Search results

1 – 10 of over 2000
To view the access options for this content please click here
Article

Guangyou Liu and Hong Ren

This paper aims to investigate the impacts of audit engagement team’s ethical leadership, trainee auditors’ reporting intent and other selected factors on their likelihood…

Abstract

Purpose

This paper aims to investigate the impacts of audit engagement team’s ethical leadership, trainee auditors’ reporting intent and other selected factors on their likelihood of reporting client’s irregularities.

Design/methodology/approach

The present investigation is based on 150 effective questionnaire responses provided by a group of trainee auditors working for certified public accounting (CPA) firms. The questionnaire items relating to trainee auditors’ likelihood of reporting client’s irregularities are based on Crawford and Weirich’s (2011) classification of common forms of fraudulent financial reporting. The authors’ measurement of the audit engagement team leaders’ ethicality is based on the ethical leadership scale developed in Newstrom and Ruch (1975) and Kantor and Weisberg (2002). Regression models are used to testify the authors’ hypotheses on the correlations of the trainee auditors’ likelihood of reporting client’s irregularities with audit engagement team’s ethical leadership, trainee auditor’ reporting intents and other selected factors.

Findings

The major conclusion of this study is that there is a significantly positive correlation between trainee auditors’ likelihood of reporting client’s irregularities and their perception of audit engagement team leader’s ethicality. This paper also points out that trainee auditors’ higher evaluation of stable firm–client relationship reduces their likelihood of reporting client’s irregularities, whereas their concerns with future career development increase the likelihood of reporting. In addition, this paper documents the fact that male trainee auditors more easily perceive the ethicality of their team leader than females, and that trainee auditors with less academic achievements (lower GPA) tend to perceive more easily the ethicality of their team leader than those with better academic achievements (higher GPA).

Research limitations/implications

Two business ethics variables constructed and used in this study, i.e. trainee auditors’ likelihood of reporting client’s irregularities and engagement team leader’s ethicality, can be applied in future research on whistleblowing in the audit profession.

Practical implications

Practical implications can also be drawn from the findings to enhance the ethical management at both engagement and firm levels.

Originality/value

This paper contributes to the audit research literature by providing evidence on the significant positive impacts of team leader’s ethicality on the entry-level audit professional’s likelihood of reporting client’s irregularities.

Details

Journal of Financial Crime, vol. 24 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

To view the access options for this content please click here
Article

Janice E. Lawrence

The study examines audit reports of a federal loan program which has a high incidence of reported irregularities. The following research questions are examined: (1) are…

Abstract

The study examines audit reports of a federal loan program which has a high incidence of reported irregularities. The following research questions are examined: (1) are there characteristics common to projects in which irregularities are reported? (2) Can variables be identified which are significant in differentiating between projects with and without reported irregularities? Projects with reported irregularities are found to be significantly associated with internal control weaknesses, related party transactions, lower net income, smaller cash flow, fewer projects per developer, and an auditor with fewer Farmers Home Administration (FmHA) clients.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 11 no. 1
Type: Research Article
ISSN: 1096-3367

To view the access options for this content please click here
Article

Arnold Schneider and Neil Wilner

This article investigates the impact of auditing on the commission of financial reporting irregularities by managers. We also examine whether the deterrent effect of…

Abstract

This article investigates the impact of auditing on the commission of financial reporting irregularities by managers. We also examine whether the deterrent effect of auditing is affected by individual demographics. An experiment, using three case scenarios, was employed. Our findings indicated that auditing had a strong deterrent effect when the following conditions were present: material dollar amounts, irregularities involving asset overstatements, unambiguous violations of accounting principles, and low incentive for misstating income. While age, experience, and contact with auditors did not influence the deterrent effect of auditing, we found evidence that respondents with accounting and finance specializations perceived auditing as a greater deterrent than other respondents.

Details

American Journal of Business, vol. 7 no. 1
Type: Research Article
ISSN: 1935-5181

Keywords

To view the access options for this content please click here
Article

Ester Gras‐Gil, Salvador Marin‐Hernandez and Domingo Garcia‐Perez de Lema

The purpose of this paper is to examine the relationship between a firm's internal audit function (IAF) and the quality of its financial reporting. Since regulations on…

Abstract

Purpose

The purpose of this paper is to examine the relationship between a firm's internal audit function (IAF) and the quality of its financial reporting. Since regulations on corporate governance were introduced, numerous national and international bodies have emphasized the fundamental role of the IAF in the financial reporting process, especially since it generally leads to higher quality reporting.

Design/methodology/approach

The paper uses questionnaires sent to internal audit directors of Spanish banks.

Findings

Banks with high quality financial reporting have greater collaboration between internal and external auditors in the annual audit. Greater involvement of internal audit in reviewing financial reporting leads to improved quality financial reporting.

Research limitations/implications

Besides the usual caveats of survey research, there are limitations to this study. First, the problem of response bias may exist. Second, the 66 per cent survey response rate may mean that respondents have larger or better‐developed internal audit functions, affording them more opportunity or motivation to respond to the survey. Hence, the results obtained through the survey may not be generalizable to non‐respondents.

Practical implications

The findings are relevant for bank regulators, management, boards of directors, and investors. In the current discussion on transparency, integrity and quality of financial reporting, these findings help define the issues.

Originality/value

Previous empirical studies analyse the quality of financial reporting with actors in the corporate governance mosaic (board of directors, audit committee and external audit), but they do not do so directly with the IAF. This paper extends prior banking literature that analyses quality financial reporting along with other variables, but not internal audit.

Details

Managerial Auditing Journal, vol. 27 no. 8
Type: Research Article
ISSN: 0268-6902

Keywords

To view the access options for this content please click here
Article

David J. Flanagan, Lori A. Muse and K.C. O'Shaughnessy

The purpose of this paper is to provide an overview of financial restatements by US companies to help students, professors, and practitioners gain a better understanding…

Abstract

Purpose

The purpose of this paper is to provide an overview of financial restatements by US companies to help students, professors, and practitioners gain a better understanding of restatements. Data from restatement activity that occurred between January 1, 1997 and June 30, 2002 is presented and relevant literature is cited to discus the players involved in restatements, the causes of restatements and their impacts.

Design/methodology/approach

A sample of 919 restatement announcements compiled by the General Accounting Office (GAO) that occurred between January 1, 1997 and June 30, 2002 is analyzed. The data and the relevant literature are used to examine the roles of companies, auditing firms, and the Security and Exchange Commission (SEC) in the financial reporting process and show how they are involved in prompting restatements. Literature is also reviewed on the root causes of restatements and their impact.

Findings

The misstatements that lead to earnings restatements are driven by a variety of forces, the most often studied and discussed being deceptive accounting practices by managers. The results of these restatements include a decline in the market value of the firm, an increase in the cost of capital, a loss of reputation for the firm and managers and an overall loss of confidence from investors. Key players in restatements by US companies are the Securities and Exchange Commission (SEC), the restating firms' auditors and the management of the restating firms. Restatements prompted by the SEC tend to be larger than those prompted by other entities. They also tend to involve firms with high profitability before the restatement. The Sarbanes‐Oxley act is the latest significant piece of legislation that impacts financial reporting by firms.

Research limitations/implications

Data on US restatements occurring between January 1, 1997 and June 30, 2002 are presented. Restatements are a continuing, global, phenomenon so studies involving restatements by firms in various countries and from more recent periods would be useful.

Practical implications

This paper provides a useful overview of restatement activity in the USA for any individual looking to become more familiar with the topic. Ideas for future research are presented.

Originality/value

This paper fills a hole in the literature by providing data and citing relevant literature to provide an overview of accounting restatement activity in the USA.

Details

International Journal of Commerce and Management, vol. 18 no. 4
Type: Research Article
ISSN: 1056-9219

Keywords

To view the access options for this content please click here
Article

Shireenjit K. Johl, Satirenjit Kaur Johl, Nava Subramaniam and Barry Cooper

The purpose of this paper is to test the impact of the internal audit function (IAF), an increasingly common internal governance mechanism, on a firm's financial reporting

Abstract

Purpose

The purpose of this paper is to test the impact of the internal audit function (IAF), an increasingly common internal governance mechanism, on a firm's financial reporting quality. Specifically, this paper investigates the association between the quality of the IAF and abnormal accruals (as a proxy for financial reporting quality) and whether the board of directors play a role in moderating the relationship.

Design/methodology/approach

This paper uses a unique dataset of survey responses and archival data. Regression analysis was used to test their hypotheses.

Findings

Although their initial findings show an unexpected positive relationship between internal audit quality and abnormal accruals, this relationship is contingent on whether firms outsource their internal audit activities and/or whether they are politically linked. In estimations excluding outsourcing and political connections observations, this paper shows that the association between internal audit quality and abnormal accruals is negative and in particular internal audit organisational independence, financial focus audit activities and investment are associated with lower income-increasing (opportunistic) abnormal accruals. Next, when this paper interact board quality with internal audit quality, this paper finds although the lower ordered variables board quality and internal audit quality coefficients are negatively related to abnormal accruals, the interaction variable between these two variables is positively associated with abnormal accruals, indicating the possibility of a substitution relationship between board quality and internal audit quality.

Research limitations/implications

Their findings show that certain internal audit attributes play an important role in the financial reporting process and thus these findings are expected to inform the Institute of Internal Auditors and other regulatory bodies on the role of internal audit (being an important internal governance mechanism) in financial reporting, which in turn can assist in market/regulatory reforms/changes and inform the revised Malaysian Code of Corporate Governance.

Originality/value

This paper extends prior internal auditing literature by examining the relationship between internal audit quality and financial reporting quality in the context of a developing country, namely Malaysia, and whether the board of directors moderate the examined association.

Details

Managerial Auditing Journal, vol. 28 no. 9
Type: Research Article
ISSN: 0268-6902

Keywords

To view the access options for this content please click here
Article

Mohamed I. Elghuweel, Collins G. Ntim, Kwaku K. Opong and Lynn Avison

The purpose of this paper is to examine the impact of corporate (CG) and Islamic (IG) governance mechanisms on corporate earnings management (EM) behaviour in Oman.

Abstract

Purpose

The purpose of this paper is to examine the impact of corporate (CG) and Islamic (IG) governance mechanisms on corporate earnings management (EM) behaviour in Oman.

Design/methodology/approach

The authors employ one of the largest and extensive data sets to-date on CG, IG and EM in any developing country, consisting of a sample of 116 unique Omani listed corporations from 2001 to 2011 (i.e. 1,152 firm-year observations) and a broad CG index containing 72 CG provisions. The authors also employ a number of robust econometric models that sufficiently account for alternative CG/EM proxies and potential endogeneities.

Findings

First, the authors find that, on average, better-governed corporations tend to engage significantly less in EM than their poorly governed counterparts. Second, the evidence suggests that corporations that depict greater commitment towards incorporating Islamic religious beliefs and values into their operations through the establishment of an IG committee tend to engage significantly less in EM than their counterparts without such a committee. Finally and by contrast, the authors do not find any evidence that board size, audit firm size, the presence of a CG committee and board gender diversity have any significant relationship with the extent of EM.

Originality/value

To the best of the authors’ knowledge, this is a first empirical attempt at examining the extent to which CG and IG structures may drive EM practices that explicitly seek to draw new insights from a behavioural theoretical framework (i.e. behavioural theory of corporate boards and governance).

Details

Journal of Accounting in Emerging Economies, vol. 7 no. 2
Type: Research Article
ISSN: 2042-1168

Keywords

To view the access options for this content please click here

Abstract

Details

Corporate Fraud Exposed
Type: Book
ISBN: 978-1-78973-418-8

To view the access options for this content please click here
Article

Tyrone M. Carlin, Nigel Finch and Nur Hidayah Laili

The purpose of this paper is to contemplate the degree to which technical expertise in Malaysian Big 4 auditing practice survives periods of material regulatory inflexion…

Abstract

Purpose

The purpose of this paper is to contemplate the degree to which technical expertise in Malaysian Big 4 auditing practice survives periods of material regulatory inflexion sufficiently to underpin quality financial reporting outcomes.

Design/methodology/approach

The adoption of IAS in Malaysia in 2006 introduced a highly technical standard (financial reporting standards – FRS 136) which impacted not only preparers but also auditors of financial statements. This transition period represents a unique opportunity to interrogate the content of financial statements drawn up under new and complex standards, with a view to gaining insight into the quality of oversight offered by the audit profession.

Findings

Contrary to the view within the extant literature that there is homogeneity in audit quality among Big 4 firms, this paper reports substantial cross‐sectional variation among the sample of Big 4 Malaysian audit firms and reports on distinctly poor compliance levels.

Research limitations/implications

The research focuses on compliance with various requirements under FRS 136 – Impairment of Assets among a sample of first‐time adaptors drawn from the FTSE Bursa Malaysia Index whose 2006 financial accounts have been audited by a Big 4 auditor.

Practical implications

The results raise questions about audit quality among the sample firms and the robustness of regulatory oversight institutions operating within Malaysia.

Originality/value

This research illustrates a novel approach to examining the issue of audit quality by introducing a compliance quality approach focusing on note‐form disclosures.

Details

Asian Review of Accounting, vol. 17 no. 2
Type: Research Article
ISSN: 1321-7348

Keywords

To view the access options for this content please click here

Abstract

Subject area

Finance, accountancy, auditing.

Study level/applicability

Supports information systems audit (ISA), auditing practises and controls, corporate governance and internal controls and financial management modules, business administration and MBA programmes.

Case overview

The case study focuses on the implementation of ISA and information technology in the highly responsible task of executing financial audits The case emphasises on the fact that the advantages of ISA can only be reaped when they are amalgamated with an auditor's scrutiny, sharp eye, extensive knowledge of auditing systems and accounting principles and a rich experience of the auditing function. The suggested synergy also facilitates a reduction of around 60 per cent, in the cost of executing the audits and the man-hours required to complete the audit, as in the case of Jain Chowdhary & Company.

Expected learning outcomes

The case helps students to comprehend the relevance of audit trail. It emphasises on the importance of identifying the source of information and tracking raw data backward. It familiarises the students with the complexities involved in a real audit and emphasises on the role of logic, intelligence, diligence, patience and farsightedness while performing the auditing function. It is important for them to understand how White collar crimes take place in real business economy. This case, hence exposes students to these nuances and can make a student, from a non-commerce background, understand the key elements of efficient auditing. (Elaborate teaching objectives are appended in the teaching note.)

Supplementary materials

Teaching note.

Details

Emerald Emerging Markets Case Studies, vol. 1 no. 3
Type: Case Study
ISSN: 2045-0621

Keywords

1 – 10 of over 2000