Search results

1 – 10 of over 41000

Abstract

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-0-76231-393-8

Article
Publication date: 10 March 2022

Kam-Wah Lai

Regulators treat all non-audit services the same by using a broad-brush approach which is reflected in the study of total non-audit fees in the same analyses or different…

Abstract

Purpose

Regulators treat all non-audit services the same by using a broad-brush approach which is reflected in the study of total non-audit fees in the same analyses or different non-audit fees in isolation by prior studies. To know whether the non-audit services have different effects and hence, should be regulated separately, this paper compares their effects on audit report lag and examines whether they follow the implied hierarchy of the Securities and Exchange Commission.

Design/methodology/approach

The effects of audit-related non-audit fees, tax fees and other non-audit fees are compared in an audit report lag model to determine whether they are the same statistically. Supporting tests for audit quality use discretionary accruals and the reporting of a small profit or small positive change in profit.

Findings

This paper finds that different non-audit fees do not have the same effects on report lag and partial support for the implied hierarchy of the Commission. Specifically, for large accelerated filers, audit-related fees and tax fees have the same negative effects on report lag but other non-audit fees are unrelated to report lag. Tests of audit quality suggest that auditors do not compromise audit quality.

Research limitations/implications

Different non-audit services are unique in their spillover effects and deserve individual attention. Audit practitioners could be more comfortable in providing audit-related non-audit or tax services for audit clients since these services could facilitate audit work without compromising independence. On the other hand, they should be cautious about the provision of other non-audit services because the services do not enhance the efficiency of audit work and without such a benefit to audit clients, the provision may create issues of perceived independence.

Practical implications

Insight is limited by the types of disclosure of non-audit fees available and the lack of internal measures of audit efficiency.

Originality/value

The results provide deeper insight into the knowledge spillover theory and prior studies which implicitly assume all non-audit services having the same effect. The results suggest that the services should be regulated each on its own but not in a bundle. Last, this paper provides the first evidence that audit-related non-audit fees reduce report lag.

Details

Journal of Applied Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 25 August 2021

Athuman Kalokola Mahyoro and Pendo Shukrani Kasoga

The purpose of this study is to examine how the level of attributes of the internal audit function relates to the effectiveness of internal audit services in local…

Abstract

Purpose

The purpose of this study is to examine how the level of attributes of the internal audit function relates to the effectiveness of internal audit services in local government authorities (LGAs) in Tanzania.

Design/methodology/approach

Data have been collected through a survey whereby 510 respondents from LGAs in Tanzania through their Heads of Internal Audit Functions, Internal Auditors and Chairpersons of Audit Committees respond to the questionnaire. The data were subjected to principal component analysis and exploratory factor analysis to reduce the set of items and to provide continuous scores for use in multiple regression analyses.

Findings

The findings reveal that audit quality; organization setting and auditee attributes have a significant positive influence on the effectiveness of internal audit services in LGAs in Tanzania.

Research limitations/implications

The study covered only LGAs in Tanzania. Future research in this field should address the gaps identified in the study.

Practical implications

This paper highlights areas that need management attention on the improvement of the effectiveness of internal audit units.

Originality/value

This paper contributes to the literature of both internal auditing and management studies by linking the level of attributes of internal audit function which are audit quality, organization setting, auditee attributes and effectiveness of internal audit services in Tanzania.

Details

Managerial Auditing Journal, vol. 36 no. 7
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 25 October 2021

Emiliano Ruiz-Barbadillo and Jennifer Martínez-Ferrero

Sustainability assurance services are carried out in a competitive market where a wide range of assurance providers operate without the need for any specific professional…

Abstract

Purpose

Sustainability assurance services are carried out in a competitive market where a wide range of assurance providers operate without the need for any specific professional qualifications, competencies or skills. Assurance providers have heterogeneous professional backgrounds and experiences that lead to substantial diversity in sustainability assurance quality levels. This paper aims to provide an understanding of sustainability assurance quality. From a legitimacy perspective, the authors focus on the choice of assurance providers by exploring why a company voluntarily chooses an incumbent financial auditor to jointly provide audit and sustainability assurance services. The authors argue that to avoid the legitimacy threats undermining stakeholders’ confidence in the sustainability information disclosed, companies should only choose their incumbent financial auditors to provide sustainability assurance services when these auditors possess the professional attributes associated with sustainability assurance quality.

Design/methodology/approach

This study develops regression models for an international sample for 2007–2016, where the authors analyze why a company voluntarily chooses an incumbent auditor to jointly provide audit and sustainability assurance services from a legitimacy theory perspective.

Findings

Evidence confirms that the choice of incumbent auditors as assurance providers is more likely when these providers are more specialized in the industry. The authors also find that independence does not play a significant role in this decision. Therefore, an assurance provider’s industry specialization can be understood as an attribute that is associated with sustainability assurance quality and one which limits the legitimacy threats caused by a lack of sufficient sustainability knowledge.

Practical implications

Given that companies have complete freedom when choosing their assurance providers, the selection of a high-quality incumbent auditor is an indirect measure of social commitment and a mechanism to improve public trust. The results confirm that it is fundamental for firms to understand the situations when choosing an incumbent financial auditor to provide sustainability assurance services is the best way to ensure firm legitimacy while obtaining higher sustainability assurance quality due to the spillover effect. This paper provides useful evidence for firms and managers who can become aware that the legitimacy threat associated with the auditing profession’s questionable competence to conduct efficient sustainability assurance engagements can be reduced if they hire an incumbent financial auditor with greater industry specialization. For assurance providers, the results are especially useful, as they should know that companies will be more likely to choose their incumbent financial auditor when that auditor possesses certain professional attributes, like industry specialization. The ability to assimilate and exploit the knowledge gained through auditing activities can be improved even more by specialization, which enhances sustainability assurance quality.

Social implications

From a social perspective, stakeholders perceive industry specialization as an indicator of the professional skills necessary to increase both the real and perceived quality of sustainability assurance services, thereby limiting the legitimacy threat arising from a lack of sustainability knowledge. The evidence also provides valuable results for regulatory bodies, as it shows that firms are not able to address the legitimacy gap caused by stakeholders’ perceptions that incumbent financial auditors can easily be controlled by companies. Thus, doubts arise as to whether this joint provision undermines auditor independence. Precisely, these doubts about assurance provider independence can erode public confidence in assurance and devalue the quality of the service. The results of this paper highlight the need to strengthen regulation on sustainability reporting and assurance. The advances and relevance of sustainable development in recent years and in future agendas require a firm commitment to sustainability reporting and assurance of quality, reliability, integrity and confidence.

Originality/value

First, this study contributes to recent empirical studies that focus on the role of sustainability assurance services in the legitimation process of corporate sustainability reporting. However, while that research analyzes how the legitimacy theory explains the voluntary adoption of sustainability assurance, this paper adds to the literature by presenting evidence about why certain incumbent auditors are appointed to carry out sustainability assurance services. Second, this paper contributes to the sustainability assurance quality literature. Third, unlike previous studies that have regressed various client-specific and institutional factors that influence firms’ decisions to choose assurance providers, this study contributes to the research by providing knowledge about a set of professional features that may explain the decision model of assurance providers selection from a legitimacy perspective.

Details

Sustainability Accounting, Management and Policy Journal, vol. 13 no. 2
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 31 August 2012

Magdy S. Farag and Rafik Z. Elias

The purpose of this study is to examine the impact of public accounting firms' mix of service revenue on their average productivity measured by total revenue per partner.

1989

Abstract

Purpose

The purpose of this study is to examine the impact of public accounting firms' mix of service revenue on their average productivity measured by total revenue per partner.

Design/methodology/approach

Using data from Public Accounting Report on top public accounting firms by revenue, an OLS regression model is applied by regressing revenue per partner on the percentage of revenue generated from auditing and attest, tax, management consulting, and other services independently.

Findings

Results show that the proportion of auditing and attest service revenue is negatively associated with public accounting firms' productivity. However, the proportion of other services revenue, other than tax and management consulting services, is positively associated with productivity. Additional investigation shows that if public accounting firms provide other services in their mix of services, then tax and management consulting services do not contribute to these public accounting firms' productivity.

Research limitations/implications

Results of this study cannot be generalized beyond the top 100 public accounting firms, and the measurement of revenue per partner ignores the exact number of partners within different service areas.

Practical implications

Although auditing and attest services are considered core services of public accounting firms, they do not increase the productivity of the firm.

Originality/value

This study helps in assessing whether average productivity of public accounting firms is affected by the proportion of a specific type of service in the post‐SOX era.

Details

Managerial Auditing Journal, vol. 27 no. 8
Type: Research Article
ISSN: 0268-6902

Keywords

Open Access
Article
Publication date: 29 February 2016

Md Jahidur Rahman, Mo Lai Lan Phllis and Lam Mo

The purpose of this paper is to study the impact of the prohibition of certain non-audit services by the Securities and Exchange Commission (SEC) of Bangladesh on the…

Abstract

The purpose of this paper is to study the impact of the prohibition of certain non-audit services by the Securities and Exchange Commission (SEC) of Bangladesh on the profitability of the audit firms which are affiliated with Big-4 international audit firms. This paper is based on personal in-depth interviews with the Big-4-affiliated audit firms. A qualitative approach, in a way which is descriptive and illustrative, is adopted in this research. This research provides evidence for the fact that audit services are the most significant and stable source of income for an audit firm. Although respondents generally admit that non-audit services might be more profitable, they all agree that audit services are indeed the core operations of an audit firm. Findings in this paper reveal a contemporary picture of the auditing profession in Bangladesh and elucidate the impact that the implementation of Corporate Governance Order 2006 has on an audit firm's profitability. This research is the first in-depth study of the impact of the prohibition of non-audit services on the profitability of the Big-4-affiliated audit firms in Bangladesh. Financial reporting regulatory authorities in Bangladesh or other developing countries may find the findings in this paper useful.

Details

Asian Journal of Accounting Research, vol. 1 no. 1
Type: Research Article
ISSN: 2459-9700

Article
Publication date: 12 July 2013

Angela Walker and David Hay

The accounting profession has argued strongly against claims that the provision of non‐audit services to audit clients leads to impaired auditor independence, instead…

1401

Abstract

Purpose

The accounting profession has argued strongly against claims that the provision of non‐audit services to audit clients leads to impaired auditor independence, instead claiming that the joint provision of non‐audit services and audit services creates knowledge spillovers that lead to a more efficient audit. This paper seeks to provide evidence concerning knowledge spillovers by examining the association between the audit report lag and non‐audit services.

Design/methodology/approach

The authors obtained a sample of 260 firm‐year observations from the financial reports of New Zealand public companies over the period 2004‐2005 and tested for associations between non‐audit services and audit report lag, controlling for other variables.

Findings

The paper finds evidence that non‐audit services are associated with a shorter audit report lag, but that this occurs in a subsequent period, not in the year in which the services are provided.

Practical implications

The results suggest that firms purchasing non‐audit services from their incumbent auditors benefit from knowledge spillovers by achieving a shorter audit report lag, but not immediately.

Originality/value

Previous studies have examined whether there is a relationship between non‐audit services and audit report lag in the concurrent period. This paper extends tests to also examine the relationship between NAS in one year and the audit in a subsequent year. These results are more consistent with knowledge spillovers that allow a more efficient audit than they are with loss of independence by the auditor, because loss of independence would take effect immediately, while knowledge spillovers might take time.

Details

Meditari Accountancy Research, vol. 21 no. 1
Type: Research Article
ISSN: 2049-372X

Keywords

Article
Publication date: 1 October 1997

Theresa Joyce and Wendy Close

It is essential that the quality of residential services is monitored, both to identify service deterioration and to improve service quality. Current models of community…

Abstract

It is essential that the quality of residential services is monitored, both to identify service deterioration and to improve service quality. Current models of community services have produced fragmentation among service providers, and a separation of purchasers and providers. These different groups need to work together to share a vision and a model of good practice. Participation in the auditing of each other's services, and a focus from commissioners on being supportive rather than punitive, assist in this. Audit also enables a view of the strategic challenges which face services to be developed. These challenges include ensuring that staff are skilled in supporting clients to live as ordinary a life as possible, as well as meeting any additional complex needs they may have.

Details

Tizard Learning Disability Review, vol. 2 no. 4
Type: Research Article
ISSN: 1359-5474

Article
Publication date: 11 February 2020

Wahab Effiezal Aswadi Abdul, Wan Zurina Nik Abdul Majid, Iman Harymawan and Dian Agustia

The purchase of non-audit services from incumbent auditors has generated considerable attention. This study aims to examine the relationship between characteristics of non…

Abstract

Purpose

The purchase of non-audit services from incumbent auditors has generated considerable attention. This study aims to examine the relationship between characteristics of non-audit services, namely, the recurrence and types of services, and accruals quality in Malaysia.

Design/methodology/approach

This study analyzed hand-collected audit and non-audit fees of 1,117 observations from Malaysian firms from 2009 to 2011. This study used descriptive analysis, univariate tests and multivariate regression to investigate the potential effect of non-audit services on accruals quality.

Findings

Non-audit services are associated with lower accruals quality. Recurring and non-recurring non-audit service fees are detrimental to the quality of accruals, as are all types of recurring non-audit services. Only non-recurring audit-related services decrease accruals quality. The results demonstrate that provisions of non-audit services create economic bonding, and thus a threat to auditor independence. Results remain robust with the inclusion of corporate governance and institutional variables.

Research limitations/implications

The sample period might represent a limitation as it only covers three years of data. This limitation is mainly because of the nature of data collection of the non-audit services fees.

Practical implications

The findings could suggest a refinement on the Malaysian Institute of Accountants (MIA) by-laws focusing on auditor independence, and it could assist other regulative bodies such as the Securities Commission, the stock exchange (Bursa Malaysia) in ensuring better governance on the provision of non-audit services.

Originality/value

This study is the first that provides evidence on the relationship between non-audit services, types, and recurring and non-recurring non-audit services and accruals quality in Malaysia.

Details

Pacific Accounting Review, vol. 32 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 1 January 2014

John M. Thornton and Michael K. Shaub

The purpose of this research is to determine whether the type of tax services provided by a public accounting firm to its audit client and the consequence severity of an…

1249

Abstract

Purpose

The purpose of this research is to determine whether the type of tax services provided by a public accounting firm to its audit client and the consequence severity of an audit failure impact jurors' assessment of audit quality and auditor liability.

Design/methodology/approach

The authors administer a court case to 168 jurors manipulating three levels of tax services provided to an audit client (none, tax preparation, and aggressive tax planning services); two levels of consequence severity of the alleged audit failure, observing the impact on jurors' assessment of audit quality, auditor responsibility for audit failure; and damages awarded the plaintiff.

Findings

Consistent with recent US regulations, jurors perceive the quality of the audit to be lower when auditors provide aggressive tax planning services, but not for tax preparation services. Damages are greater when auditors provide aggressive tax planning services across both levels of consequence severity.

Research limitations/implications

The results indicate that the type of tax services provided may impact jurors' views of audit quality and damage assessments against auditors. The questionnaire uses previously validated measures, but the results may not be generalizable to jurors in all jurisdictions.

Practical implications

Though empirical evidence is mixed at best about the impact of auditors providing non-audit services on auditor independence in fact, auditor independence in appearance, and thus audit quality, such impacts may affect the way jurors perceive the situation.

Originality/value

The study directly tests the implications for auditor liability of new restrictions on tax services and more accurately measures the impact of consequence severity, using actual jurors.

Details

Managerial Auditing Journal, vol. 29 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

1 – 10 of over 41000