Search results

1 – 10 of over 1000
Click here to view access options
Article
Publication date: 6 November 2019

Angel Arturo Pacheco Paredes and Clark Wheatley

This study aims to extend recent research analyzing the effect of auditor busyness on audit quality. Specifically, this study explores the effect on audit quality of a…

Abstract

Purpose

This study aims to extend recent research analyzing the effect of auditor busyness on audit quality. Specifically, this study explores the effect on audit quality of a change of fiscal year-end to or from an audit firm’s busy period.

Design/methodology/approach

Empirical archival.

Findings

When firms change their fiscal year-end to a period when the auditor is less busy, client firms are rewarded with lower audit fees and auditors are rewarded with a reduction in required effort. This study finds no difference in the level of audit quality after a change in fiscal year-end.

Practical implications

There are significant implications for audit firms as they may gain cost advantages by successfully promoting off-season fiscal year-ends, and reduce the negative effect on employees associated with “busy season” stress. Similarly, client firms may find that audit costs are reduced when they adopt a less “busy” fiscal year-end.

Social implications

These results have policy implications for regulators because regulators often dictate the fiscal year-end for certain industries or traded securities. Such dictates may thus introduce inefficiencies into the market for audit services.

Originality/value

These results should guide regulators in their decisions to dictate fiscal year-ends and firms in their choice of reporting periods.

Details

Journal of Financial Economic Policy, vol. 12 no. 3
Type: Research Article
ISSN: 1757-6385

Keywords

Click here to view access options
Article
Publication date: 25 November 2013

Nancy Chun Feng

The purpose of this paper is to examine the potential effect of busy season resource constraints on the selection of a new auditor, conditioned upon the status of the…

Abstract

Purpose

The purpose of this paper is to examine the potential effect of busy season resource constraints on the selection of a new auditor, conditioned upon the status of the prior auditor.

Design/methodology/approach

The paper employs multivariate logistic regressions for a sample of firms that changed auditors between 1979 and 2005 to explore the empirical correlations between having a December fiscal year-end (FYE) and non-lateral switches.

Findings

The paper finds that non-BigN clients with December FYEs are less likely to switch to BigN auditors than those with non-December FYEs prior to the enactment of the Sarbanes-Oxley Act (SOX). This trend subsides after SOX. For firms with BigN predecessor auditors, fiscal year-end appears to have insignificant influence on auditor switching.

Research limitations/implications

The findings suggest that upwardly mobile clients face greater audit supply constraints compared to clients already being audited by a BigN firm during the traditional busy season. However, the curbing influence on switching upwards erodes after SOX.

Practical implications

This study is to show the impact of supplier capacity constraints on audit production and structural changes within the auditing profession.

Originality/value

The findings can further the understanding of the determinants of auditor-client realignment, given that the paper identifies and explores the effects of having a December FYE on subsequent auditor appointments, conditioned upon the status of the prior auditor.

Details

Journal of Applied Accounting Research, vol. 14 no. 3
Type: Research Article
ISSN: 0967-5426

Keywords

Click here to view access options
Article
Publication date: 15 May 2018

R. Mithu Dey and Lucy Lim

Setting audit fees is a persistent source of stress for auditors who must, on one hand, comply with the increasing government regulations that generally cause costs to…

Abstract

Purpose

Setting audit fees is a persistent source of stress for auditors who must, on one hand, comply with the increasing government regulations that generally cause costs to rise; and on the other hand, respond to client pressures to keep audit fees down. In the post-scandal environment of Enron, WorldCom, and the demise of Arthur Andersen, policy makers have introduced additional costs for auditors by increasing regulations and creating a new industry watchdog – the Public Company Accounting Oversight Board (PCAOB). In this environment of constant pricing-cost tension for the auditor, the purpose of this paper is to examine audit fee trends over an extended period, 2000-2014.

Design/methodology/approach

The authors calculate the unexpected audit fees using the audit fee model. The authors examine audit fee trends while controlling for changes due to inflation, auditor wages, and other audit fee determinants.

Findings

The key findings indicate that audit fees increased in response to the promulgation of new audit regulations requiring additional audit work, the Sarbanes-Oxley (SOX) Act of 2002 and Auditing Standard No. 2 in 2004. Additionally, the authors find that audit fees decreased after new regulations alleviating audit work, namely the passage of Auditing Standard No. 5 in 2007, and remained unchanged when new regulations had a minimal impact on audit work, namely the Dodd-Frank Act of 2010.

Practical implications

The findings of this research are relevant to audit clients, auditors, and regulators as they weigh the cost and benefits of significant new audit regulations and their impacts on audit fees.

Originality/value

Using the more recent US data, the results in this paper show how events changed audit fee trends in recent years. The findings indicate that audit fees increased after the passage of new audit regulations such as the SOX Act of 2002, Auditing Standards No. 2 in 2004, and decreased after the passage of Auditing Standards No. 5 in 2007.

Details

American Journal of Business, vol. 33 no. 1/2
Type: Research Article
ISSN: 1935-5181

Keywords

Click here to view access options
Article
Publication date: 20 October 2021

Rachana Kalelkar and Qiao Xu

The authors investigate whether the different tenure phases of executives have a differential effect on audit pricing. Two alternate views – career concern and power – can…

Abstract

Purpose

The authors investigate whether the different tenure phases of executives have a differential effect on audit pricing. Two alternate views – career concern and power – can explain the effect of executives’ tenure on audit pricing. This paper aims to determine, which viewpoint dominates in explaining the relationship between audit pricing and executive tenure phases.

Design/methodology/approach

Using a sample of 11,198 firm-year observations from 2007 to 2016, the authors adopt an ordinary least squares regression model to assess the impact of the middle and long phases of executives’ tenure on audit fees.

Findings

Audit fees are significantly lower when executives enter the middle and long phases of tenure. The reduction in audit fees is greatest as both chief executive officers and chief financial officers enter the long tenure phase. Although audit fees gradually decrease as executive tenure is extended, they start increasing two years before the end of executive tenure. Furthermore, the negative association between the executive tenure phase and audit fees is greater when the executive is appointed externally. Finally, the long phase of executive tenure also mitigates the positive relationship between audit fees and internal control weaknesses.

Research limitations/implications

This study is based on US data. Future research may extend this study to other countries.

Practical implications

The findings are important to firms, practitioners and academicians, particularly, as the length of tenure of top executives has increased in recent years. By documenting that executives’ middle and long tenure phases reduce audit fees, the findings highlight the importance of maintaining executives in the firm. Finally, the findings have implications for investors, policymakers and auditors to identify companies with high audit risk.

Originality/value

This study is the first to document the impact of executives’ middle and long tenure phases on audit fees.

Details

Review of Accounting and Finance, vol. 20 no. 5
Type: Research Article
ISSN: 1475-7702

Keywords

Click here to view access options
Article
Publication date: 27 April 2020

Enoch Kusi Asare, J. Lee Whittington and Robert Walsh

Accounting work is characterized by high job demands and tight deadlines. With less task variety, accounting work is susceptible to employee disengagement. This paper aims…

Abstract

Purpose

Accounting work is characterized by high job demands and tight deadlines. With less task variety, accounting work is susceptible to employee disengagement. This paper aims to examine the role of enhanced performance management practices as intervention mechanism to the disengagement among accountants.

Design/methodology/approach

A total of 105 accountants participated in an online survey, answering self and social reports. Hypotheses were tested using regression analyses.

Findings

Enhanced performance management practices promote engagement among accountants. In turn, engagement promotes job satisfaction and affective commitment among accountants.

Research limitations/implications

Further studies are necessary to test the study’s findings. Future research should focus on replicating this study in other settings.

Practical implications

Performance planning and implementation are critical to enhancing accountants’ work attitudes and behaviors.

Originality/value

The accounting literature has consistently addressed negative accounting work outcomes from the perspective of burnout (a negative approach). This paper addresses the issue from the perspective of engagement (a positive approach).

Click here to view access options
Article
Publication date: 28 March 2018

Wan Nordin Wan Hussin, Hasan Mohamad Bamahros and Siti Norwahida Shukeri

Motivated by a recent call from DeFond and Zhang (2014) for auditing scholars to use “a richer set of audit firm, auditor office, and individual auditor characteristics to…

Downloads
1399

Abstract

Purpose

Motivated by a recent call from DeFond and Zhang (2014) for auditing scholars to use “a richer set of audit firm, auditor office, and individual auditor characteristics to capture competency”, this study aims to extend the related line of research by examining the association between lead engagement partner workload, defined as the number of public listed clients the partner is in charge of, and audit lag. The moderating effects of partner tenure on the partner workload–audit lag relationship have also been examined.

Design/methodology/approach

The association between auditor workload and financial reporting timeliness on 651 non-financial firms listed on Bursa Malaysia is tested in this study. Data to compute the partner workload are based on 222 lead engagement partners who signed off the audit reports for all 892 public listed firms in 2013.

Findings

The busy auditors are observed to prolong audit lags, and the effect is more acute for non-Big 4 clients, busy season clients and a short partner tenure. The engagement partners with heavy workload can also mitigate the adverse effects of reduced audit report timeliness when they have a longer partner–client tenure.

Research limitations/implications

This study may understate the level of engagement partner workload when partners have private firms in their client portfolios. Notwithstanding that, this study reiterates the growing importance of examining accounting and auditing outcomes at the individual partner level.

Practical implications

The findings that over-burdened engagement partner takes a longer time to complete the audit add to the current debate, where audit regulators and various stakeholders are actively promoting discussions on potential indicators of audit efficiency and quality.

Originality/value

This study provides new evidence on the association between partner workload and audit reporting lag, which has hitherto been unexplored. This study also extends the research carried out by Gul et al. (2017) and Sharma et al. (2017) by providing additional evidence on the relationship between partner tenure and audit delay.

Details

Managerial Auditing Journal, vol. 33 no. 3
Type: Research Article
ISSN: 0268-6902

Keywords

Click here to view access options
Article
Publication date: 1 July 2014

Mahbub Zaman and Jaravee Chayasombat

There is limited evidence on how differences in economic environments affect the demand for and supply of auditing. Research on audit pricing has mainly focused on large…

Abstract

Purpose

There is limited evidence on how differences in economic environments affect the demand for and supply of auditing. Research on audit pricing has mainly focused on large client markets in developed economies; in contrast, the purpose of this paper is to focus on the small client segment in the emerging economy of Thailand which offers a choice between auditors of two different qualities.

Design/methodology/approach

This paper is based on a random stratified sample of small clients in Thailand qualifying for audit exemption. The final sample consists of 1,950 firm-year observations for 2002-2006.

Findings

The authors find evidence of product differentiation in the small client market, suggesting that small firms view certified public accountants as superior and pay a premium for their services. The authors also find that audit fees have a positive significant association with leverage, metropolitan location and client size. Audit risk and audit opinion are not, however, significantly associated with audit fees. Furthermore, the authors find no evidence that clients whose financial year ends in the auditorsbusy period pay significantly higher audit fees, and auditors engage in low-balling on initial engagements to attract audit clients.

Research limitations/implications

The research shows the importance of exploring actual decisions regarding audit practice and audit pricing in different institutional and organizational settings.

Originality/value

The paper extends the literature from developed economies and large/listed market setting to the emerging economy and small client market setting. As far as the authors are aware, this is the first paper to examine audit pricing in the small client market in an emerging economy.

Details

Journal of Accounting in Emerging Economies, vol. 4 no. 2
Type: Research Article
ISSN: 2042-1168

Keywords

Click here to view access options
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

Keywords

Click here to view access options
Article
Publication date: 1 March 1994

Marc A. Rubin

For private sector organizations, Palmrose and Simunic document a positive relationship between fees for management advisory services (MAS) and fees for audits paid to…

Abstract

For private sector organizations, Palmrose and Simunic document a positive relationship between fees for management advisory services (MAS) and fees for audits paid to incumbent auditors(1). In contrast, Abdel-Khalik provides evidence that the purchase of MAS does not affect audit fees.(2) This study, unlike previous studies, examines the relationship between the purchase of MAS and audit fees in government organizations. Results suggest a negative relationship between audit fees and fees paid for related audit services provided by incumbent auditors. In addition, bond issuance and consulting fees paid to incumbent auditors and all fees paid to nonincumbent auditors are found to be not significant.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 6 no. 3
Type: Research Article
ISSN: 1096-3367

Click here to view access options
Article
Publication date: 1 March 1994

Ken W. Brown and Thomas M. Margavio

This study provides public administrators with an introduction into research of the determinants of audit fees. A working knowledge of external audit cost determinants can…

Abstract

This study provides public administrators with an introduction into research of the determinants of audit fees. A working knowledge of external audit cost determinants can help public administrators hone their evaluation skills for use in audit-procurement. Most prior research on audit cost determinants has focused on the few hundred cities in the nation with populations exceeding 50,000. As a result, this study investigated the audit costs incurred by small cities with populations less than 50,000.

Besides providing a glimpse of small-city auditing practices, the study tested the significance of the Single Audit Act in audit-fee determination. Missouri municipalities with populations between 2,000 and 50,000 provided the sample for the study. Because Missouri is one of the few states in the nation that neither legislates nor monitors municipal auditing, it represents an unregulated audit market in which town officials decide on the need for an audit, the firm to conduct the audit, and the process by which the audit firm is selected. The results of a nine-variable regression model suggested that the size of the town, the existence of a city administrator, the complexity of the town's operation, the method of accounting, the timing and completion time of the audit, and audit-firm specialization in municipal auditing were important determinants of audit fees.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 6 no. 3
Type: Research Article
ISSN: 1096-3367

1 – 10 of over 1000