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1 – 10 of over 4000The auditing and accounting profession must provide appropriate disclosure of the going concern status of an entity, especially when that status is threatened. Auditors have an…
Abstract
The auditing and accounting profession must provide appropriate disclosure of the going concern status of an entity, especially when that status is threatened. Auditors have an obligation to consider the wider legal environment of an entity, including all relevant case law, when they perform any such audit. Despite this obligation, the auditing profession appears to violate important legal principles. The auditor’s approach to the going concern status of an entity is contained in the South African Auditing Standard, SAAS 570 “Going Concern”. The South African legal framework’s approach to this issue emerges from the Supreme Court case Philotex (Pty) Ltd v Snyman. This article explores the fundamental disagreement between the auditor’s approach to the going concern problem and that adopted in terms of the wider South African legal framework.
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Yuen Hoong Voon, Anna Che Azmi and Sharmila Jayasingam
This study aims to examine the consequences of tax authorities’ use of concession-timing negotiation strategies on tax practitioners and their final proposed offers.
Abstract
Purpose
This study aims to examine the consequences of tax authorities’ use of concession-timing negotiation strategies on tax practitioners and their final proposed offers.
Design/methodology/approach
This is an experimental study conducted on tax practitioners using a design of 2 × 1, varying the tax authorities’ negotiation strategy (i.e. concession-gradual and concession-end strategies) across two levels.
Findings
The concessionary negotiation strategies adopted by tax authorities influence tax practitioners’ final proposed offers, their perceptions of fairness (i.e. distributive justice and procedural justice) and their aggressiveness of stance in tax audit negotiations.
Originality/value
This experimental study contributes to existing research on tax authority-tax practitioner negotiation models used during tax audits by providing the first evidence that concession timing matters. The study extends the negotiation model to include tax aggressiveness as a new variable and examines the indirect roles of fairness and offers in tax audit negotiations.
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Nor Aishah Mohd Ali, Zurina Shafii and Shahida Shahimi
The purpose of this study is to identify the competencies required of Shari’ah auditor (SAR) in the Islamic banking environment.
Abstract
Purpose
The purpose of this study is to identify the competencies required of Shari’ah auditor (SAR) in the Islamic banking environment.
Design/methodology/approach
A qualitative approach using a multiple-case study through the semi-structured interview was used. Data was gathered from a representative of Central Bank of Malaysia, and 30 other respondents consist of the Head of Shari’ah audit (HSA) and SAR from four types of banking institutions. A focus group discussion was later conducted to validate the model of competency proposed.
Findings
Results show a mixed practice on the recruitment of SAR. Most banking institutions prefer to use their existing internal auditors as opposed to recruiting fresh graduates or acquire experienced SAR from other financial institutions. Knowledge in Shari’ah, Islamic banking and Fiqh Muamalat is considered as the essential knowledge component for SAR, while auditing is revealed as the core skill that SAR should have to perform the Shari’ah audit effectively. The study also found that personal skills such as willingness to learn and teamwork as the complementing characteristics to the knowledge and skill components, as a package required for a competent SAR.
Research limitations/implications
The results of this study would have both theoretical and practical contributions to the regulatory bodies, academicians and professionals. Theoretically, this study made a concerted effort to enhance prior studies on the qualification aspect of Shari’ah audit literature, emphasizing the elements necessary to recruit competent SARs in the Islamic financial institutions (IFIs). The element of “time” has been infused to the existing effective job performance theory add dynamics to the model, recognizing the need for years of experience as part of elements necessary to become competent SAR. In practice, the competency model is recommended to the industry players in pooling competent talents in the Islamic finance industry (R4) and (B5). In spite of its limitation to confine only to the IFIs, it sheds light on human resource management within the Islamic organizations.
Practical implications
The study would contribute to the practitioners as a guideline to the Human Resource Department in recruiting their SAR and also for succession planning purposes.
Originality/value
A competency model for SAR was proposed focusing on building knowledge, core and personal skills that can be used as guidance in determining the criteria needed for a competent SAR, which is a new dimension for Islamic auditing literature. The sub-objective of determining the elements of competency, as well as understanding the current practice of recruiting the SAR became the input in the building of the competency model.
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Nieves Carrera, Nieves Gómez‐Aguilar, Christopher Humphrey and Emiliano Ruiz‐Barbadillo
In recent international debates on auditing regulation, Spain has assumed a real prominence as a claimed practical example of where a policy of mandatory audit firm rotation did…
Abstract
Purpose
In recent international debates on auditing regulation, Spain has assumed a real prominence as a claimed practical example of where a policy of mandatory audit firm rotation did not work and was duly abolished. This study aims to provide an analysis of the implementation and subsequent removal of mandatory audit firm rotation in Spain in the 1990s.
Design/methodology/approach
This takes the form of historical analysis; the evidence in the paper derives from congressional hearings, financial newspapers and documents produced by the professional associations of auditors in Spain.
Findings
This paper demonstrates that at no stage was mandatory rotation of audit firms ever enforced on Spanish auditors. Further, the revision and subsequent removal of the Spanish law on mandatory audit firm rotation emerge as a rather politicized process, with no evident reference being made in the process of legislative reform to Spanish auditing experiences. The analysis also reveals that at the very time that Spain was being cited internationally for rejecting mandatory audit firm rotation, Spanish political parties and regulators were debating whether to “re‐introduce” such a regulation.
Originality/value
The clear implication of the paper is that considerable caution needs to be taken in today's international‐auditing arena, when analyzing the standpoints and claims made by professional associations and the evidence they provide to support their arguments for and against regulatory reform.
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Bryan Lowes and George Luffman
The past decade has witnessed a heated debate in the Western industrial nations about whether or not large companies should accept broader social obligations commensurate with…
Abstract
The past decade has witnessed a heated debate in the Western industrial nations about whether or not large companies should accept broader social obligations commensurate with their great power. This debate has been useful in highlighting the social pressures to which large companies are being subjected. It has also served to stimulate interest in the possibility of a wider, stakeholder ethos for guiding management decision‐making. The restricted profit‐making role historically assigned to business has been challenged in favour of a more radical alternative, which acknowledges that companies have responsibilities to all their stakeholders—employees, customers and the community—as well as shareholders. And as the debate has progressed, a whole new range of potential management functions have developed, concerned with monitoring social pressures, measuring company social performance by means of social audits and guiding management decision‐making through codes of conduct.
Saleh Aly Saleh Aly, Ahmed Diab and Samir Ibrahim Abdelazim
This study aims to investigate the impact of audit fees on audit quality, the impact of audit quality on firm value and whether these effects are conditional on audit tenure by…
Abstract
Purpose
This study aims to investigate the impact of audit fees on audit quality, the impact of audit quality on firm value and whether these effects are conditional on audit tenure by bringing evidence from an emerging market.
Design/methodology/approach
Different regression techniques are used, such as logistic regression, probit regression, ordinary least squares regression and fixed effects regression. The authors used panel data of 80 nonfinancial Egyptian-listed firms over 2016–2020.
Findings
The authors found a significant positive relationship between audit fees and audit quality and a significant positive relationship between audit quality and firm value. Furthermore, the authors found that the positive relationship between audit fees and audit quality is less pronounced for higher audit tenure firms. Finally, the authors also found that the positive relationship between audit quality and firm value is stronger for lower audit tenure firms.
Originality/value
To the best of the authors’ knowledge, this is the first study to bring evidence from an emerging African market about the joint association between audit tenure, audit fees, audit quality and firm value. It provides beneficial insights to regulators regarding the possibility and the benefits of improving audit quality, which is critically needed in contexts with weak governance systems.
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Michael Crockett and Muhammad Jahangir Ali
The purpose of this paper is to examine the efficacy of the current legislative provisions that protect auditor independence in Australia. The collapses of several high-profile…
Abstract
Purpose
The purpose of this paper is to examine the efficacy of the current legislative provisions that protect auditor independence in Australia. The collapses of several high-profile companies (Enron and WorldCom in the USA, HIH insurance and OneTel in Australia) in the early 2000s has raised questions about audit quality and independence. In response, regulators have introduced new regulations and guidance to improve audit quality. In Australia, the Corporations Act 2001 (2001) was amended via the Corporate Law Economic Reform Program Act 2004. This study poses the question: do non-audit service fees influence the level of accounting conservatism?
Design/methodology/approach
The sample used in this analysis consists of all available Australian listed companies from the years 2006 till 2010.
Findings
Using multiple measures of accounting conservatism and the auditor-client economic bond, our results suggest that the level of the economic bond between the auditor and the client does not significantly influence the level of accounting conservatism.
Originality/value
Our results demonstrate that the combination of intrinsic market mechanisms and regulation in Australia sufficiently protect auditor independence.
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Azam Abdelhakeem Khalid, Hasnah Haj Haron and Tajul Ariffin Masron
This paper aims to examine the characteristics influencing internal Shariah audit effectiveness in Islamic financial institutions (IFIs) in Bahrain.
Abstract
Purpose
This paper aims to examine the characteristics influencing internal Shariah audit effectiveness in Islamic financial institutions (IFIs) in Bahrain.
Design/methodology/approach
Data were collected from 76 internal Shariah auditors, 23 Shariah supervisory board and 16 audit and governance committee from 52 IFIs in Bahrain. The data were analyzed using structural equation method via SmartPLS 2.0 to examine the relationship between characteristics and effectiveness of internal Shariah audit.
Findings
It was found that competency and work performance were positively significant with internal Shariah audit effectiveness. The findings revealed that the main competency of internal Shariah audit to influence effectiveness were to have professional certification and skills, while work performance to influence effectiveness were engagement planning, performing the engagement and communicating results with management and having sufficient information to provide sound opinion formed by Shariah audit.
Originality/value
From the research perspective, this is the first study that examines the relationship between internal Shariah audit characteristics and its effectiveness in Bahraini IFIs.
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Yew Ming Chia, Irvine Lapsley and Hing‐Wah Lee
This study sets out to examine the effect of the choice of auditors in constraining earnings management within a rule‐based reporting framework during the Asian financial crisis.
Abstract
Purpose
This study sets out to examine the effect of the choice of auditors in constraining earnings management within a rule‐based reporting framework during the Asian financial crisis.
Design/methodology/approach
Using the iterative seemingly unrelated regression methodology, 383 firm‐observations of service‐oriented listed companies in Singapore are analysed.
Findings
The results show that service‐oriented companies engage in income decreasing earnings management during the crisis period. More importantly, the results indicate that only the Big‐6 firms are able to significantly constrain the earnings management of managers of such companies.
Practical implications
The ability of Big‐6 firms to constrain earnings management is perceived to add credibility to the quality of reported earnings, and hence contributes to the competitive advantage of the Big‐6 firms in the market for auditing services.
Originality/value
The evidence contributes to the literature on corporate governance and the competitiveness of the market for audit services in the context of an economy‐wide financial crisis from an Asian perspective.
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Auditing involves a high degree of interaction with clients and colleagues if it is to be successful. We need therefore to be more aware of the psychological factors related to…