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The purpose of this study is to examine the impact of industry specialization of audit partners and audit committee members on the level of tax avoidance in Australian banks.

This study uses a multivariate regression analysis based on hand-collected data consisting of 180 observations from Australian domestic banks between 2010 and 2018.

The primary results of the empirical analysis indicate that audit partner industry specialization is negatively associated with the level of tax avoidance in Australian banks. Regarding the audit committee, the proportion of industry specialists among audit committee members reduces the magnitude of tax avoidance. These results are robust, as they hold the same for alternative measures of tax avoidance and industry specialization of audit partner and audit committee members. Results from supplementary analysis reveal that the interactive effect of both audit firm and audit partner industry specialization strengthens the auditors’ effectiveness in reducing the level of tax avoidance.

As this study highlights the importance of the industry specialization in decreasing tax avoidance, it can be beneficial for policymakers to assess the impact of good governance on the level of tax avoidance in the banking industry.

Even though the existing studies examine the link between the governance actors’ industry specialization and tax avoidance in nonfinancial firms, this paper explores the banking industry that differs from nonfinancial firms in among others; accounting and fiscal regulations. This study further provides unique evidence indicating that industry specialization of the audit partner constitutes a significant determinant of minimizing the bank’s level of tax avoidance.

The current study uses an advanced machine learning method and aims to investigate whether auditors perceive financial statements that are principles-based as less risky. More specifically, this study aims to explore the association between principles-based accounting standards and audit pricing and between principles-based accounting standards and the likelihood of receiving a going concern opinion.

The study uses an advanced machine-learning method to understand the role of principles-based accounting standards in predicting audit fees and going concern opinion. The study also uses multiple regression models defining audit fees and the probability of receiving going concern opinion. The analyses are complemented by additional tests such as economic significance, firm fixed effects, propensity score matching, entropy balancing, change analysis, yearly regression results and controlling for managerial risk-taking incentives and governance variables.

The paper provides empirical evidence that auditors charge less audit fees to clients whose financial statements are more principles-based. The finding suggests that auditors perceive financial statements that are principles-based less risky. The study also provides evidence that the probability of receiving a going-concern opinion reduces as firms rely more on principles-based standards. The finding further suggests that auditors discount the financial numbers supplied by the managers using rules-based standards. The study also reveals that the degree of reliance by a US firm on principles-based accounting standards has a negative impact on accounting conservatism, the risk of financial statement misstatement, accruals and the difficulty in predicting future earnings. This suggests potential mechanisms through which principles-based accounting standards influence auditors’ risk assessments.

The authors recognize the limitation of this study regarding the sample period. Prior studies compare rules vs principles-based standards by focusing on the differences between US generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) or pre- and post-IFRS adoption, which raises questions about differences in cross-country settings and institutional environment and other confounding factors such as transition costs. This study addresses these issues by comparing rules vs principles-based standards within the US GAAP setting. However, this limits the sample period to the year 2006 because the measure of the relative extent to which a US firm is reliant upon principles-based standards is available until 2006.

The study has major public policy suggestions as it responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US Securities and Exchange Commission (SEC), to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the International Accounting Standards Board (IASB) Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks such as climate change.

The study has major public policy suggestions because it demonstrates the value of principles-based standards. The study responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US SEC, to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information as business transactions and investor needs continue to evolve globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the IASB Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks like climate change. The study fills the gap in the literature that auditors perceive principles-based financial statements as less risky and further expands the literature by providing empirical evidence that the likelihood of receiving a going concern opinion is increasing in the degree of rules-based standards.

The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial information disclosure potentially helps auditors make better assessments.

Using a sample of China’s listed firms from 2007 to 2021, the authors aim to find the relationship between customers’ financial restatements and their suppliers’ audit opinions. Heckman selection model, placebo tests and other robustness checks are used as well.

The findings reveal that customers’ financial restatements have a significant effect on the likelihood of suppliers receiving modified audit opinions. This relationship is pronounced when suppliers face a higher level of financial constraints, exhibit poorer accounting conservatism or receive more negative media coverage. Additionally, this effect occurs through increased business risk and information risk, which heightens auditors’ perceived audit risk. Moreover, the study highlights the influence of switching costs, auditor expertise and restatement severity on this relationship.

Risks originating from customers can spread along the supply chain, emphasizing the necessity for auditors to give heightened attention to both the audited firms and their customer information. Moreover, regulators should carefully consider the important impact of customer information disclosures to maximize the protection of the interests of external information users.

This study not only confirms the crucial role of customer information disclosures in annual reports for stakeholders and auditors but also contributes to the existing literature on customer–supplier relationships.

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.

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.

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.

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.

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

This study aims to examine whether the newly available auditor tenure information is associated with non-GAAP earnings, as the recent requirement to disclose the initial year of auditor-client relationship in audit reports may give the impression that longer auditor tenure may be related to lower audit quality.

Using a sample of firm-quarters from 2017 to 2020, the authors conduct both univariate and regression analyses. We use hand-collected data for auditor tenure, SEC comment letters, and non-GAAP variables.

First, the authors find that the likelihood of disclosing non-GAAP earnings monotonically increases with auditor tenure on a univariate basis. Second, auditor tenure is negatively associated with aggressive non-GAAP reporting. Third, the authors document evidence of aggressive reporting in general; that is, items excluded in calculating non-GAAP earnings are associated with future performance. However, the association declines with longer auditor tenure. Finally, the authors report evidence that the likelihood of receiving an SEC comment letter that contains non-GAAP comments decreases with longer auditor tenure.

The results show that regulators need to consider both GAAP and non-GAAP disclosures’ costs and benefits when enacting auditor tenure regulation. Investors can benefit from the findings in evaluating the quality of non-GAAP earnings. The findings are also relevant to the SEC when allocating limited resources in monitoring non-GAAP reporting.

To the best of the authors’ knowledge, this is the first study showing that auditor tenure is associated with the quality of non-GAAP earnings. Given that financial reporting quality should be understood as a comprehensive system comprising both mandatory and voluntary disclosures, this study complements the literature that examines the effect of auditor tenure on financial reporting quality using GAAP reporting.

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.

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.

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.

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.

This study aims to examine the correlation between the readability of financial statements and the likelihood of future stock price crashes in nonfinancial companies listed on the Egyptian Stock Exchange. It further explores the possible moderating effect of audit quality on this relationship.

The study uses ordinary least squares regression, generalized least squares estimation and two-stage least squares methodology to examine and validate the research hypotheses. The sample comprises 107 nonfinancial companies registered on the Egyptian Stock Exchange from 2016 to 2019.

The results reveal a significant negative association between the readability of financial statements and stock price crash risk. This suggests that companies with more complex financial statements tend to experience higher future crash risks. Additionally, the study identifies audit quality as a significant moderating factor. Higher audit quality, often indicated by engagements with Big-4 audit firms, strengthens the influence of financial statements readability on stock price crash risk. This implies that while high audit quality enhances investor confidence and market stability, it also accentuates the negative consequences of complex financial statements.

The findings of this paper have significant implications for regulators and standard-setting bodies in Egypt. They should consider refining and revising existing standards to emphasize the importance of enhancing the readability of financial reports. Additionally, auditing firms should actively engage in efforts to ensure clearer and more transparent financial reporting. These actions are vital for boosting investor confidence, strengthening Egypt’s capital market and mitigating potential risks associated with information opacity and complexity.

This study represents a pioneering endeavor within the Arab and Egyptian financial environments. To the best of the author’s knowledge, it is the first examination of the association between the readability of financial statements and stock price crash risk in these contexts. Furthermore, it explores factors such as audit quality that may influence this connection.

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.

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.

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.

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.

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.

This study aims to contribute to the debate on goodwill accounting by examining the information content of impairment losses recognized in half-yearly reports. Half-yearly reports provide a suitable context to examine the effectiveness of the impairment process. Due to IFRIC 10 requirements, indeed, managers may have incentives to avoid recognizing impairment losses at the interim reporting date.

The study adopts an archival approach. Based on the traditional Ohlson’s model (1995), it explores the information content of half-yearly impairment losses in the European context over the period 2007–2017.

Findings confirm the relevance of half-yearly reports and suggest that half-yearly impairment losses are significantly associated with stock prices. In particular, investors positively value companies that recognized goodwill impairment losses at the interim reporting date.

The study contributes to the academic debate on goodwill and the effectiveness of the impairment procedure. In particular, it provides empirical evidence on the recognition of goodwill write-offs when it is possible to avoid the impairment test in the absence of indications of impairment.

Findings of this study can support the current debate on accounting for goodwill also in the light of the recent proposals of the IASB on the need to improve the effectiveness of the impairment test.

This study provides original empirical evidence on the goodwill impairment test in half-yearly reports, extending previous research that typically examines this issue in annual reports.

This study aims to examine whether and how the experience of specialized external governance mechanisms mandated by the Employee Retirement Income Security Act of 1974 – the actuary and auditor – affect pension plan funding.

This study uses data from annual pension plan regulatory reports (Form 5500), Form 10-K filings, Form DEF 14A filings (company proxy statements) and publicly available data sources. The hand-collected data include information related to the pension plan’s actuary and auditor and various pension plan data disclosed in the company’s financial statement footnotes.

The author finds that more experienced actuaries and auditors are associated with better funded pension plans, especially when the company has higher financial risk or lower board independence. Additional analyses indicate that companies with more experienced actuaries and pension plan auditors are more likely to make higher annual pension plan contributions and hold fewer Level 3 fair value assets.

The dearth of pension plan governance research generally focuses on whether and how internal governance mechanisms affect pension plan funding. To the best of the author’s knowledge, this is the first empirical study of the relationship between external pension plan governance mechanisms and pension plan funding.