the paper is to examine the causal link between the level of performance in achieving own revenues and that of the financial autonomy of local public administrations. The paper includes a summary of the evolution of legal regulations in Romania specific to local public administration and own revenue management, as well as an analysis of information highlighted in budget execution accounts published by entities for 2018-2020, and the latest annual reports published by the Court of Accounts of Romania regarding the deviations found and the audit opinion formulated following the financial audit missions in order to identify the aspects that may influence the level of performance in achieving its own revenues at the level of local public administrations. The sample consists of territorial administrative units classified as cities in the Western Region of Romania, which are not municipalities and are found in Arad County. The results of the study revealed that some cities had a fairly high level of performance in generating their own revenues, and some reported increasing capital expenditures from year to year, but in most cases the degree of achievement of their own revenues still remains quite low. The conclusion is that the degree of achievement of own revenues is in most cases at a level that needs to be improved, and payments for capital expenditures are still quite low, so none of the cities in the selected sample have the opportunity to be financed exclusively from own revenues.

Evolution and Diversification of the Going Concern Uncertainties Disclosed in the Auditor’s Report

The going concern of an entity's activity is a fundamental accounting principle. The practical application of this principle has accounting, legal and financial implications. From an accounting point of view, the management of the entities shall be responsible for drawing up the financial statements in accordance with this principle. From a legal perspective, entities that go into liquidation are no longer obliged to respect the going concern principle. When auditing financial statements, auditors shall be responsible for assessing the adequacy of compliance with the principle of going concern and for including the appropriate references in their report. The objective of the paper is to analyse the reasons for including in the auditors' report the paragraph on going concern uncertainties, in the light of their evolution over time, their frequency and diversification. The sample included 120 companies listed on European stock exchanges, included in the main stock indexes for the period 2010-2020. The data was gathered from reports published by auditors that were included in the Audit Analytics database. The results showed that there was an average trend of 20 reported situations per year, but with a significant increase over the last two years analysed mainly due to the situations arising from the impact of the Covid-19 pandemic. The most common reasons were liquidity risk, substantial liabilities and the refinancing of activities. In recent years there has been a diversification of reasons, but with a reduced frequency, such as the working capital, the decrease in stockholder equity and competitor threat. Reporting on going concern issues is of particular importance so that increasing transparency in the publication of this information can contribute to a higher degree of investor confidence in the entities' financial statements.