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Book part
Publication date: 9 May 2012

James Lloyd Bierstaker, James E. Hunton and Jay C. Thibodeau

The current study examines the effect of fraud training on auditors' ability to identify fraud risk factors. This is important because most auditors have little or no…

Abstract

The current study examines the effect of fraud training on auditors' ability to identify fraud risk factors. This is important because most auditors have little or no direct experience with fraud; thus, research that investigates the potential effect of indirect experience through training is vitally important to fraud detection and audit quality. A total of 369 experienced auditors completed a complex audit simulation task that involved 15 seeded fraud risk red flags. A total of 143 auditors participated in a 30-minute training session focused specifically on fraud risk, while the remaining 226 auditors learned about general internal control risk during this time block. The results indicate that auditors with fraud training identified significantly more red flags and obtained greater knowledge about fraud risk than auditors who did not receive the training. Considering that the fraud training consumed only 30 minutes out of a 64-hour training session, the findings suggest that even modest exposure to fraud training is quite effective.

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Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-78052-758-1

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Book part
Publication date: 28 December 2006

C. Richard Baker

This paper has two purposes. The first is to demonstrate that over time, and in a number of professional and academic places, the concept of auditor independence has been…

Abstract

This paper has two purposes. The first is to demonstrate that over time, and in a number of professional and academic places, the concept of auditor independence has been contested; that is, there have been different concepts of auditor independence within different time periods, and even when there appears to have been consensus on the meaning of auditor independence, there have been significant debates about auditor independence. The second purpose of the paper is to advocate a complete reconsideration of the concept of auditor independence; one which would move us towards the idea that auditors should be prohibited from acting as advocates in any way on behalf of their clients, and that client management should have no ability whatsoever to determine the audit fee or the scope of audit engagement. These are controversial ideas. They are meant to be so.

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Independent Accounts
Type: Book
ISBN: 978-0-76231-382-2

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Article
Publication date: 18 January 2022

Michael Kend and Lan Anh Nguyen

The purpose of this study is to explore audit procedure disclosures related to key audit risks, during the prior year and the initial year of the COVID-19 outbreak, by…

Abstract

Purpose

The purpose of this study is to explore audit procedure disclosures related to key audit risks, during the prior year and the initial year of the COVID-19 outbreak, by reporting on matters published in over 3,000 Australian statutory audit reports during 2019 and 2020.

Design/methodology/approach

This study partially uses latent semantic analysis methods to apply textual and readability analyses to external audit reports in Australia. The authors measure the tone of the audit reports using the Loughran and McDonald (2011) approach.

Findings

The authors find that 3% of audit procedures undertaken during 2020 were designed to address audit risks associated with the COVID-19 pandemic. As a percentage of total audit procedures undertaken during 2020, the authors find that smaller practitioners reported much less audit procedures related to COVID-19 audit risks than most larger audit firms. Finally, the textual analysis further found differences in the sentiment or tone of words used by different auditors in 2020, but differences in sentiment or tone were not found when 2020 was compared to the prior year 2019.

Originality/value

This study provides early evidence on whether auditors designed audit procedures to deal specifically with audit risks that arose due to the COVID-19 pandemic and on the extent and nature of those audit procedures. The study will help policymakers to better understand whether Key Audit Matters provided informational value to investors during a time of global crisis.

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

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Article
Publication date: 10 January 2022

Yeamin Jacky and Noor Adwa Sulaiman

This study examines the perceptions of interested stakeholders on the factors affecting the use of data analytics (DA) in financial statement audits. Response letters…

Abstract

Purpose

This study examines the perceptions of interested stakeholders on the factors affecting the use of data analytics (DA) in financial statement audits. Response letters submitted by stakeholders of the auditing services to the International Auditing and Assurance Standards Board's (IAASB) Data Analytics Working Group (DAWG) served as sources for analysis.

Design/methodology/approach

The modified information technology audit model was used as a framework to perform a direct content analysis of all the 50 response letters submitted to the DAWG.

Findings

The analysis showed that a range of attributes, such as the usefulness of DA in auditing, authoritative guidance (auditing standards), data reliability and quality, auditors' skills, clients' factors and costs, were the factors perceived by stakeholders to be affecting the use of DA in external auditing.

Research limitations/implications

This study is subjected to the limitations inherent to all content analysis studies. Nonetheless, the findings offer additional insights about potential factors affecting the adoption of DA in audit practices.

Originality/value

The data noted in the published statements highlighted the perceptions of a range of stakeholders with regards to the factors affecting the use of DA in auditing.

Details

Asian Review of Accounting, vol. 30 no. 1
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 4 January 2022

Khairul Anuar Kamarudin, Ainul Islam, Ahsan Habib and Wan Adibah Wan Ismail

This paper aims to investigate the effect of auditor switching and lowballing on conditional conservatism, particularly how different types of auditor switching, namely…

Abstract

Purpose

This paper aims to investigate the effect of auditor switching and lowballing on conditional conservatism, particularly how different types of auditor switching, namely, upward, downward and lateral switching to/from Big 4 and industry specialists, affect earnings quality in the following selected Asian countries: Indonesia, Malaysia, the Philippines, South Korea and Thailand.

Design/methodology/approach

Using conditional conservatism as a proxy for earnings quality, this study hypothesises that upward switching from non-Big 4 to Big 4 auditors, or from non-specialist to specialist auditors, would result in high conditional conservatism, while downward switching would lead to low conditional conservatism. The study further tests whether lowballing provides a viable explanation for reduced earnings conservatism in firms that switch from Big 4 to non-Big 4 auditors, or from specialist to non-specialist auditors.

Findings

The analysis, on a sample of 28,073 firm-year observations from 2007 to 2016, shows that the decision to downgrade auditors leads to lower conditional conservatism in the year of switching, compared with other firms and the pre-switching year. The evidence further shows that, when firms downgrade their auditors, lowballing contributes to a decrease in conditional conservatism in the first year of audit switching. Further, this research finds that switching to specialist auditors will result in increased conditional conservatism, while switching from specialist auditors to non-specialist auditors will result in reduced conditional conservatism.

Practical implications

The findings of this study are useful to investors who are looking to diversify their investment portfolio in developing markets, as evidence about auditor switching and quality of financial reporting may be an important factor in their investment decisions. Downward auditor switches and lowballing could act as red flags to investors in the sense that these events could signal a decrease in conditional conservatism and, hence, quality of earnings.

Originality/value

This research offers new evidence to support the view that management decisions to switch to lower-quality auditors will force newly appointed auditors to acquiesce to clients’ demands for reporting low-quality earnings.

Details

Managerial Auditing Journal, vol. 37 no. 2
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 20 January 2022

Sarini Azizan and Nurhafiza Abdul Kader Malim

This study aims to investigate whether firms’ involvement in socially provocative business activities or businesses that are inconsistent with Shariah principles affect…

Abstract

Purpose

This study aims to investigate whether firms’ involvement in socially provocative business activities or businesses that are inconsistent with Shariah principles affect auditor’s perceived risk associated with the financial reporting information.

Design/methodology/approach

This study uses a median regression with measures that are consistent with prior literature. This study comprises of 11,799 firm-year observations obtained from MSCI environmental, sustainable and governance STATS database.

Findings

The results provide evidence indicating that auditors relatively charge higher audit fees for Shariah non-compliant firms except for firms that are involved with alcohol and gambling businesses. Firms that are involved in gambling activities report relatively lower audit fees, whereas firms with high involvement in alcohol business activities report non-significant relationship with audit fees.

Research limitations/implications

The findings suggest that on average, ethical contextualisation on perceived acceptable behaviours is relatively consistent across beliefs and the severe lack of it has implications on auditors’ business risk assessment. However, as a social construct, the conception of ethical behaviour is highly dependent on the change in the societal values and therefore this explains the variance in the expected findings for gambling and alcohol business activities.

Originality/value

This study adds to the existing business risk literature, by examining the under-explored association between Shariah non-compliant risk and auditors’ perceived risk, measured by audit fees in a non-Muslim majority setting.

Details

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

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Article
Publication date: 13 January 2022

Yosra Mnif and Imen Cherif

The paper aims to investigate the relation between the auditor's workload (LogAPW) and audit quality. Further, it explores whether the presence of a female audit partner…

Abstract

Purpose

The paper aims to investigate the relation between the auditor's workload (LogAPW) and audit quality. Further, it explores whether the presence of a female audit partner (hereafter FEM) influences the LogAPW effect on audit quality.

Design/methodology/approach

A dataset of 1,629 firm-year observations from 181 companies listed in the NASDAQ OMX Stockholm for the years 2010–2018 has been analyzed. The testable hypotheses have been tested using least squares regressions clustered at the Swedish public-listed companies (client-firm) level.

Findings

The research findings first indicate that overburdened audit partners (APS) are associated with lower-quality audits, consistent with the “busyness hypothesis.” Nevertheless, the adverse association turns to be positive for FEMs, supporting the thesis that FEMs have more tendency, as compared to their male counterparts, to preserve their partnership's position in the public-audit firms. Collectively, these results seem sound, as the results hold unchanged after controlling for the endogeneity concerns and provide the same conclusion for a host of additional measures for both the client-firms' discretionary accruals and the LogAPW.

Research limitations/implications

Even though a lower magnitude of the client-firms' discretionary accruals corresponds to a lower-opportunistic behavior of managers, the research is limited to by which lower values of earnings management reflect a better-quality financial reporting. Given that the empirical analysis has been confined to the Swedish Corporation, the regression results might not be generalizable for other countries with different contextual features.

Practical implications

The study might participate to the ongoing debate about the introduction of more women to the public-audit firms' elite positions (e.g. partnership) by providing evidence for the favorable female auditor effect on the quality of the client-firms' financial reporting.

Originality/value

The regression results provide a preliminary evidence on how does the presence of a FEM mitigate the inverse relation between the LogAPW and audit quality, which is an issue that has not been examined before.

Details

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

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Article
Publication date: 10 January 2022

Ramesh Ruben Louis, Noor Adwa Sulaiman and Zarina Zakaria

Prior literature on talent management (TM) in the audit setting has suggested several practices that may affect auditors’ performance. However, the study is limited in…

Abstract

Purpose

Prior literature on talent management (TM) in the audit setting has suggested several practices that may affect auditors’ performance. However, the study is limited in terms of a measurable set of comprehensive constructs of TM in the audit setting, as well as the impact of comprehensive TM constructs on auditors’ performance. Thus, the purpose of this study is to examine TM practices perceived to be important by auditors for auditors’ performance.

Design/methodology/approach

Data were obtained from 307 survey questionnaires received from auditors of large- as well as small- and medium-sized firms.

Findings

The study respondents perceived TM attributes related to supervision and review practices as the most vital for auditors’ performance. This category was followed by attributes related to ethics management practices along with training and development. The findings reveal that respondents generally perceived lower significance for attributes pertaining to work–life balance (WLB) and establishing a TM policy for auditors’ performance. While both top management and staff members of audit firms regarded WLB and establishing a TM policy to be of lower significance, top management placed greater importance on attributes related to ethics management, while staff perceived training and development attributes to be more critical.

Originality/value

This study examined a comprehensive set of TM practices (establishing a TM policy, recruitment, ethics management, training and development, supervision and review, remuneration, WLB and succession planning) and assessed the perceptions of audit practitioners on the significance of these practices on auditors’ performance.

Details

Pacific Accounting Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 1 June 2000

Giselle Bou‐Raad

The role of internal auditors is changing from a traditional audit approach to a more proactive value‐added approach where internal auditors are taking up partnerships…

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Abstract

The role of internal auditors is changing from a traditional audit approach to a more proactive value‐added approach where internal auditors are taking up partnerships with management. The debate of internal auditors needing to expand their repertoire has been around for many decades, though now, the evidence of more internal auditors changing their practices has began to emerge and examples are visible. Internal auditors are seen to be accepting change to keep up with the demands of the market place and are doing so in order to provide a service of value to the organisation that employs them. Southcorp, Qantas and KMPG Consulting are a few providing their internal auditors with opportunities to undertake assurance based services and are finding this new branch of practice to be most valuable in assisting their managers to execute the objectives of the organisation

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Managerial Auditing Journal, vol. 15 no. 4
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 January 1980

Gareth Morgan

This paper analyses the internal auditor's role from a perspective which emphasises the pluralist nature of organisational life. The internal auditor operates in…

Abstract

This paper analyses the internal auditor's role from a perspective which emphasises the pluralist nature of organisational life. The internal auditor operates in organisational contexts where norms and values are at best only partially shared, and where the auditor's formal concern for improved efficiency and control of resource use may be viewed with varying degrees of favour. The pluralist nature of organisational life reflects itself in day‐to‐day strains, tensions and conflicts between internal auditors and auditees, which cannot be eliminated through traditional “Human Relations” approaches to organisational problems. There are inherent conflicts between audit and other organisational roles, and also insofar as its modern conception is concerned, within the internal auditor's role itself.

Details

Managerial Finance, vol. 5 no. 2
Type: Research Article
ISSN: 0307-4358

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