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This paper aims to analyze Public Companies Accounting Oversight Board (PCAOB) inspection reports on audit reports of those inspected accounting firms in Brazil, Russia, India and China (BRIC). In meeting the requirements of the Sarbanes-Oxley Act, the PCAOB conducts inspections on audit reports of firms listed on the New York Stock Exchange.

The reports include those submitted by both the US audit parent firms and their secondary firms located outside the USA. In each PCAOB report, it unravels the nature of audit deficiencies. The focus is on Big Four because they play a dominant role in the marketplace and issuers’ market capitalization. All the seven-year deficiencies are documented since publications of the reports from 2004 to 2012.

Of the 37 reports, 19 (51 per cent) were issued relating to audits conducted by the Big Four. Out of these 19 reports, 10 (53 per cent) contain inspection criticism. These include audit quality and common recurring audit deficiencies.

This paper is based solely on those inspection reports published by the PCAOB.

The findings have significant implications to audit firms and the audit profession on improving audit quality, firms’ internal control and reports.

No known prior research paper is available on the ramifications of the PCAOB’s inspection reports relating to BRIC.

This paper deals with the preferences of creditors and investors in Jordan regarding the credibility and use of financial statements audited by accounting firms with international affiliations compared to local accounting firms. Audit firms in Jordan are divided into two groups. Group 1 consists of audit firms with affiliation with an international firm. Group 2 consists of audit firms with no international affiliation. A questionnaire elicited preferences of creditors and investors for Group 1 and Group 2 audit firms. This questionnaire was administered to a sample of investors and creditors. The results suggest that a preference by both creditors and investors for financial statements audited by accounting firms with international affiliation. The factors leading to such a preference are also indicated. The results suggest that affiliation with international audit firms, application of international standards, personal contacts and the long experience of auditors are the most important factors that make both investors and creditors prefer Group 1 over Group 2 audit firms.

The purpose of this paper is to examine the impact of audit quality, measured by financial statements audited by the big four accounting firms, on the investors' ability to predict future earnings for profitable and unprofitable firms.

The paper uses the returns‐earnings regression model and interacts all independent variables in this model with a dummy variable, AUDIT, which is set to equal one if financial statements audited by the big four accounting firms, zero otherwise. Future earnings response coefficient is the measure of earnings predictability.

The paper finds that investors are able to better anticipate future earnings when financial statements are audited by the big four accounting firms. However, the findings are not applicable for unprofitable firms.

The findings of the paper have implications for auditing related academic research and the users of financial statements. In particular, the study shows that the big four accounting firms have not lost their audit quality advantage and that financial statements audited by the big four accounting firms are arguably of higher quality than those audited by non‐big four accounting firms.

It is believed that there is no UK study to date examining the association of the quality of financial statements audited by the big four accounting firms and the returns‐earnings association. Consequently, this paper significantly contributes to the limited literature on the perceived value relevance of audit quality.

This paper seeks to discuss the effect that the Sarbanes‐Oxley Act (SOA) had on both the nature of the external audit function and overall audit quality. Additionally, it aims to discuss how audit firms maneuvered through the newly regulated environment, and what their strategic actions are for the future.

This discussion is based on interviews conducted with auditors from nine public accounting firms located in Northeast Ohio, United States of America. The sample consisted of five national and four regional firms, and the interviewees included mostly partners and a few senior managers.

The increased oversight and workload resulting from the SOA requirements has changed the nature of the external audit function to more compliance type work, and the environment has created much anxiety for the auditors. The new reform has significantly impacted the audit environment in terms of: scope of services; client assessment procedures; management and audit committee relationships with the external auditor; audit firm personnel management; and the long‐term outlook of the profession. The details of these impacts are discussed throughout the paper.

This paper provides detailed insight as to how the SOA impacted the audit profession. Hopefully, such an understanding will benefit future research in measuring the costs and benefits of the new reform. Lastly, a future research showed further examine the effect that the SOA has had on overall audit quality.

This paper summarizes the insightful comments obtained in structured interviews with several leading audit professionals. The sample was judged to be highly knowledgeable of the changing audit environment caused by the SOA. With an improved understanding of its impacts, regulators, practitioners, and academics can better assess the effectiveness of the SOA.

The purpose of this paper is to examine how the Andersen implosion over Enron impacted Fortune 500 firms that were competitors of Enron and/or audited by Andersen. This event provides an opportunity to study various contagion effects.

An event study methodology is used to analyze the immediate financial impact of the Andersen implosion on competitors of Enron and/or firms audited by Andersen. More specifically, how did the announcement of the implosion impact these firms?

The results support a strong industry contagion effect where Enron's failure benefited the surviving energy/utility firms who could then increase their market shares. The authors find the energy/utility firms not audited by Andersen, on average, experienced an astounding 2.5 percent increase in market capitalization when the audit scandal was announced. In dollar terms, the mean and median market capitalization increases were $226 million and $101 million, respectively. In the aggregate, the 21 utility/energy firms gained $4.76 billion in market capitalization.

The results show the importance of the auditing process and the impact of unethical actions on the firm, their auditor, and their competitors. One limitation is the data are limited to large Fortune 500 firms.

This is the first study, to the authors' knowledge, that evaluates the contagion effect of the Andersen/Enron audit scandal on Fortune 500 firms: in the same industry as Enron; audited by Andersen; and operating in the same industry as Enron and audited by Andersen.

The purpose of this paper is to provide a succinct overview of academic research that has examined audit firm rotation both in the USA and in other countries.

The authors outline the unresolved nature of academic research on audit firm rotation, review recent literature, discuss why academics have been unable to resolve this issue and offer suggestions for improving subsequent research in the area.

Overall, the collective evidence is inconclusive at best; with earlier studies generally finding mixed results and more recent studies indicating that audit quality generally goes through two distinct phases during the auditor‐client relationship, the “auditor learning” and “auditor closeness” phases.

Given the importance of the issue, this article provides an overview of academic research that has examined audit firm rotation, discusses why academics have been unable to resolve this issue, and provides suggestions on how academics and practitioners can work together to enhance the quality of future research.

The purpose of this research is to investigate the link between external audit quality and integrated reporting (IR) quality in the Jordanian market, a developing market. Furthermore, the research model considers the mediating effect of earnings management practices and the moderating effect of board gender diversity. As a result, it intends to provide further empirical evidence in this area.

This research investigates its model using data from Jordanian services companies listed on the Amman Stock Exchange (ASE) during the period 2013–2022. With 430 company-year observations, the current research’s sample includes all companies in the research population for which complete data were available during the period under investigation. Data relevant to the research setting were obtained from annual disclosures and the ASE's database.

The findings of this research show that audit firm size and audit firm specialty have a positive influence on IR quality, but audit firm tenure does not. External audit quality (as proxied by the size, specialty and turnover of the audit firm) had a negative impact on earnings management practices, while earnings management practices had a negative impact on IR quality. Additionally, the findings reveal that earnings management practices completely mediate the relationship between two external audit quality proxies (audit firm size and audit firm specialty) and IR quality. Furthermore, in terms of the moderating impact of board gender diversity, it is obvious that board gender diversity favorably moderates the relationships between all external audit quality proxies and IR quality.

Using agency theory and stakeholder theory, this investigation fills a gap in previous literature by adding scientific explanations and empirical evidence from the Jordanian market, a developing market, in the context of the impact of audit quality on IR quality, mediated by earnings management and moderated by board gender diversity.

This paper aims to examine how the allocation of audit hours to the year-round procedures, based on the risk of material misstatements in financial statements, impacts audit quality.

Using a data set on audit hours spent on year-round and year-end procedures, the authors build an empirical model for testing the effectiveness of year-round auditing of Korean public firms during the period of 2014–2018.

The initial tests do not show that proportionate increases in year-round procedures increase audit quality. However, after the authors control for the risk of material misstatements, the authors find that proportionate increases in year-round audit hours generally increase audit quality, except for high-risk firms where audit quality increases only as year-end hours proportionately increase. For high-risk firms, the results suggest that increases in year-round audit procedures occur at the cost of the essential year-end work. Similarly, except for high-risk firms, the authors find that the allocation of more audit effort to year-round procedures improves audit efficiency.

To the best of the authors’ knowledge, this study provides some of the first empirical evidence showing how a risk-based approach to allocating audit effort over the duration of an audit can impact audit quality and efficiency. Regulatory bodies, such as the International Auditing and Assurance Standards Board and Public Company Accounting Oversight Board, which consider the proper allocation of audit hours as a key audit quality indicator, should find the results useful.

This study aims to examine whether the adoption of artificial intelligence (AI) by audit firms and their clients affects audit efficiency and audit quality.

This study empirically examines the abovementioned research question based on data from China for the years 2011 to 2020. It uses audit report lag as a proxy for audit efficiency and the likelihood of annual report restatement as a proxy for audit quality. It adopts the propensity score matching and the two-stage OLS regression model to address the endogeneity issue led by firms’ innate complicated functions.

The findings show that when audit firms and their clients use AI separately, there's a positive link between AI use and audit report lag. However, when audit firms and clients use AI together, there's a negative link between AI use and audit report delays that enhance overall audit efficiency. Next, the authors observe a negative link between AI use and the likelihood of a restatement. Finally, the authors find that the association between AI adoption and audit quality is driven by increased audit effort lag. Results are consistent and robust to endogeneity tests and sensitivity analyses.

Findings can complement the audit quality and corporate governance literature by clarifying that external audit must evolve through digitalization and the incorporation of newly developed digital tools, such as AI.

The purpose of this study is to examine the relation between product market competition and audit fees by using firm-level product market competition measures and mitigating the endogeneity issues.

This study uses 12,136 US firms from 2004 and 2019. To ensure the robustness of the main findings, this study uses three firm-level product market competition measures and import trade tariff rate reductions of the USA as a quasi-natural experiment. This study also performs three cross-sectional tests and validation tests.

This study demonstrates that there is a negative relation between product market competition and audit fees and establishes a causal relation. Moreover, it reveals that the findings become more pronounced when auditors possess industry-specific expertise, when client firms are younger, and when operating within more homogeneous industries. Additionally, a validation analysis supports the findings.

This study offers significant insights for regulators by highlighting how product market competition plays a constructive role in overseeing firm management.

The authors contribute to the existing literature by showing that there is a negative association between product market competition and audit fees after controlling external monitoring mechanisms. The authors also find the causal relation. These findings indicate that competitive pressures originating from product markets exert a significant influence on disciplining a client firm’s management.