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Article
Publication date: 15 March 2024

Muni Kelly and Muni Kelly

The purpose of this study is to examine whether the gender of an audit engagement partner (EP) is associated with the quality of the EP’s audit output.

Abstract

Purpose

The purpose of this study is to examine whether the gender of an audit engagement partner (EP) is associated with the quality of the EP’s audit output.

Design/methodology/approach

This paper defines a low-quality EP as an EP who leads the audit of at least one client firm that subsequently restates its financial statements, while a high-quality EP is an EP that is not associated with any restatement. Using a sample of 6,082 observations from 2016 to 2020, the study estimates a logistic regression of EP quality on EP gender and control variables.

Findings

The results show that female EPs are more likely to be high-quality EPs. With an odds ratio of 1.25, the results imply that female EPs are 1.25 times more likely to be associated with higher-quality audits compared to male EPs.

Research limitations/implications

The results of this study imply that female EPs are more likely to perform high-quality audits, and it supports the assertion that EP gender plays a significant role in determining EP quality. Further studies may apply gender theory to investigate the behavior of female EPs.

Practical implications

The results show that female EPs are more likely to be high-quality EPs. With an odds ratio of 1.25, the results imply that female EPs are 1.25 times more likely to be associated with higher-quality audits compared to male EPs.

Originality/value

The results of this study should be of interest to stakeholders such as audit committees, regulators, investors and creditors, as they provide an indicator for assessing the quality of audits. Moreover, considering the EP’s important role in an audit, the current study extends the existing literature by providing evidence of a relationship between EP gender and EP quality.

Details

Journal of Accounting & Organizational Change, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1832-5912

Keywords

Article
Publication date: 8 February 2024

Md Khokan Bepari, Shamsun Nahar and Abu Taher Mollik

This paper aims to examine the perspectives of auditors, regulators and financial report preparers on the effects of key audit matters (KAMs) reporting on audit effort, fees…

Abstract

Purpose

This paper aims to examine the perspectives of auditors, regulators and financial report preparers on the effects of key audit matters (KAMs) reporting on audit effort, fees, quality and report transparency.

Design/methodology/approach

The authors conducted 21 semi-structured interviews with stakeholders (13 Audit Partners, 5 Chief Financial Officers and 3 regulators) and thematically analysed the interviews. They use the frame of “Paradox of Transparency” to explain the findings.

Findings

Auditors perceive that the overall quality control of their audits has improved both in the planning and execution stages, and such improvement can mostly be attributed to the coercive pressures from professional bodies and regulators. Nevertheless, audit fee remains unchanged. Auditors disclose industry generic items and descriptions of KAMs, sometimes masking the real problem areas of the clients. Even after improving the performative audit quality, transparency of audit reporting has not improved. Issues that warrant going concern qualifications or audit report modifications are now reported as KAMs. Hence, KAMs reporting might make the audit report less transparent.

Practical implications

Localised audit environments and institutions affect the transparency of KAMs reporting. Without attention to corporate governance and auditors’ independence issues, paradoxically, performative improvement in audit quality (due to the KAMs reporting requirement) does not enhance the transparency of audit reports.

Originality/value

To the best of the authors’ knowledge, this study is the first to provide field-level evidence in Bangladesh and other developing countries about the perceptions of auditors, financial report preparers and regulators on the effects of KAMs reporting on audit efforts, fees, quality and report transparency.

Details

Qualitative Research in Accounting & Management, vol. 21 no. 2
Type: Research Article
ISSN: 1176-6093

Keywords

Open Access
Article
Publication date: 2 January 2024

Ewald Aschauer and Reiner Quick

This study aims to investigate why and how shared service centres (SSCs) are implemented as well as how they affect audit firm practice and audit quality.

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Abstract

Purpose

This study aims to investigate why and how shared service centres (SSCs) are implemented as well as how they affect audit firm practice and audit quality.

Design/methodology/approach

In this qualitative study guided by the theoretical framework of institutional theory, the authors conducted 25 semi-structured interviews in seven European countries, including 16 interviews with audit partners from Big 4 firms, 6 with audit team members, 2 with interviewees from second-tier audit firms and 1 with a member of an oversight body.

Findings

The authors show that the central rationale for audit firms to implement SSCs is economic rather than external legitimacy. The authors find that SSC implementation has substantial effects on audit practices, particularly those related to standardisation, coordination and monitoring activities. The authors also highlight the potential impacts on audit quality.

Originality/value

By exploring the motivation for and effects of SSC implementation amongst audit firms, the authors offer insights into the best practices related to subsequent change processes and audit quality.

Details

Accounting, Auditing & Accountability Journal, vol. 37 no. 9
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 11 May 2023

Naruanard Sarapaivanich, Erboon Ekasingh, Jomjai Sampet and Paul Patterson

This study examines how professional service firms' communication effectiveness (affiliative communications style, social dialogue and information provision), social cognitive…

Abstract

Purpose

This study examines how professional service firms' communication effectiveness (affiliative communications style, social dialogue and information provision), social cognitive capital and rapport established between an auditor and SME client are instrumental in influencing the latter's evaluation of the technical quality of an audit.

Design/methodology/approach

The study combines qualitative and quantitative methodologies to create a cross-sectional survey covering four geographic regions in an emerging economy – Thailand. The authors examine the hypotheses by employing social interaction theory.

Findings

A study of 744 SME executives plus post-survey interviews with three audit partners revealed that an affiliative communications style and information provision are positively associated with the rapport developed between financial auditor and client, and that rapport, in turn, had a strong association with client perceptions of audit quality. In addition, affiliative communication style, information provision and social cognitive capital had a direct (positive) association with perceptions of audit quality. The effects of communication effectiveness and social cognitive capital varied, depending on whether or not the SME client possessed formal accounting qualifications.

Originality/value

The study contributes to the literature on the business-to-business professional services, and accounting in particular, by explicating the important roles of communication effectiveness, rapport, and social cognitive capital in the relationship between an auditor and a client. Moreover, the paper reveals that the differences in educational background of clients result in differential impacts of communication effectiveness and social cognitive capital on rapport and perceptions of audit quality.

Details

Journal of Accounting in Emerging Economies, vol. 14 no. 2
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 17 March 2023

Yulianti Yulianti, Mohammad Wahyudin Zarkasyi, Harry Suharman and Roebiandini Soemantri

This study aims to examine the effect of professional commitment, commitment to ethics, internal locus of control and emotional intelligence on the ability to detect fraud through…

Abstract

Purpose

This study aims to examine the effect of professional commitment, commitment to ethics, internal locus of control and emotional intelligence on the ability to detect fraud through reduced audit quality behaviors.

Design/methodology/approach

The analysis unit is the internal auditor in internal control unit at state Islamic religious higher education in Indonesia. Data processing used covariance-based structural equation modeling using Lisrel Software and the Sobel test to verify the direct and indirect effects.

Findings

This study found empirical evidence that professional commitment and emotional intelligence positively impact the ability to detect fraud. Commitment to ethics and emotional intelligence has a negative effect on reduced audit quality behaviors. Furthermore, this study also provides that commitment to ethics and emotional intelligence indirectly impacts on the ability to detect fraud through reduced audit quality behaviors.

Practical implications

The organization periodically monitors auditors’ behaviors, especially reduced audit quality behaviors, during the audit process and encourages regulators to formulate policies related to increasing the ability to detect fraud.

Originality/value

This study provides knowledge regarding the driving force of internal auditors to mitigate reduced audit quality behaviors and increase the ability to detect fraud.

Details

Journal of Islamic Accounting and Business Research, vol. 15 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 3 November 2023

Kriengkrai Boonlert-u-thai, Pattanaporn Chatjuthamard, Suwongrat Papangkorn and Pornsit Jiraporn

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is…

Abstract

Purpose

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is influenced by the discipline of the takeover market. External auditors and the takeover market both function as important instruments of external corporate governance.

Design/methodology/approach

The authors execute a standard regression analysis and run a variety of robustness checks to minimize endogeneity, namely, propensity score matching (PSM), entropy balancing, an instrumental-variable analysis, Generalized method of moment (GMM) dynamic panel data analysis and Lewbel's (2012) heteroscedastic identification.

Findings

The authors’ immense sample spans half a century, encompassing nearly 180,000 observations and 17 takeover-related state legislations, one of the largest samples in the literature in this area. The authors’ results suggest that firms with more takeover exposure are significantly less likely to use Big N auditors. Therefore, a more active takeover market results in poorer external audit quality, corroborating the substitution hypothesis. The discipline of the takeover market substitutes for the necessity for a high-quality external auditor. Specifically, a rise in takeover susceptibility by one standard deviation lowers the probability of using a Big N auditor by 4.29%.

Originality/value

The authors’ study is the first to examine the effect of the takeover over market on audit quality using a novel measure of hostile takeover susceptibility mainly based on the staggered implementation of state legislation. Because the enactment of state legislation is beyond the control of any firm individually, it is plausibly exogenous. The authors’ results therefore probably reflect a causal influence rather than merely a correlation.

Details

Managerial Finance, vol. 50 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 17 October 2023

Peter Kodjo Luh

This study aims to examine how woman leadership (i.e., woman board chairperson, woman chief executive officer (CEO) and board gender diversity) affects audit fee and also…

Abstract

Purpose

This study aims to examine how woman leadership (i.e., woman board chairperson, woman chief executive officer (CEO) and board gender diversity) affects audit fee and also ascertained the interactive effect of woman leadership and gender diversity on audit committee on audit fee.

Design/methodology/approach

The study applied ordinary least square and fixed-effect estimators on the data of 21 universal banks in Ghana for the period 2010–2021 to estimate the empirical results.

Findings

It is revealed that under the leadership of women (woman CEO and board gender diversity), higher external audit quality is ensured as higher audit fee is paid. Interestingly, it was found that with the presence of women on the audit committee, the integrity of internal controls and internal audit procedures are enhanced, which leads to quality financial reporting, calls for lower audit effort, hence lower audit fee.

Practical implications

The result indicates that firms can rely on the leadership of women in ensuring quality external audit and quality financial reporting, which ultimately helps to minimize the information risk to all stakeholders.

Originality/value

The paper contributes to extant literature by establishing that, under the leadership of women in banking entities from a developing country context, external audit quality and financial reporting are achieved.

Details

Gender in Management: An International Journal , vol. 39 no. 3
Type: Research Article
ISSN: 1754-2413

Keywords

Open Access
Article
Publication date: 27 November 2023

Gianluca Ginesti, Rosalinda Santonastaso and Riccardo Macchioni

This paper aims to investigate the impact of family involvement in ownership and governance on the quality of internal auditing.

Abstract

Purpose

This paper aims to investigate the impact of family involvement in ownership and governance on the quality of internal auditing.

Design/methodology/approach

Leveraging a hand-collected data set of listed family firms from 2014 to 2020, this study uses regression analyses to investigate the impact of family ownership, family involvement on the board, family CEO and the generational stage of the family business on the quality of internal auditing.

Findings

The results provide evidence that family ownership is positively associated with the quality of internal auditing, while later generational stages of family businesses have the opposite effect. Additional analyses reveal that the presence of a sustainability board sub-committee moderates the relationship between generational stages of family businesses and the quality of internal auditing function.

Research limitations/implications

This paper does not consider country-institutional factors and other potentially family-related antecedents or governance factors that may affect the quality of internal auditing.

Practical implications

The results are informative for investors and non-family stakeholders interested in understanding under which conditions family-related factors influence the quality of internal auditing functions.

Originality/value

This study offers fresh evidence regarding the relationship between family-related factors and the quality of internal auditing and board sub-committees that moderate such a relationship in family businesses.

Details

Corporate Governance: The International Journal of Business in Society, vol. 24 no. 8
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 11 March 2024

Devon Jefferson

This paper’s objective is to provide a systematic literature review of the contextual factors affecting downward communication from supervisors to subordinates in the audit…

Abstract

Purpose

This paper’s objective is to provide a systematic literature review of the contextual factors affecting downward communication from supervisors to subordinates in the audit environment. In addition, this review identifies emerging research themes and directions for future research.

Design/methodology/approach

I accomplish this review’s objectives by leveraging communication literature to establish a framework to identify and synthesize contextual factors affecting downward communication in the audit environment. The review identifies 50 published articles in the last 20 years from leading accounting and auditing journals.

Findings

This study consolidates research findings on downward communication under two primary contextual factors: (1) message and (2) channel. Findings indicate that empirical research examining communication in audit is fragmented and limited. Studies examining the message focus heavily on its content and treatment in the areas of feedback, nonverbal cues, and fraud brainstorming, and a handful of additional studies examine the effectiveness of the channel in these areas. Additional research is needed to understand a broader set of supervisor–subordinate communication practices, including those that are computer-mediated, and their effect on subordinate auditors’ judgments and behaviors in the contemporary audit environment.

Originality/value

Much of the audit literature examining communication to date is topic-versus construct-based, making it difficult to see how the research findings relate to one another. This review is the first to synthesize the literature to provide academics recommendations for a way forward, and inform practitioners of communication practices whereby supervisors can be trained to improve audit quality.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 31 May 2023

Nathanaël Betti, Steven DeSimone, Joy Gray and Ingrid Poncin

This research paper aims to investigate the effects of internal audit’s (IA) use of data analytics and the performance of consulting activities on perceived IA quality.

Abstract

Purpose

This research paper aims to investigate the effects of internal audit’s (IA) use of data analytics and the performance of consulting activities on perceived IA quality.

Design/methodology/approach

The authors conduct a 2 × 2 between-subjects experiment among upper and middle managers where the use of data analytics and the performance of consulting activities by internal auditors are manipulated.

Findings

Results highlight the importance of internal auditor use of data analytics and performance of consulting activities to improve perceived IA quality. First, managers perceive internal auditors as more competent when the auditors use data analytics. Second, managers perceive internal auditors’ recommendations as more relevant when the auditors perform consulting activities. Finally, managers perceive an improvement in the quality of relationships with internal auditors when auditors perform consulting activities, which is strengthened when internal auditors combine the use of data analytics and the performance of consulting activities.

Research limitations/implications

From a theoretical perspective, this research builds on the IA quality framework by considering digitalization as a contextual factor. This research focused on the perceptions of one major stakeholder of the IA function: senior management. Future research should investigate the perceptions of other stakeholders and other contextual factors.

Practical implications

This research suggests that internal auditors should prioritize the development of the consulting role in their function and develop their digital expertise, especially expertise in data analytics, to improve perceived IA quality.

Originality/value

This research tests the impacts of the use of data analytics and the performance of consulting activities on perceived IA quality holistically, by testing Trotman and Duncan’s (2018) framework using an experiment.

Details

Journal of Accounting & Organizational Change, vol. 20 no. 2
Type: Research Article
ISSN: 1832-5912

Keywords

1 – 10 of 642