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Article
Publication date: 1 July 2011

Tang Yuejun

The purpose of this paper is to empirically analyze the impacts of motivation for avoiding loss and actual abnormal audit fees on management behaviors of audit opinion shopping.

Abstract

Purpose

The purpose of this paper is to empirically analyze the impacts of motivation for avoiding loss and actual abnormal audit fees on management behaviors of audit opinion shopping.

Design/methodology/approach

Using empirical research methods, this study employs regressive models and moderating effect models with data from Chinese listed companies from 2001 to 2008.

Findings

By analyzing the empirical data, it is found that strong motivation for avoiding loss has a certain moderating effect on the relationship between abnormal audit fees and audit opinion shopping; abnormal descent of audit fees significantly increases both the likelihood of receiving modified audit opinions of annual financial reports and that of the improvement of audit opinions; listed companies reporting consecutive losses in the last two years have a higher likelihood of an improvement in unfavorable audit opinions because of stronger motivation for avoiding loss and audit opinion shopping of management; and strong motivation for avoiding loss has a significant moderating effect on the relationship between abnormal increase of audit fees and audit opinion shopping.

Practical implications

This study has a significant practical implication for market supervisors, small and medium investors.

Originality/value

The paper classifies abnormal audit fees into abnormal increase and descent of audit fees, and audit opinions differences into the improvement and deterioration of audit opinions, and further empirically analyzes and verifies the moderating effect of motivation for avoiding loss on the relationship between abnormal audit fees and audit opinion shopping.

Details

China Finance Review International, vol. 1 no. 3
Type: Research Article
ISSN: 2044-1398

Keywords

Open Access
Article
Publication date: 4 September 2019

Rahmat Akbar Simamora and Hendarjatno Hendarjatno

The going concern audit opinion is an audit opinion issued by an auditor to evaluate the company’s ability in maintaining the business continuity. The purpose of this…

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Abstract

Purpose

The going concern audit opinion is an audit opinion issued by an auditor to evaluate the company’s ability in maintaining the business continuity. The purpose of this paper is to discover the effects of audit client tenure, audit lag, opinion shopping, liquidity ratio and leverage on the going concern audit opinion.

Design/methodology/approach

The study used secondary data obtained from financial reports and independent audit reports published by Indonesian Stock Exchange (ISE) as well as Indonesian Capital Market Directory. Besides, the population of the study included manufacturing companies registered in ISE from 2009 to 2013. Further, the present study applied purposive sampling technique which resulted in 16 companies used as the sample of the study. Then the hypothesis was examined by applying logistic regression.

Findings

Results of the hypothesis examination indicated that the variables of opinion shopping and leverage affected the going concern audit opinion, whereas the variables of audit client tenure, audit lag and liquidity ratio did not affect the going concern audit opinion.

Originality/value

Results of the hypothesis examination indicated that the variables of opinion shopping and leverage affected the going concern audit opinion, whereas the variables of audit client tenure, audit lag and liquidity ratio did not affect the going concern audit opinion.

Details

Asian Journal of Accounting Research, vol. 4 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Article
Publication date: 18 September 2009

Wendy Green, Robert Czernkowski and Yi Wang

The purpose of this paper is to trace the behaviour of Chinese companies receiving a special treatment (ST) designation in order to determine the extent to which the…

772

Abstract

Purpose

The purpose of this paper is to trace the behaviour of Chinese companies receiving a special treatment (ST) designation in order to determine the extent to which the application of this regulation may have led companies to engage in activities conducive to the removal of the ST designation. In particular, the paper examines evidence of opinion shopping or earnings manipulation by these companies.

Design/methodology/approach

Empirical analysis of annual report databases for Chinese‐listed companies, including statistical significance testing relating to ST companies.

Findings

Most ST companies have removed the ST status by the third year after the initial ST designation. Compared to non‐ST companies, ST companies losing the ST status are more likely to engage in practices indicating earnings manipulation. Also, compared to non‐ST companies, ST companies are more likely to change auditors after an initial or second year of ST designation. However, while this behaviour suggests opinion shopping, auditor switching for the ST companies is not associated with losses becoming profits nor with improved audit opinions.

Research limitations/implications

The results reported in this paper must be considered in light of the limitations inherent in empirical analyses. That is, the relationships identified in this paper are indicative of potential earnings management or audit opinion shopping; however, the study cannot provide the actual reasons for these empirical results.

Practical implications

The results suggest the ST regulation did not lead to unintended consequences in terms of auditor switching by ST companies to improve either their reported earnings or their audit opinion.

Originality/value

The ST status is unique to China and this paper is the first to report on potential reporting and audit quality implications of this regulation.

Details

Asian Review of Accounting, vol. 17 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 15 November 2022

Heesun Chung and Yewon Kim

The purpose of this study is to examine whether the change in accounting standards from the rules-based local GAAP to the principles-based IFRS influences a manager’s…

Abstract

Purpose

The purpose of this study is to examine whether the change in accounting standards from the rules-based local GAAP to the principles-based IFRS influences a manager’s opportunistic auditor choice for a favorable audit opinion, opinion shopping (OS) behavior. The authors view that IFRS adopters exploit the flexibility of IFRS to their advantage and search for auditors that are more likely to give clean opinions. However, auditors may refuse to yield to client pressure for OS, because of the greater potential audit risk under principles-based standards.

Design/methodology/approach

This study applies a difference-in-differences methodology by using Korean listed firms (i.e. IFRS adopters) as a treatment sample and Korean unlisted firms that do not voluntarily adopt IFRS (i.e. K-GAAP users) as the control sample. OS behavior is measured by the methodology of Lennox (2000).

Findings

The results of this study show that the OS behavior of IFRS adopters increases after IFRS adoption compared to that of K-GAAP users. This phenomenon is more prevalent when they are audited by non-Big 4 auditors or when they are economically important to auditors. These suggest that the principles-based IFRS without specific rules increase the scope of OS, and auditors tend to accept OS clients by weighing up its costs and benefits.

Originality/value

This study contributes to the literature on OS by presenting that the approach of accounting standards can be an important influencing factor on a firm’s successful engagement in OS. This finding also provides policy implications for many economies by suggesting mechanisms that can be developed to reduce clients’ opportunistic auditor choices under principles-based accounting standards.

Details

Managerial Auditing Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0268-6902

Keywords

Book part
Publication date: 17 September 2004

Mark C. Mitschow and Nader Asgary

Abstract

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-84950-807-0

Article
Publication date: 11 May 2020

Mahdi Salehi, Mahdi Saravani and Safoura Rouhi

This study aims to study the relationship between audit components and collusion in the audit market.

Abstract

Purpose

This study aims to study the relationship between audit components and collusion in the audit market.

Design/methodology/approach

The statistical population of the study includes 130 listed firms on the Tehran Stock Exchange from 2012-2017. The data tested using multivariate regression.

Findings

The findings of the study indicate that there is a positive and significant relationship between Rank A audit firms, competition and audit fees and audit market adaptability. The relationship standard fees and audit market adaptability, however, is negative and significant. Moreover, the results of the study show that there is no significant relationship between opinion shopping, type of audit report, audit market concentration, and agency costs with audit market adaptability.

Originality/value

The current study fills the gap in this area, and the results of the study may give direction to researchers and policy makers.

Article
Publication date: 25 May 2010

Robert Czernkowski, Wendy Green and Yi Wang

The purpose of this paper is to determine whether audit opinions matter in China after the introduction of several key regulatory changes, specifically aimed at…

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Abstract

Purpose

The purpose of this paper is to determine whether audit opinions matter in China after the introduction of several key regulatory changes, specifically aimed at strengthening the confidence of investors in the audit function.

Design/methodology/approach

The question is addressed by examining the market response to modified audit opinions of companies listed on the Shanghai Stock Exchange.

Findings

In contrast to earlier research, this paper does not find evidence that modified audit opinions have significant information value to Chinese investors, despite the regulatory changes. However, when partitioning the sample by year, there is weak evidence of a stock price response to modified audit opinions in 2003. Examination of the impact of different types of audit opinions shows no consistent results.

Research limitations/implications

The results reported in this paper must be considered in light of the limitations inherent in empirical analyses. That is, the relationships identified in this paper are indicative of potential earnings management or audit opinion shopping, however, the paper cannot provide the actual reasons for these empirical results.

Practical implications

The results suggest the Chinese market is beginning to value audit opinions in the same fashion way as more developed markets.

Originality/value

The paper refines market reaction models used in earlier studies through the introduction of additional explanatory variables, together with an improved methodology.

Details

Managerial Auditing Journal, vol. 25 no. 5
Type: Research Article
ISSN: 0268-6902

Keywords

Open Access
Article
Publication date: 4 December 2020

Thomas Averio

It is argued that the going concern opinion is issued if auditors have a doubt about financial condition of a company. Provision of the going concern audit opinion may…

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Abstract

Purpose

It is argued that the going concern opinion is issued if auditors have a doubt about financial condition of a company. Provision of the going concern audit opinion may worsen the company in terms of gaining public trust and may even indicate bankruptcy. This study aims to determine the factors that affect the auditor's going concern opinion.

Design/methodology/approach

This research used secondary data obtained from annual reports and independent audit reports published by the Indonesia Stock Exchange. The population of this research included manufacturing firms registered in the Indonesia Stock Exchange from 2015 to 2019. The sample after the purposive sampling technique being applied consisted of 33 companies. The data were analyzed using logistic regression performed in the statistical analysis software, SPSS 24.0.

Findings

The results indicated that leverage positively affected the going concern audit opinion, then the audit quality, profitability and liquidity negatively affected the going concern audit opinion, whereas firm size and audit lag did not affect the going concern audit opinion.

Originality/value

This study is in contrast to several existing studies on the determinants of the auditor's going concern opinion and provides knowledge on developing more factors affecting the auditor's going concern opinion.

Details

Asian Journal of Accounting Research, vol. 6 no. 2
Type: Research Article
ISSN: 2443-4175

Keywords

Article
Publication date: 7 August 2017

Fang Hu, Jenny Stewart and Weiqiang Tan

The purpose of this paper is to investigate whether audit opinions of listed firms in China vary systematically with the political connections of the firm’s chief…

1204

Abstract

Purpose

The purpose of this paper is to investigate whether audit opinions of listed firms in China vary systematically with the political connections of the firm’s chief executive officer (CEO). Prior literature only shows the importance of political influence to auditor choice and audit quality.

Design/methodology/approach

A politically connected firm is defined as a firm in which the CEO has a political background. The authors use a “difference-in-difference” model to control for self-selection problems.

Findings

The authors find that the likelihood of receiving a favourable opinion in the subsequent period is positively associated with a CEO’s political connections. This positive association is stronger with CEOs connected to local government within the same region. The authors further find that the CEO’s political connections have more influence on favourable audit opinions in non-state-owned enterprises (non-SOEs) in a less developed and lower investor protection region. The influence is also less significant in the regions where there are more non-state-owned or foreign banks and where there are greater penalties for political corruption and relationship-based contracting.

Originality/value

The study complements and extends the existing literature on the role of political connections in the economy by providing evidence on the effect of a CEO’s political connections on audit opinions. The authors extend the research on auditing in emerging markets by explicitly accounting for unique institutional and market factors in China. They explore audit quality by observing how audit opinions are directly shaped by political and institutional factors.

Details

Pacific Accounting Review, vol. 29 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 16 June 2021

Hojat Mohammadi, Mahdi Salehi, Meysam Arabzadeh and Hassan Ghodrati

This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure).

Abstract

Purpose

This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure).

Design/methodology/approach

This paper’s method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2018 using a sample of 188 firms (1,310 observations). The method used for hypothesis testing is linear regression using panel data.

Findings

The results show a negative and significant relationship between auditor narcissism and audit market competition and its indices, including auditor concentration, clients’ concentration and competitive pressure. Moreover, a positive and significant relationship was observed between audit quality and audit market competition and its indices, including auditor concentration, client concentration and competitive pressure.

Originality/value

To analyzes competition indices in the audit market (auditor concentration, clients’ concentration and competitive pressure). The variable is assessed once more using the exploratory factor analysis of the so-called three variables single variable, named audit market competition. So the central question of the study is investigated within a broader sense. Moreover, as the present study is carried out in the emergent financial markets with extremely competitive audit markets to figure out the effect of auditors’ intrinsic characteristics on such markets’ competitiveness, it can provide useful information in this field.

Details

Management Research Review, vol. 44 no. 11
Type: Research Article
ISSN: 2040-8269

Keywords

1 – 10 of over 3000