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This paper deals with the preferences of creditors and investors in Jordan regarding the credibility and use of financial statements audited by accounting firms with international affiliations compared to local accounting firms. Audit firms in Jordan are divided into two groups. Group 1 consists of audit firms with affiliation with an international firm. Group 2 consists of audit firms with no international affiliation. A questionnaire elicited preferences of creditors and investors for Group 1 and Group 2 audit firms. This questionnaire was administered to a sample of investors and creditors. The results suggest that a preference by both creditors and investors for financial statements audited by accounting firms with international affiliation. The factors leading to such a preference are also indicated. The results suggest that affiliation with international audit firms, application of international standards, personal contacts and the long experience of auditors are the most important factors that make both investors and creditors prefer Group 1 over Group 2 audit firms.

The purpose of this paper is to investigate the comment letters (CLs) in the standard-setting process of audits of less complex entities (LCEs). The objective is to gain insight into the overall picture of the CLs and to report on areas where comment providers agree or disagree with IAASB's Part 10.

A content analysis of 60 comment letter (CLs) was conducted to investigate the suggested additional Part 10 on audits of groups' financial statements in the proposed ISA for LCEs. Hence, this study examines three specific topics: (1) the views related to the use of the International Standard on Auditing (ISA) for LCEs for group audits in which component auditors are involved, (2) the proposed group-specific qualitative characteristics to describe the scope of group audits and, finally, (3) insights into the content of the proposed Part 10 and related conforming amendments. The Gioia method is used to provide a holistic approach to concept development of the arguments about the new Part 10.

The CLs stated that, while the proposed Part 10 has some weak points, it still provides a solid and practical structure within which to undertake an LCE group audit and a promising basis for further development. For instance, when discussing the improvements, the CLs stated that Part 10 should allow for more auditor judgment when determining when the involvement of component auditors renders a group audit complex. In addition, the CLs asserted that professional judgment should be engaged when considering the qualitative characteristics and the complexity of the group.

This study contributes to the very scarce research about the ISA for LCEs and the role of lobbying in shaping the audit standard-setting process.

The purpose of this paper is to investigate the consequences of the auditor’s choice in group companies and the expectation gap of listed firms on the Tehran Stock Exchange (TSE).

In this study, 128 companies (768 observations) listed on the TSE during the period 2012 to 2017 have been investigated. To test the hypotheses, logistic regression has been used.

The results showed that companies that are members of business groups are more likely to choose their auditors from large audit firms. The research findings also showed no significant relationship between the business group firms that have used the large auditor and the financial reporting quality. The results showed a positive and meaningful relationship between the member firms that use the large auditor and the audit fees. The results showed a negative and significant relationship between membership in business groups and the audit expectations gap.

Despite the importance of the audit performance, defining auditors’ roles most acceptably has always been challenging to create a gap through the diverse understanding of auditors’ role, which is the distance of perception between users’ auditors. For this reason, over the past years, the audit expectation gap and how to reduce it have focused on academics, professional accounting firms and users of financial statements. As any unmet expectations from the community will reduce the audit firm’s credibility and ability to gain and be widely detrimental to stakeholders, the audit study’s expectation gap in performing audit study is critical. Although there are extensive studies on the gap in auditing expectations in developed economies, most conclusions cannot be attributed to developing countries such as Iran due to cultural and legal differences. Besides, the audit environment in Iran and existing laws can have different results. This research also helps to bridge this gap by providing additional guidance to regulators. Besides, as all recent studies on the expectation gap were qualitative, the present study measures the expectation gap through quantitative statistical methods.

Studies that have indicated that the processing of audit evidence results in judgment bias may be the result of the study of individual decision-making. Building on work that suggests important differences between individual and group decision-making, this paper evaluates decision-making attributes of audit groups. Experienced auditors from offices of Big-Five firms in the U.S. served as the participants in an experiment involving the going concern judgment. Results show that recency does affect the judgments of individual auditors but disappears as an important effect when groups make judgments. Group responses are less extreme and exhibit greater confidence than those of individuals.

This paper synthesizes the extant geographically distributed work literature, focusing on how geographic distribution affects coordination and communication, knowledge sharing, work design, and social identity. Geographically distributed audit arrangements, such as group audits and offshoring, are becoming increasingly prevalent in audit practice. However, little empirically is known about how working across cities, countries, and continents affects auditors, the audit process, or audit quality. To this end, the synthesis seeks to stimulate research investigating the implications of geographically distributed work arrangements in auditing, by surveying the extant literature within the management and social psychology disciplines and developing eighteen research questions for future audit research to consider. The synthesis reveals that geographically distributed audit work is likely to be very different from work performed in more traditional arrangements and therefore cannot be treated by audit researchers, practitioners, or standard setters as replications of domestic processes abroad. As a result, the synthesis focuses on building a greater understanding of the changes in day-to-day auditing, the consequences of such changes, and interventions that may moderate the challenges encountered in geographically distributed audit arrangements.

This study aims to investigate the moderating role of audit quality on the association between business group affiliation of firms and earnings management in the South Asian emerging economy of Bangladesh.

A usable sample of 917 firm-year observations was drawn from companies listed on the Dhaka Stock Exchange from 2005 to 2013. Data were collected from the annual reports of sample companies. Earnings management was measured using the absolute value of discretionary accruals, and two proxies were used to measure audit quality: auditor size and industry specialisation.

Results showed that the level of discretionary accruals is positively associated with business group affiliation status, and higher audit quality reduces this association. This suggests that in environments without strong investor protection, complex ownership structures create opportunities for controlling shareholders to expropriate minority shareholders. The controlling shareholders could then mask this practice through earnings management. The findings also show that in environments lacking strong investor protection, audit quality can help improve earnings quality for group-affiliated firms.

The results suggest that financial statement users need to consider audit quality for a reasonable evaluation of the earnings quality of business groups. The study also informs regulators by illuminating audit quality as a key area of focus in any effort directed at enhancing stock market efficiency through improved earnings quality in environments where business group affiliation is prevalent.

This study documents empirical evidence on the moderating effect of audit quality on the positive association between business group affiliation and earnings management.

This paper aims to investigate the relative importance of audit-team and audit-firm attributes in perceptions of audit quality by two groups of users of audit services: audit committee chairs/members (“insiders”) and financial analysts/fund managers (“outsiders”).

Using a survey questionnaire, data are gathered from 39 audit committee chairs/members and 42 financial analysts/fund managers and analysed using adaptive conjoint analysis.

The findings reveal that both groups perceive audit-team attributes as relatively more important than audit-firm attributes. This is consistent with expectations for “insiders”, but inconsistent with expectations for “outsiders”. Differences are also found in the internal ratings of some of the attributes, with “insiders” and “outsiders” placing different relative importance on some attributes.

The usual set of limitations that are present in a survey method also apply in this study, i.e. surveys rely on reports of behaviours rather than observations and are therefore susceptible to measurement error. A further limitation is that, in using adaptive conjoint analysis, the number of attributes that may be included in the survey is restricted and, consequently, the attributes selected may not be comprehensive or fully representative.

The study extends the scope of prior studies by examining the relative importance of audit-team and audit-firm attributes in perceptions of audit quality. In using conjoint analysis, the study makes a unique and innovative contribution by providing direct evidence on the relative importance of attributes in perceptions of audit quality for different users of audit services. The findings have implications for regulators and the accounting profession concerned with improving confidence in corporates and for audit firms in monitoring and promoting the quality of their audit services.

This paper aims to examine whether family business groups’ (FBG) having the same network auditor among their affiliates mitigates earnings manipulation (EM).

This paper used unbalanced panel data from the years 2010–2019. The sample of the study is composed of 327 nonfinancial listed Pakistan Stock Exchange firms, consisting of 187 FBG-affiliated firms and 140 nonaffiliated firms. The ordinary least square and generalized least square regressions have been used to check the hypothesized relationship. Furthermore, the propensity score matching technique is used to ascertain comparable companies’ features and to control the potential endogeneity problem. Finally, the results are robust to various measures of EM and FBG’ proxies.

The findings of the study show that the same network auditor is reducing EM in FBG affiliates. In addition, the BIG4 same network auditors are also instrumental in constraining EM as compared to non-BIG4 audit firms. Overall, the results of this study depict that the same network auditor in FBG’s affiliated firms significantly influences EM. These results are robust with respect to generalized least squares and the endogeneity problem.

This research study has two important implications for the interested parties. First, although the authors find in this research study that the same network auditor is negatively associated with EM in the FBG-affiliated firms, however, FBG-affiliated firms might use opportunistically the real activity manipulation. Second, regulators highlight the change in audit partner/firm rotation, though the study findings indicate that regulators and practitioners may consider the benefits associated with the same network auditors for FBG.

This research study adds a new investigation to previous literature by examining the role of the same network auditors in the EM of the FBG’ affiliates. To the best of the author’s knowledge, this is the first study to bring new knowledge by investigating the role played by the same network auditors along with the BIG4 same network audit firms in constraining EM in FBG.

The objective of this paper is to extend the debate on audit quality in the less complex entity (LCE) context by analyzing comment letters submitted to the International Auditing and Assurance Standards Board (IAASB). The IAASB has drafted a new, stand-alone standard for audits of LCEs’ financial statements.

The Gioia method is utilized to conduct the qualitative analysis. This enables the material to shine and provide a comprehensive picture of the important aspects of the comment letters about the International Standard on Auditing (ISA) for LCEs. A content analysis of the 145 comment letters is conducted to identify the extent of the support for and the arguments against the new, stand-alone draft standard for audits of LCEs’ financial statements. In addition, this study considers how the comment letters describe the respondents’ views on audit quality in relation to the new standard. Finally, the tone of the comment letters and audit quality arguments is investigated.

The findings provide a useful framework of the most frequently used arguments supporting and opposing the ISA for LCEs. Within the themes identified, a wide variety of issues and concerns are discussed. The results reveal that the arguments in the comment letters are contradictory. For instance, when discussing audit quality, those interest groups that perceived many positive opportunities in the adoption of the ISA for LCEs thought that the audit quality would increase. Conversely, those interest groups that were skeptical about the success of the ISA for LCEs argued that the audit quality could be compromised by the general prejudice that the ISA for LCEs might be perceived as a lower-quality audit with fewer procedures.

This paper is, to the best of the authors’ knowledge, the first to examine the content of comment letters in the context of a new, stand-alone standard for audits of LCEs. The international audience can utilize the results in the context of the widely discussed issue of reducing LCEs’ auditing obligations. This study aims to contribute to the two streams of accounting literature concerning audit quality and political lobbying.

The purpose of this paper is to analyze the application and the level of integration of internal and external audits in organizations that are registered to multiple management system standards.

Using descriptive analyses, this work examines the manner in which organizations, categorized in a previous study with respect to the degree of integration of their standardized management systems (MSs), apply and integrate the related MS audits. The sample included 435 Spanish organizations registered to ISO 9001: 2000 and ISO 14001: 2004 at the minimum.

It was found that organizations that exhibited a higher level of integration of their standardized MSs also demonstrated more highly‐integrated audits. In addition, the level of integration was generally higher for internal compared with the external audits.

The main limitation was related to the survey responses, because they were asked and obtained from the organizations' managers only, and not from the registrars or other external audit bodies.

The study contributes to a more comprehensive understanding of the usage of auditing systems in organizations, in particular the level of integration of internal and external MS audits relative to the integration of the corresponding MSs.