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Article
Publication date: 13 August 2019

Damai Nasution and Ralf Östermark

The purpose of this paper is to develop and test the scale of auditors’ awareness of the profession’s reputation for independence, defined as the degree to which auditors…

Abstract

Purpose

The purpose of this paper is to develop and test the scale of auditors’ awareness of the profession’s reputation for independence, defined as the degree to which auditors recognise the importance of the reputation for independence and acknowledge the impact of their judgements and decisions on that reputation, and to provide preliminary evidence of an association between auditors’ awareness of the profession’s reputation and auditors’ ethical judgement.

Design/methodology/approach

A seven-item scale was developed to measure auditors’ awareness of the profession’s reputation for independence, and an auditing case was used to measure auditors’ ethical judgement. A survey questionnaire of practising auditors working in auditing firms in Indonesia provides data for testing the validity and reliability of the new scale and proposed hypothesis.

Findings

The findings show that the scale is unidimensional and has satisfied reliability and validity. Moreover, the preliminary evidence of a positive association between the new scale and auditors’ ethical judgement is provided.

Research limitations/implications

Further studies should test the validity and reliability of the scale of awareness of the profession’s reputation for independence with larger data and in different settings. Investigation of the antecedent factors of auditors’ awareness of the profession’s reputation for independence is suggested.

Originality/value

This paper develops a new measure, namely, the awareness of the profession’s reputation for independence. Preliminary evidence to establish an association between that awareness and auditor ethical judgement is provided.

Details

Social Responsibility Journal, vol. 16 no. 8
Type: Research Article
ISSN: 1747-1117

Keywords

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Article
Publication date: 24 October 2019

Devi Sulistyo Kalanjati, Damai Nasution, Karin Jonnergård and Soegeng Sutedjo

The purpose of this paper is to investigate the association between audit rotation – at the audit partner and audit firm level – and audit quality. As mentioned in the…

Abstract

Purpose

The purpose of this paper is to investigate the association between audit rotation – at the audit partner and audit firm level – and audit quality. As mentioned in the literature, audit rotation has several benefits, and one of them is it can bring a fresh look to audit tasks and subsequently improve audit quality. Moreover, audit itself can help a client to improve its financial reporting. However, ineffective communication between predecessor and successor audit partners or audit firms, and pseudo-rotation can hamper that benefit.

Design/methodology/approach

This study uses multivariate regression analysis to test its hypotheses. Using data from companies listed on the Indonesia Stock Exchange, the sample consists of 688 company-year observations covering the period 2003–2016.

Findings

This study finds that the cumulative number of audit partner rotations is positively associated with audit quality, indicating that rotations at the audit partner level will enhance audit quality. Conversely, it finds that the cumulative number of audit firm rotations is negatively associated with audit quality.

Practical implications

The study’s findings may assist regulators in crafting standards regarding audit rotation. As the findings show, audit partner rotation will improve audit quality, but the audit firm rotation will decrease audit quality. As this study tries to explain the decreasing audit quality from audit firm rotation could be a consequence of ineffective communication or pseudo audit firm rotation. Regulators should try to tackle these problems.

Originality/value

Instead of using tenure as a proxy for a rotation, this study creates a new proxy named the cumulative number of audit partner and audit firm rotations to provide evidence on the benefits of audit rotation.

Details

Asian Review of Accounting, vol. 27 no. 4
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 3 July 2017

Damai Nasution and Karin Jonnergård

This study aims to examine the association between auditor and chief financial officer (CFO) gender and earnings quality, utilising data from Sweden. This study also aims…

Abstract

Purpose

This study aims to examine the association between auditor and chief financial officer (CFO) gender and earnings quality, utilising data from Sweden. This study also aims to examine whether interactions between auditor and CFO, which may affect a firm’s earnings quality, are associated with their gender. These aims are inspired by the notion that gender differences will be overruled by the rewards and socialisation into the occupational roles as suggested by the structural approach to gender.

Design/methodology/approach

This study uses a multivariate regression model to test its hypotheses. The sample consists of 976 firm-year observations covering the period 2008 to 2013.

Findings

The results show that gender of the auditor and CFO is not associated with earnings quality, and the interactions between auditors and CFOs, which may affect earnings quality, are not associated with their gender. Consequently, the results give tentative support for the structural approach in gender studies in the accounting and auditing field.

Research limitations/implications

This study indicates that future research in gender studies should consider the structural approach based on the argument of gender similarities. This approach contends that work-related behaviour of women will more resemble men, and this is caused by the socialisation process into the occupational role and the structure where they work (e.g. organisational and professional culture, work conditions, a compensation scheme, national culture, etc.) instead of gender.

Originality/value

This study contributes to the understanding whether gender – auditor and CFO gender – is associated with firms’ earnings quality and standing whether the interactions between auditor and CFO are associated with their gender, something that, to the best of the authors’ knowledge, has not been tested previously. It also re-introduces the structural approach within the gender research in the accounting and auditing field.

Details

Gender in Management: An International Journal, vol. 32 no. 5
Type: Research Article
ISSN: 1754-2413

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Article
Publication date: 13 July 2012

Damai Nasution and Ralf Östermark

The purpose of this paper is to investigate the impact of improper social pressures on auditors’ judgment in the setting of a high power distance and low individualism…

Abstract

Purpose

The purpose of this paper is to investigate the impact of improper social pressures on auditors’ judgment in the setting of a high power distance and low individualism society. Auditors’ judgment in this paper is related to the case of auditors’ willingness to sign off on net equipment balance for assets in question. Second, the paper investigates the role of locus of control and the relationship of multidimensional professional commitment on auditors’ judgment under conditions of social pressure.

Design/methodology/approach

The experimental method is used in this research. The paper uses a case that was developed by Lord and DeZoort to manipulate the interest variable, social pressures. The paper also uses locus of control and multidimensional professional commitment as the explanatory variables.

Findings

The research finds that social pressures affect auditors’ judgment in a high power distance and low individualism society. Auditors who contend with improper social pressures make judgments that violate their integrity and professionalism. The paper also finds that locus of control and multidimensionality of professional commitment might potentially affect auditors’ judgment.

Originality/value

The research takes into account cultural influence on auditors’ judgment. The paper uses subjects who are in a high power distance and low individualism society. As Public Accountant is a worldwide profession, it is important to understand the impact of cultural dimensions on the profession. Moreover, insights drawn from this paper may be of assistance to regulators and the public accountant profession in considering and developing a mechanism that can mitigate the impact of improper social pressures.

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