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1 – 10 of over 1000In the fourth industrial revolution, where business accounting integrates with automation through artificial intelligence (AI) and information communication technology (ICT)…
Abstract
Purpose
In the fourth industrial revolution, where business accounting integrates with automation through artificial intelligence (AI) and information communication technology (ICT), auditors must be able to access and analyze vast data and information to identify potential risks and issues. Using data analytics and AI to study significant amounts of data linked to audits, this study aims to investigate auditing practices by leveraging ICT and AI to enhance the audit process.
Design/methodology/approach
Bibliometric and quantitative research techniques have been used in the study’s mixed-method process. The theoretical underpinnings of AI have been investigated using the bibliometric research method, and the challenge of implementing ICT-enabled auditing practices among auditing professionals has been studied using the quantitative research method. Surveys, interviews and bibliometric analysis have all been used as data-gathering techniques.
Findings
Research in AI and auditing has a broad worldwide scope, involving developed and developing nations. ICT perceived benefits have no direct effect on auditing practices. However, ICT training has a mediating effect on the relationship between ICT perceived benefits and auditing practices. ICT adoption has no moderating effect on the relationship between ICT training and auditing practices.
Research limitations/implications
Findings have significance for lead auditors, policymakers and the Institute of Chartered Accountants of India (ICAI), who are keenly interested in upgrading the auditing practice of accounting professionals in India by incorporating AI and ICT determinants.
Practical implications
This research makes a significant contribution by offering a thorough framework for improving the knowledge management of practising auditors regarding ICT adoption, training and perceived benefits, a crucial component of auditing practices in the digital age. In addition, it provides insightful information about how AI affects accounting practices, which may point the way for further study in this area.
Originality/value
This research has significant implications for auditing firms in India. It can inform ICAI, policymakers and regulators in their attempts to foster the incorporation of AI and ICTs in auditing practice.
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This paper aims to examine the effect of conditional conservatism on audit fees and whether the firm’s engagement in sustainable practices moderates the relationship between…
Abstract
Purpose
This paper aims to examine the effect of conditional conservatism on audit fees and whether the firm’s engagement in sustainable practices moderates the relationship between conditional conservatism and audit fees.
Design/methodology/approach
Using a sample of 3,767 firm-year observations from 14 European Union countries over the period of 2006–2019, the authors adopt the ordinary least square estimator to perform a panel data analysis of the effect of conditional conservatism on audit fees, and the moderating role of the environmental, social and governance (ESG) scores on the relationship between conditional conservatism and audit fees.
Findings
The authors find that conditional conservatism has a significant negative effect on audit fees, suggesting that auditors charge lower audit fees on more conservative clients. The authors also find that firms engaging in ESG actions, whether combined or individual, pay higher audit fees. More interestingly, the authors provide evidence that the negative effect of conditional conservatism on audit fees is mitigated only when ESG performance is considered in combination. This implies that firms exhibiting less commitment to ESG sustainability practices are prone to paying reduced audit fees when engaged in more conservative reporting. The findings remain robust after conducting a battery of tests.
Practical implications
The findings of this study have practical implications for several parties, including companies, auditors and regulators. This study emphasizes the potential benefit associated with using conservative accounting practices in terms of shaping downward the amount of audit fees. However, it also highlights the importance of considering the additional audit costs associated with higher ESG scores when making decisions about implementing sustainable practices.
Originality/value
Unlike prior studies that investigate the direct impact of sustainable practices on audit fees, the present work contributes to the literature on the benefits and costs of ESG by examining the moderating role of ESG performance in the association between audit fees and conditional conservatism. To the best of the authors’ knowledge, this study is the first to examine this relationship. Theoretically, the research integrates the theories of audit risk and agency to provide a more comprehensive understanding of the drivers of audit fees.
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In a rapidly changing career landscape where lifelong job security is no longer guaranteed, this study investigates how audit firms play an important role in shaping their…
Abstract
Purpose
In a rapidly changing career landscape where lifelong job security is no longer guaranteed, this study investigates how audit firms play an important role in shaping their employees’ career perceptions and the subsequent effects on auditor behavior. Specifically, it explores the link between audit firms’ career development initiatives and auditors’ perceptions of external employability – an important determinant of auditor behavior. Using the framework of social exchange theory, the study investigates how perceived external employability affects both relational and operational behaviors of auditors.
Design/methodology/approach
The study employs structural equation modeling on survey data from 359 auditors.
Findings
The results indicate that when audit firms actively support career development, it positively contributes to auditors’ perceived external employability. A higher perceived external employability, in turn, leads to positive behavioral outcomes among auditors, including stronger relational behaviors (such as professional commitment) and operational behaviors (including heightened professional skepticism and reduced behaviors that could compromise audit quality).
Originality/value
This study uncovers a paradox where perceived external employability, typically viewed as a risk, emerges as a potent driver of desirable auditor behavior. In today’s dynamic career landscape, emphasizing individual-centered and flexible careers, these results highlight the benefits of perceived external employability. Rather than undermining audit services, increased perceived external employability driven by firm investments in auditors’ careers acts as a catalyst for desirable auditor behavior. Organizational support in terms of career development practices creates an environment where auditors are more committed, professionally skeptical and uphold the quality of audit services.
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Rasha Kassem and Kamil Omoteso
Using a qualitative grounded theory approach, this study explores the methods experienced external auditors use to detect fraudulent financial reporting (FFR) during standard…
Abstract
Purpose
Using a qualitative grounded theory approach, this study explores the methods experienced external auditors use to detect fraudulent financial reporting (FFR) during standard audits.
Design/methodology/approach
Semi-structured interviews were conducted with 24 experienced external auditors to explore the methods they used to detect FFR successfully during standard external audits.
Findings
The authors find 58 methods used for FFR detection, out of which the following methods are frequently used and help in detecting more than one type of FFR: (1) specific analytical procedures, (2) positive confirmation, (3) understanding of the client's business and industry, (4) the inspection of specific documents, (5) a detailed analysis of the audit client's anti-fraud controls and (6) investigating tip-offs from suppliers, employees and customers.
Research limitations/implications
Based on the grounded theory approach, the authors theorise that auditors must return to the basics and focus on specific audit procedures highlighted in this study for effective fraud detection.
Practical implications
The study provides practical guidance, including 58 methods used in audit practice to detect FFR. This knowledge can improve auditors' skills in detecting material misstatements due to fraud. Besides, analytical procedures and positive confirmation helped external auditors in this study detect all forms of FFR, yet they are overlooked in the external audit practice. Therefore, audit firms should emphasise the significance of these audit procedures in their professional audit training programmes. Audit regulators should advise auditors to consider positive confirmation instead of negative confirmation in financial audits to increase the likelihood of FFR detection. Moreover, audit standards (ISA 240 and SAS 99) should explicitly require auditors to conduct a detailed analysis of the client's anti-fraud controls.
Originality/value
This is the first study to identify actual, effective methods used by external auditors in detecting FFR during the ordinary course of an audit.
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Phuong Thi Nguyen, Michael Kend and Dung Quang Le
This study aims to explore some perceptions related to the suggestion that external auditors will be replaced by audit technologies that use artificial intelligence (AI) tools to…
Abstract
Purpose
This study aims to explore some perceptions related to the suggestion that external auditors will be replaced by audit technologies that use artificial intelligence (AI) tools to make audit judgements when performing the financial statement audits. Digital transformation is revitalising the technologies used by external auditors and their firms; thus, the authors seek to understand what challenges this creates for the auditing profession in Vietnam.
Design/methodology/approach
Through the theoretical lens of new institutionalism theory, this study uses a qualitative approach involving 20 semi-structured interviews conducted with external auditors in Vietnam during 2022. This sample includes the global Big Four, global mid-tier and smaller local Vietnamese audit firms.
Findings
The findings indicate that there is resistance or disagreement with the suggestion that in the future audit technologies using AI tools can replace humans (external auditors). The role of external auditors in the professional services sector will gradually be changed by audit technologies; however, external auditors are unlikely to be replaced by audit technologies that use AI tools based on the responses of the participants. Strict institutional rules that exist in Vietnam would prevent the replacement of (human) external auditors. In the future, external auditors may take on new roles as consultants, with unique skills in classifying and processing data for decision-making processes; however, they will not be completely replaced by technology in the audit space.
Research limitations/implications
This study has limitations that it is based on the data collection from a single developing country, Vietnam; therefore, the generalisability of the findings is limited to Vietnam. Also, the authors sought insights into the future of external audits in Vietnam.
Practical implications
This study highlights the changing role of auditors and institutions. Thus, policymakers, external auditors and auditees in other developing countries would find the findings helpful.
Originality/value
This study provides new perspectives, particularly from local Vietnamese firms, about audit practices that emerge due to high-level technological advancements and then embed themselves into existing audit practices in an emerging economy. Prior studies tended to focus on the global Big Four firms, thus this study contributes by sharing the perceptions of the smaller practitioners also.
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Mohamed Khaled Eldaly, Ahmed A. Elamer and Magdy Abdel-Kader
This study aims to examine the effects of the entry of foreign direct investments (FDIs) on the audit markets in developing countries (i.e. Egypt). There is a long-standing debate…
Abstract
Purpose
This study aims to examine the effects of the entry of foreign direct investments (FDIs) on the audit markets in developing countries (i.e. Egypt). There is a long-standing debate on the impact of FDIs on developing markets, but little is still known about the effect of FDI on national suppliers, such as audit firms.
Design/methodology/approach
This paper reports the results of a study that used qualitative research methods. It involves interviews with senior management teams of the Big 4 audit firms, to find out how these firms deal simultaneously with conflicting global and local influences. The interviews were complemented by the publicly available data on the firms’ websites as well as published reports related to the Egyptian economy and current investment regulations.
Findings
Drawing on the institutional theory, the findings suggest that an increased litigious environment, compliance with developed markets’ regulations, auditor regulatory sanctions and improved local accounting and auditing standards are highly significant consequences of foreign investment inflows. The findings indicate that more emphasis has been given to the quality of audit and auditors’ independence when auditing FDIs. Both audit regulators and audit firms in the domestic market pay higher attention to improving the quality of financial reports when FDIs have entered the market. More inspections and reviews for audit firms have been conducted, and local auditing and accounting standards have been revised to be in compliance with international standards.
Research limitations/implications
Our results have important implications for investors, regulatory authorities and governments in relation to the development, implementation and enforcement of international financial reporting and auditing standards.
Originality/value
Policymakers and regulators in Egypt have responded to international pressure by revitalizing their local accounting and auditing standards and adopting international financial reporting and auditing standards. The authors identify strategies that have been adopted by audit firms to face the FDIs’ challenges.
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Rasha H. Majeed and Alaa A.D. Taha
This paper seeks to investigate the factors influencing auditors' behavioural intentions towards blockchain technology (BT) adoption in Iraqi government banks. It also highlights…
Abstract
Purpose
This paper seeks to investigate the factors influencing auditors' behavioural intentions towards blockchain technology (BT) adoption in Iraqi government banks. It also highlights the relationships between these factors to determine if the proposed model can provide a more comprehensive means of comprehending how auditors in government banks have adopted BT.
Design/methodology/approach
The study uses the unified theory of acceptance and use of technology and expands it by incorporating five external constructs: “system trust”, “cost”, “transparency”, “security” and “auditor's skill.” This study employed a quantitative and exploratory methodology through the gathering and examination of data from 300 auditors. For the evaluation of the measurement and structural models, the authors adopted the partial least squares structural equation modelling approach with SmartPLS v4.
Findings
The findings demonstrate that “auditor's skill and four government features of BT adoption” are major factors in government bank auditors' adoption of BT. Additionally, the findings indicate that social influence is a potent indicator of one's intention to adopt BT in the banking industry.
Research limitations/implications
One limit of this study is the selection of governmental perspective. This study is limited to auditors' opinions, who work at the government banks. Further studies may consider other perspectives in order to provide an in-depth analysis of blockchain.
Practical implications
This paper offers valuable insights into the factors influencing the adoption of blockchain technology in Iraqi governmental banks. It provides empirical evidence supporting auditing units and internal auditors in enhancing their job performance through the adoption of such technology.
Originality/value
This study contributes to the existing literature on technology adoption within the audit profession, specifically examining the use of blockchain technology. By exploring the features of technology adoption within government institutions in the auditing field, it introduces a new perspective, emphasizing the importance of auditor skills.
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The purpose of this paper was to study the direct impact of audit quality on environmental, social and governance (ESG) transparency. It aimed also to investigate the moderating…
Abstract
Purpose
The purpose of this paper was to study the direct impact of audit quality on environmental, social and governance (ESG) transparency. It aimed also to investigate the moderating effect of media coverage on the relationship between audit quality and ESG transparency in the USA.
Design/methodology/approach
The sample consisted of US companies listed in the Standard and Poor’s 500 Stock Index between 2010 and 2019. The Thomson Reuters database was used to collect ESG disclosure scores and governance information. The authors applied multiple panel data regressions.
Findings
The results showed that audit quality has a direct positive effect on ESG transparency. The findings also showed that the high exposure to public media by firms, the more they commit to high audit quality leading to disclose more transparent ESG information.
Research limitations/implications
The results illustrated the significance of an external audit on an organization’s ESG report. Second, improving data quality has significant consequences not only for rating agencies but also for investors, businesses and researchers. These steps are required to increase the information content of ESG ratings.
Originality/value
The findings demonstrated that third-party external verification improves the dependability of nonfinancial reporting, hence bridging the confidence gap between corporations and the market regarding sustainability reporting.
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Shilin Liu, Noor Adwa Sulaiman and Suhaily Shahimi
Using attribution theory, this study examined the effects of situational factors [time budget pressure (TBP), organisational ethical culture (OEC) and quality control procedures…
Abstract
Purpose
Using attribution theory, this study examined the effects of situational factors [time budget pressure (TBP), organisational ethical culture (OEC) and quality control procedures (QCPs)] and dispositional factors [auditor professional commitment (APC) and internal locus of control (ILOC)] on audit quality threatening behaviour (AQTB). In addition, it observed the moderating role of religiosity in the relationship between situational and dispositional factors and AQTB.
Design/methodology/approach
A total of 189 external auditors responded to the survey questionnaire. This study employed structural equation modelling via SmartPLS to analyse the proposed model.
Findings
The results documented that the OEC and QCPs situational factors were negatively related to the incidence of AQTB, whilst TBP was positively linked to the incidence of AQTB. Dispositional factors APC and ILOC were negatively connected to AQTB. Furthermore, the findings recorded the moderating effect of religiosity on most of the situational and dispositional factors related to AQTB.
Practical implications
Regulators and accounting firms' efforts to promote high audit quality (AQ) may consider the theological/religious lens and reinforce ethical culture and quality control to reduce AQTB.
Originality/value
The findings provide further insights into situational and dispositional factors that may cause or impede the incidence of AQTB in auditing practices, as well as the moderating role of religiosity in curbing AQTB.
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Zayyad Abdul-Baki and Ahmed Diab
The purpose of this study is to examine both the responses of auditees to corporate governance audit (CGA) regulation and the practices of CGA auditors.
Abstract
Purpose
The purpose of this study is to examine both the responses of auditees to corporate governance audit (CGA) regulation and the practices of CGA auditors.
Design/methodology/approach
The study used a mixed method. Content analysis of 200 annual and CGA reports was carried out for 13 years, from 2008 to 2021, split into voluntary disclosure and mandatory disclosure periods. Quantitative analysis was also conducted using Kruskal–Wallis and Dunn's tests. Data gathered were interpreted through the lens of isomorphism and Oliver's (1991) strategic responses to institutional processes.
Findings
The study revealed that in the voluntary disclosure period, auditees responded mainly with acquiescence, motivated by mimetic isomorphic pressure. In the mandatory disclosure period, auditee responses ranged from acquiescence to dismissal of corporate governance regulation (i.e. coercive isomorphic pressure). Auditor reporting of CGA findings was found to be heterogeneous, suggesting that normative and mimetic isomorphism did not homogenize auditor practices.
Practical implications
The absence of uniform auditee responses to CGA regulation during the mandatory disclosure period suggests that the purpose of mandating the regulation has not yet been achieved and may signal inadequate coercive isomorphic pressure from the Financial Reporting Council of Nigeria (FRCN). Similarly, heterogeneous reporting of CGA findings by corporate governance auditors inhibits the comparability of audit findings, limiting their value for information users.
Originality/value
This study examines corporate governance auditor practices and auditee responses to corporate governance audit regulation.
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