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Open Access
Article
Publication date: 22 March 2024

Piotr Rogala, Piotr Kafel and Inga Lapina

The study aims to determine whether audited organizations experience differences between external audits and official controls.

Abstract

Purpose

The study aims to determine whether audited organizations experience differences between external audits and official controls.

Design/methodology/approach

A survey among 100 organic food producers was conducted to explore differences regarding the usability of external audits and official controls. The survey was conducted in 2020 using the computer-assisted telephone interview (CATI) method supplemented by the computer-assisted web interview (CAWI) method. Organizations processing organic farming products in Poland were chosen for the study.

Findings

Three primary benefits associated with external audits and official controls were identified, i.e. (1) enabling and initiating activities related to the improvement of the organization, (2) improving the financial performance of the organization and (3) enhancing credibility. For most organizations, the assessment of these features was at the same level for both external audits and official control. However, if these assessments differed, commercial audits were assessed at a higher level than official controls.

Research limitations/implications

The study is limited to only one specific type of manufacturing organization and one European country.

Originality/value

The literature review shows some conceptual differences between audits and official controls, but the results of this study show that the business environment does not perceive these differences as significant. Thus, the value of the study is reflected in the conclusion that both external audits and official controls are considered useful and credible approaches to monitoring the quality within the organization, which allows us to state that external evaluation is generally seen as an opportunity to improve the performance of the organization.

Details

Central European Management Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2658-0845

Keywords

Article
Publication date: 1 April 2024

Phuong Thi Nguyen, Michael Kend and Dung Quang Le

This study aims to explore some perceptions related to the suggestion that external auditors will be replaced by audit technologies that use artificial intelligence (AI) tools to…

Abstract

Purpose

This study aims to explore some perceptions related to the suggestion that external auditors will be replaced by audit technologies that use artificial intelligence (AI) tools to make audit judgements when performing the financial statement audits. Digital transformation is revitalising the technologies used by external auditors and their firms; thus, the authors seek to understand what challenges this creates for the auditing profession in Vietnam.

Design/methodology/approach

Through the theoretical lens of new institutionalism theory, this study uses a qualitative approach involving 20 semi-structured interviews conducted with external auditors in Vietnam during 2022. This sample includes the global Big Four, global mid-tier and smaller local Vietnamese audit firms.

Findings

The findings indicate that there is resistance or disagreement with the suggestion that in the future audit technologies using AI tools can replace humans (external auditors). The role of external auditors in the professional services sector will gradually be changed by audit technologies; however, external auditors are unlikely to be replaced by audit technologies that use AI tools based on the responses of the participants. Strict institutional rules that exist in Vietnam would prevent the replacement of (human) external auditors. In the future, external auditors may take on new roles as consultants, with unique skills in classifying and processing data for decision-making processes; however, they will not be completely replaced by technology in the audit space.

Research limitations/implications

This study has limitations that it is based on the data collection from a single developing country, Vietnam; therefore, the generalisability of the findings is limited to Vietnam. Also, the authors sought insights into the future of external audits in Vietnam.

Practical implications

This study highlights the changing role of auditors and institutions. Thus, policymakers, external auditors and auditees in other developing countries would find the findings helpful.

Originality/value

This study provides new perspectives, particularly from local Vietnamese firms, about audit practices that emerge due to high-level technological advancements and then embed themselves into existing audit practices in an emerging economy. Prior studies tended to focus on the global Big Four firms, thus this study contributes by sharing the perceptions of the smaller practitioners also.

Details

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

Keywords

Article
Publication date: 3 November 2023

Kriengkrai Boonlert-u-thai, Pattanaporn Chatjuthamard, Suwongrat Papangkorn and Pornsit Jiraporn

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is…

Abstract

Purpose

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is influenced by the discipline of the takeover market. External auditors and the takeover market both function as important instruments of external corporate governance.

Design/methodology/approach

The authors execute a standard regression analysis and run a variety of robustness checks to minimize endogeneity, namely, propensity score matching (PSM), entropy balancing, an instrumental-variable analysis, Generalized method of moment (GMM) dynamic panel data analysis and Lewbel's (2012) heteroscedastic identification.

Findings

The authors’ immense sample spans half a century, encompassing nearly 180,000 observations and 17 takeover-related state legislations, one of the largest samples in the literature in this area. The authors’ results suggest that firms with more takeover exposure are significantly less likely to use Big N auditors. Therefore, a more active takeover market results in poorer external audit quality, corroborating the substitution hypothesis. The discipline of the takeover market substitutes for the necessity for a high-quality external auditor. Specifically, a rise in takeover susceptibility by one standard deviation lowers the probability of using a Big N auditor by 4.29%.

Originality/value

The authors’ study is the first to examine the effect of the takeover over market on audit quality using a novel measure of hostile takeover susceptibility mainly based on the staggered implementation of state legislation. Because the enactment of state legislation is beyond the control of any firm individually, it is plausibly exogenous. The authors’ results therefore probably reflect a causal influence rather than merely a correlation.

Details

Managerial Finance, vol. 50 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 9 January 2024

Dereck Barr-Pulliam, Marc Eulerich and Nicole Ratzinger-Sakel

This study aims to examine the extent to which external auditors (EAs) use the work of the internal audit function (IAF) based on the purpose of its primary activities. The…

Abstract

Purpose

This study aims to examine the extent to which external auditors (EAs) use the work of the internal audit function (IAF) based on the purpose of its primary activities. The authors rely on attribution theory, which suggests that individuals search for meaning when an event occurs. In this setting, the authors explore how the overall (assurance vs advisory) or specific (e.g. risk management and evaluating internal controls) focus of IAF activities influences perceived EA reliance on the IAF’s work.

Design/methodology/approach

The authors first explore the research question with data extracted from a broad, longitudinal survey conducted triennially by the national chapters of the Institute of Internal Auditors in Austria, Germany and Switzerland. The data includes responses from 2014, 2017 and 2020 administrations of the survey. The authors conduct a parallel survey with practicing EAs attending two training sessions of a European office of a global network firm. Hypotheses were tested using ordered logistic regression.

Findings

Among the chief audit executive (CAE) participants, the authors observe that a balanced or primarily assurance-related purpose of the IAF, relative to a primarily advisory-related purpose, is associated with higher perceived EA reliance. The authors observe similar perceptions of the extent of reliance among the EA participants.

Originality/value

With a unique data set of practicing internal auditors from three countries, coupled with a sample of EAs, to the best of the authors’ knowledge, this study is the first to examine differences in EA reliance across the IAF’s primary roles. The study relies on data from three European countries, which differs from prior EA reliance literature with a largely North American focus. Further, comparison between perceptions of EAs and CAEs is a novel approach and this paper’s findings suggest that perceptions of CAEs could be a reliable proxy for EA-intended behavior.

Open Access
Article
Publication date: 2 January 2024

Ewald Aschauer and Reiner Quick

This study aims to investigate why and how shared service centres (SSCs) are implemented as well as how they affect audit firm practice and audit quality.

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Abstract

Purpose

This study aims to investigate why and how shared service centres (SSCs) are implemented as well as how they affect audit firm practice and audit quality.

Design/methodology/approach

In this qualitative study guided by the theoretical framework of institutional theory, the authors conducted 25 semi-structured interviews in seven European countries, including 16 interviews with audit partners from Big 4 firms, 6 with audit team members, 2 with interviewees from second-tier audit firms and 1 with a member of an oversight body.

Findings

The authors show that the central rationale for audit firms to implement SSCs is economic rather than external legitimacy. The authors find that SSC implementation has substantial effects on audit practices, particularly those related to standardisation, coordination and monitoring activities. The authors also highlight the potential impacts on audit quality.

Originality/value

By exploring the motivation for and effects of SSC implementation amongst audit firms, the authors offer insights into the best practices related to subsequent change processes and audit quality.

Details

Accounting, Auditing & Accountability Journal, vol. 37 no. 9
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 5 March 2024

Carolyn J. Cordery and David Hay

New public management (NPM) has transformed the public sector auditing context, although in quite different ways. Further, investigations into NPM’s impact on public sector…

Abstract

Purpose

New public management (NPM) has transformed the public sector auditing context, although in quite different ways. Further, investigations into NPM’s impact on public sector auditors and audit institutions have been largely unconnected, with the exception of the critical examination of performance audits. We investigate the question of how public sector auditors’ roles and activities have changed as a result of NPM and later reforms.

Design/methodology/approach

We examine and synthesise public sector audit research examining reforms since the year 2000. The research presented considers changes to external and internal public sector audits as well as the development of public sector audit institutions – known as supreme audit institutions (SAIs).

Findings

Considerable changes have occurred. Many were influenced by NPM, but others have evolved from the eco-system of accounting, auditing and public sector management. External auditors have responded to an increase in demand for accountability. Additional management and governance techniques have been introduced from the private sector, such as internal auditing and audit committees. NPM has also led to conflicting trends, particularly when governments introduced competition to public sector auditing by contracting out but then chose to centralise to improve accountability. There is also greater international influence now through bodies like the International Organisation of Supreme Audit Institutions (INTOSAI) and similar regional bodies.

Originality/value

NPM reforms and the eco-system have impacted public sector auditing. Sustainability reporting is emerging as an area requiring more auditing attention; auditors also need to continue to develop better ways to communicate with citizens. Further, research into auditing in non-Western nations and emerging technologies is also required, especially where it provides learnings around more valuable audit practices. Empirical evidence is required of the strengths and weaknesses of SAIs’ structural variety.

Details

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

Keywords

Article
Publication date: 28 March 2023

Muhammad Iqmal Hisham Kamaruddin, Zurina Shafii, Mustafa Mohammed Hanefah, Supiah Salleh and Nurazalia Zakaria

This study aims to explore the current Shariah audit practices in zakat and waqf institutions in Malaysia.

Abstract

Purpose

This study aims to explore the current Shariah audit practices in zakat and waqf institutions in Malaysia.

Design/methodology/approach

A focus group discussion (FGD) with 38 zakat and waqf officers from 17 different zakat and waqf institutions in Malaysia was conducted. For reporting purposes, this study used a single-case study approach. The FGD was conducted and completed at the end of June 2021 via an online approach through Microsoft Teams.

Findings

The finding highlights the existing Shariah governance practices especially in terms of Shariah supervision roles, Shariah audit implementation in terms of Shariah audit scopes and common findings, Shariah audit competency, Shariah audit effectiveness especially the need for external Shariah audit function and Shariah audit issues and challenges faced in the implementation of Shariah audit practices.

Practical implications

The study findings and recommendations are useful for zakat and waqf institutions as well as the State Islamic Religious Councils to enhance Shariah audit practices in Malaysia.

Originality/value

This study is among the pioneer studies that explore Shariah audit practices in zakat and waqf institutions in Malaysia.

Details

Journal of Islamic Accounting and Business Research, vol. 15 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 11 March 2024

Saida Belhouchet and Jamel Chouaibi

This paper aims to shed light on the relationship between audit committee attributes and integrated reporting quality (IRQ).

Abstract

Purpose

This paper aims to shed light on the relationship between audit committee attributes and integrated reporting quality (IRQ).

Design/methodology/approach

Data on a sample of 360 European firms selected from the STOXX Europe 600 index between 2010 and 2021 were used to test the model based on multiple regression for panel data to analyze the effect of audit committee attributes on IRQ. This paper considers generalized least squares (GLS) estimation for panel data models.

Findings

The findings of this study confirm expectations concerning the impact of audit committee attributes on the IRQ. Indeed, audit committee independence and meetings have a significant positive impact on IRQ. However, no significant association is found between financial expertise and IRQ.

Practical implications

The findings of this paper have significant implications for policymakers, who, through proper legislation, should encourage the formation of larger audit committees and ones with a higher percentage of independent members. They should also establish a minimum number of audit committee meetings per year. These regulations, which aim to increase the efficacy of audit committees’ supervisory and monitoring tasks, would promote corporate transparency and improve IRQ.

Originality/value

This study supports the existing literature. First, it expands the scientific debate on IRQ. Second, unlike previous studies, which used more subjective methods to measure the degree of integrated reporting (IR), this study relied on the CGVS variable from the DataStream ASSET 4 Database. Third, the research is novel because it indicates the crucial role of internal assurance mechanisms in wide managerial reporting practices in European companies. The sample consisted of European firms only, whereas previous studies used a global sample. Finally, this study is based on recent data (2010–2021), while other studies covered the period between 2008 and 2013.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

Keywords

Open Access
Article
Publication date: 27 November 2023

Gianluca Ginesti, Rosalinda Santonastaso and Riccardo Macchioni

This paper aims to investigate the impact of family involvement in ownership and governance on the quality of internal auditing.

Abstract

Purpose

This paper aims to investigate the impact of family involvement in ownership and governance on the quality of internal auditing.

Design/methodology/approach

Leveraging a hand-collected data set of listed family firms from 2014 to 2020, this study uses regression analyses to investigate the impact of family ownership, family involvement on the board, family CEO and the generational stage of the family business on the quality of internal auditing.

Findings

The results provide evidence that family ownership is positively associated with the quality of internal auditing, while later generational stages of family businesses have the opposite effect. Additional analyses reveal that the presence of a sustainability board sub-committee moderates the relationship between generational stages of family businesses and the quality of internal auditing function.

Research limitations/implications

This paper does not consider country-institutional factors and other potentially family-related antecedents or governance factors that may affect the quality of internal auditing.

Practical implications

The results are informative for investors and non-family stakeholders interested in understanding under which conditions family-related factors influence the quality of internal auditing functions.

Originality/value

This study offers fresh evidence regarding the relationship between family-related factors and the quality of internal auditing and board sub-committees that moderate such a relationship in family businesses.

Details

Corporate Governance: The International Journal of Business in Society, vol. 24 no. 8
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 28 February 2023

Magda Siahaan, Harry Suharman, Tettet Fitrijanti and Haryono Umar

The phenomenon of corruption requires extra handling to achieve zero corruption. The purpose of this paper is to examine the integrated governance, risk management and compliance…

Abstract

Purpose

The phenomenon of corruption requires extra handling to achieve zero corruption. The purpose of this paper is to examine the integrated governance, risk management and compliance (GRC) implementation, the quality of internal audits and management's commitment to improving the ability to detect corruption and its impact on the company's financial performance.

Design/methodology/approach

This paper used primary and secondary data. Financial statement data and survey results from participants in 69 state-owned companies were analyzed using the Partial Least Square method.

Findings

There was a positive and significant effect of the integrated GRC implementation, quality of internal audit and management's commitment to increasing the organization's internal capability in detecting corruption. However, the failure to detect corruption mediates the effect of management commitment on financial performance. Besides, the organization's three internal factors could be better because their functions could be more optimal and require further improvement.

Research limitations/implications

State-owned companies are continuing to be restructured, so these results can be helpful for now. However, they must update continuously with developments related to the composition and classification of state-owned companies.

Practical implications

Organizations can improve their ability to detect corruption in the workplace by using an early warning system such as the integrated GRC, internal audit quality and a high commitment from management.

Originality/value

To the author's limited knowledge, empirical research on integrated GRC implementation, internal audit quality and management commitment are still rare if they improve the detection of corruption ability. It uses the factors that cause corruption in the fraud hexagon to analyze the financial performance.

Details

Journal of Financial Crime, vol. 31 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

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