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1 – 10 of over 12000
Article
Publication date: 11 September 2017

Ying-Chieh Wang, Hua Wei Huang, Jeng-Ren Chiou and Yu Chieh Huang

The purpose of this paper is to examine the association between the cost of debt (COD) and auditor industry expertise using Taiwanese data. Since previous studies (Li et al.

Abstract

Purpose

The purpose of this paper is to examine the association between the cost of debt (COD) and auditor industry expertise using Taiwanese data. Since previous studies (Li et al., 2010) have only examined the relation between industry specialization and COD at the audit firm level in western countries, the authors further examine the association between industry specialization and COD at the individual auditor level in an Asian context.

Design/methodology/approach

The authors use the interest rate on the firm’s debt as a proxy variable for the COD (Francis, Khurana and Pereira, 2005). The authors adopt three different methods to measure industry specialization, which consist of the auditors’ market share in terms of client sales and number of clients, and client assets.

Findings

The results indicate that the clients of industry specialists at individual auditor levels have a lower COD.

Originality/value

First, the authors extend the research of Li et al. (2010) and find that the clients of individual auditor industry specialists also have a lower COD. Second, the authors also believe the evidence on the effects of industry expertise at the individual auditor level may have policy implications for regulators and public investors. Finally, in contrast to works carried out in the US market, the authors provide empirical evidence for the relation between industry specialization and COD in an Asian market.

Details

Asian Review of Accounting, vol. 25 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 9 August 2023

Mohammad Hossein Safarzadeh and Mohammad Amin Mohammadian

This study aims to examine the association between Iranian auditors' narcissism and the auditors' professional skepticism.

Abstract

Purpose

This study aims to examine the association between Iranian auditors' narcissism and the auditors' professional skepticism.

Design/methodology/approach

The authors' sample is comprised of 355 professional auditors working in the private and public sectors in Iranian firms in 2022. The authors use cross-sectional multivariate regression as the main methodology, along with the structural equation modeling (SEM) technique.

Findings

The authors find that a higher level of narcissism leads to a greater level of professional skepticism among auditors, which ultimately can enhance the quality of the audit process. The results provided via the robustness tests also supported this finding.

Originality/value

The authors' findings further the understanding of the role of narcissistic personality traits in improving professional skepticism among auditors of an Islamic and emerging country. In addition, audit firms and audit partners can also consider the findings of this study and enhance the effectiveness of audit processes by assigning appropriate employees with certain personalities to specific tasks.

Details

Asian Review of Accounting, vol. 32 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 6 April 2022

Chew Har Loke, Suhaiza Ismail and A.H. Fatima

The purpose of this paper are twofold. Firstly, it explores the extent to which ethical work climate (EWC) is prevalent among public sector auditors at the National Audit…

Abstract

Purpose

The purpose of this paper are twofold. Firstly, it explores the extent to which ethical work climate (EWC) is prevalent among public sector auditors at the National Audit Department (NAD) of Malaysia. Secondly, it examines the relationship between EWC and the work-related ethical behaviour of public sector auditors in the NAD of Malaysia.

Design/methodology/approach

This study used a postal questionnaire survey, which was distributed to the public sector auditors in Malaysia. A total of 823 responses from public sector auditors in 213 audit teams was received, constituting a 66% and 78% response rate, respectively. To achieve the first research objective, the responses were analysed using descriptive statistical analysis, including mean values and mean value ranking. For the second objective, hierarchical linear modelling (HLM) statistical software was used for the cross-level data analysis.

Findings

The results reveal a moderate level of the overall EWC at the NAD. The overall EWC at the team level also has a positive significant influence on work-related ethical behaviour assessed at the individual level of auditors. In terms of the individual components of the EWC, multivariate regression analysis of HLM shows collective moral (CM) sensitivity and CM judgement have a significantly positive relationship with work-related ethical behaviour, whereas CM motivation has a negatively significant relationship with work-related ethical behaviour.

Practical implications

The empirical evidence on the level of EWC and its components implies that there is room for improvement in the ethical climate in the NAD. The finding is important for the NAD to design necessary measures to enhance the EWC, including tightening the auditors’ code of ethics and organizing ethics-related seminars, training and workshops for the auditors. The result on the positive influence of CM sensitivity and CM judgment of work-related ethical behaviour of public sector auditors is also crucial for the NAD to further inculcate moral sensitivity and moral judgment among the public sector auditors.

Originality/value

This study is among the initial research that uses Arnaud’s EWC model in assessing the influence of EWC on ethical behaviour, particularly in the context of public sector organization of a developing country, i.e. Malaysia.

Details

International Journal of Ethics and Systems, vol. 38 no. 4
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 27 July 2020

Nancy Chun Feng

Using a sample of US nonprofit organizations, where the identity of the auditor in charge of the audit is revealed, I investigate whether individual auditor characteristics…

Abstract

Purpose

Using a sample of US nonprofit organizations, where the identity of the auditor in charge of the audit is revealed, I investigate whether individual auditor characteristics (gender, engagement size and tenure) are associated with audit quality.

Design/methodology/approach

To investigate how individual audit partner characteristics affect audit quality, I follow Petrovits et al. (2011) and Fitzgerald et al. (2018) who investigate client characteristics and partner tenure as determinants of ICDs in nonprofits. I add three characteristics of the auditor in charge – gender, engagement size and tenure – to their models. In additional analyses, I use subsamples partitioned by client risk and audit firm size, and find that individual auditor characteristics generally play a more significant role in the issuance of ICDs and QAOs for riskier clients than for less risky clients.

Findings

My results show that female auditors are more likely to report internal control deficiencies and issue qualified audit opinions (QAOs) to nonprofits. I also find that auditors with more Single Audit engagements within the same year are less likely to report ICDs. In addition, auditor tenure is negatively associated with the likelihood of issuing an ICD report, suggesting that auditors become complacent as the length of the auditor–client relationship lengthens or, alternatively, that they are better able to assist their clients in correcting ICDs and in maintaining stronger internal control environments as they gain client-specific knowledge over time. Additional analysis suggests tenure and engagement load results are sensitive to the sample specification employed.

Research limitations/implications

One caveat of this study is that self-selection bias may be present when a client chooses an audit firm, the audit firm selects a client, and the audit firm assigns a partner to the engagement. Future study with more advanced econometric models is needed to mitigate self-selection bias. Another limitation is that my sample consists of nonprofit organizations and may not be generalizable to for-profit firms. Another caveat of this study is that the tenure variable is truncated compared to prior literature (e.g. Fitzgerald et al., 2018). Also given the rarity of audit quality measures in the nonprofit setting, internal control deficiencies and qualified opinions are used as proxies for audit quality because they reflect both the quality of audit work and the quality of organizations' internal control and financial reporting. Future studies with data including additional audit quality measures could shed more light on the topic.

Originality/value

This study contributes to the literature in several ways. First, this study offers a more comprehensive examination on the impact that a broader set of individual auditor characteristics on audit quality in the nonprofit setting, compared to Fitzgerald et al.'s (2018) study. Second, the findings should be of interest to policymakers who recently mandated engagement partner disclosures from US audit firms (PCAOB, 2015b). Finally, another distinctive feature of this study is that I examine the impact of individual auditor characteristics on audit quality in a setting where Big 4 audit firms are not dominant.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 32 no. 4
Type: Research Article
ISSN: 1096-3367

Keywords

Article
Publication date: 5 June 2017

Anne-Mie Reheul, Tom Van Caneghem, Machteld Van den Bogaerd and Sandra Verbruggen

The purpose of this study is to investigate the association between individual auditor characteristics (gender, experience and sector expertise) and audit opinions in Belgian…

1909

Abstract

Purpose

The purpose of this study is to investigate the association between individual auditor characteristics (gender, experience and sector expertise) and audit opinions in Belgian non-profit organizations (NPOs). The purpose is to identify auditor characteristics that imply a better assurance of financial statement (FS) quality. FS quality is essential to enhance financial accountability toward the resource providers of NPOs and the public at large.

Design/methodology/approach

Multinomial regressions are conducted on a data set of Belgian NPOs. Propensity score matching is used to control for potential self-selection bias.

Findings

Auditors with sector expertise are found to provide better assurance than their non-sector-expert counterparts. The former are more likely to disclose FS errors and uncertainties in their audit report.

Originality/value

This study contributes to the auditing literature by focusing on an understudied audit market, namely, the non-profit audit market. The number of non-profit studies that investigate determinant of audit quality is very scarce, and none of them explores the determinants of audit opinions. Moreover, these studies ignore individual auditor characteristics as determinants of audit quality. The findings of this study provide meaningful information for several actors in the NP field and for audit firms.

Details

Managerial Auditing Journal, vol. 32 no. 6
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 10 July 2020

Huangyue Chen, Xiaoping Tan and Qun CAO

This paper aims to investigate whether and how air pollution affects auditor behavior and audit quality. Specifically, the authors draw from studies of behavioral economics and…

1082

Abstract

Purpose

This paper aims to investigate whether and how air pollution affects auditor behavior and audit quality. Specifically, the authors draw from studies of behavioral economics and psychology to develop a new prediction that air pollution-induced negative mood causes pessimistic bias in auditors’ risk assessments of client firms, which motivates them to put more effort into achieving higher audit quality.

Design/methodology/approach

This study uses a sample of Chinese public firms for the period 2013 to 2018 and an ordinary least squares model to examine the effects of air pollution on audit quality.

Findings

The results suggest that auditors exposed to higher levels of air pollution are more likely to put more effort into their audits, resulting in higher audit quality. Furthermore, the impacts of air pollution on audit quality are more pronounced when an auditor has a higher level of education, a major in accounting or a related subject and a position as a partner. A series of identification tests and sensitivity tests further support the main findings.

Practical implications

This study provides deeper insight into how air pollution affects auditors’ decision-making through its effect on mood.

Social implications

The findings have broad potential implications for auditing and other high-skill professions. Because air pollution-induced negative mood is a common occurrence and numerous psychological experiments have demonstrated the potentially adaptive and beneficial role of negative mood in decision-making for professions like auditing that need a more conservative, alert and detail-oriented cognitive style, negative mood may to some extent facilitate decision-making. Professionals may benefit from paying closer attention to the adaptive benefits of different moods.

Originality/value

Few studies empirically discuss the effects of auditors’ psychology on audit outcomes. This study responds to this research gap with analyzes of how air pollution-induced negative mood can affect auditors’ professional judgment and audit outcomes. Further, this study adds to the growing literature that examines how air pollution affects various aspects of the economy and enriches the literature on behavioral economics, providing empirical evidence from a large sample of the effects of an environmental stressor on individual auditors’ professional judgment.

Details

Sustainability Accounting, Management and Policy Journal, vol. 12 no. 1
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 19 September 2019

Wenjun Wen

Previous literature on the commercialisation of the audit profession has focused on the coercive force of macro-institutional structures. The purpose of this paper is to focus on…

Abstract

Purpose

Previous literature on the commercialisation of the audit profession has focused on the coercive force of macro-institutional structures. The purpose of this paper is to focus on the agency of individual auditors and examine their active construction of the commercial self in a Big Four audit firm in China.

Design/methodology/approach

This paper applied a qualitative research approach to data collection and analysis. A total of 17 interviews were conducted with senior auditors, managers, directors and partners to generate a rich narrative.

Findings

This study analyses prevalent discourses identified in the Chinese organisational setting and finds that, within the “clan-like” structure of the audit engagement team, three recurring discourses (i.e. the client relationship, adding value and career) were powerful scripts in constructing individual subjectivity wherein the “professionalism” ideal was re-enacted to rationalise the incorporation of more commercialistic elements.

Research limitations/implications

This study collected interviews representing various perspectives within a Big Four audit firm in China. Nonetheless, the scope of this study was limited to certain types of audit firms at certain times.

Originality/value

This study demonstrates that the scripts are not just a matter of self-presentation, but important sources of self-formation and self-definition. Rather than being imposed externally, “commercial selves” are actively constructed by individual auditors, leading to the institutionalisation of commercialism in the audit profession at the micro level.

Details

Journal of Accounting in Emerging Economies, vol. 10 no. 2
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 19 May 2023

Saeed Rabea Baatwah, Ali Ali Al-Ansi, Ehsan Saleh Almoataz and Zalailah Salleh

The COVID-19 pandemic has introduced new challenges for auditors to provide high-quality audits. These challenges pose interesting questions about the ability of auditors to…

Abstract

Purpose

The COVID-19 pandemic has introduced new challenges for auditors to provide high-quality audits. These challenges pose interesting questions about the ability of auditors to obtain audit evidence and ensure appropriate conclusions. In response to these questions, this paper aims to examine how self-efficacy affects the auditors’ effort and performance during COVID-19 and how remote audit proficiency helps them respond to these challenges, as reflected in more effort and high-quality performance.

Design/methodology/approach

To test the hypotheses, this study used a quantitative approach in which 193 Saudi auditors were surveyed and partial least squares structural equation modeling was used to analyze the data.

Findings

The authors demonstrated that self-efficacy is positively associated with the perceived audit effort and performance during the COVID-19 crisis. The results also showed that remote audit proficiency plays a significant role during COVID-19 as it can help auditors exert more effort and perform audit activities effectively. This study also found that remote audit mediates the association between self-efficacy and both effort and performance during COVID-19. These results are also asserted under several robust analyses.

Originality/value

To the best of the authors’ knowledge, these findings provide the first evidence on the effect of COVID-19 on auditors and have implications for both theory and practice.

Details

Managerial Auditing Journal, vol. 38 no. 6
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 1 March 2015

Anne-Mie Reheul, Tom Van Caneghem and Sandra Verbruggen

From 2006 onwards very large Belgian nonprofit organizations (NPOs) are legally required to appoint an external auditor. In this context we investigate whether auditor choice in…

Abstract

From 2006 onwards very large Belgian nonprofit organizations (NPOs) are legally required to appoint an external auditor. In this context we investigate whether auditor choice in favor of a sector expert, being a higher quality auditor, is associated with NPOs’ expectations regarding several auditor attributes. We find that NPOs are more likely to choose a sector expert if they attach higher importance to an auditor’s client focus and relationship with management. NPOs are less likely to choose a sector expert if they care more about the practical execution of the audit. We provide recommendations for increasing the appeal of sector expertise as valuable auditor attribute. The resulting quality increase of NPOs’ financial statements and audit reports could benefit various stakeholders.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 27 no. 2
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 2 December 2019

Hanwen Chen, Liquan Xing and Haiyan Zhou

Product market competition may have various impacts on audit fees. On the one hand, according to the agency theory, product market competition can mitigate agency problems between…

Abstract

Purpose

Product market competition may have various impacts on audit fees. On the one hand, according to the agency theory, product market competition can mitigate agency problems between management and shareholders. For clients with higher product market competition, auditors will lower the level of engagement risk assessment and reduce the required level of audit evidence, and hence audit fees will be lower. On the other hand, according to the audit risk model, product market competition will increase client business risk and audit engagement risk. Moreover, for clients with competition advantage, client business risk and audit engagement risk will be lower, and hence a lower audit fee. The paper aims to discuss this issue.

Design/methodology/approach

In this paper, the authors collect financial accounting data and audit fee data from CSMAR database. Our sample selection starts with all available observations on the Chinese listed companies during 2006–2011. Since there is a big difference in accounting practices between financial companies and other industries, the authors delete observations on financial companies. The authors further remove observations with missing data, yielding 6,709 observations for the final analysis. To define the industry, the authors use the first two digits of standard industry classification code set by China Securities Regulatory Commission. In order to reduce the effect of extreme observations, the authors also truncate the data at 1 and 99 percent. The authors use the Herfindahl–Hirschman index (HHI) and the natural logarithm of the number of listed companies within the industry to measure product market competition intensity. HHI is calculated as the sum of the squared percentage of revenues of the client firm among the total revenues of all public companies, i.e. HHI = i = 1 N ( s i / S ) 2 . N is the number of listed companies in the industry, Si is the revenues for an individual firm and S is the total revenues of all public companies within the same industry. A higher HHI score indicates fewer companies dominate the industry and hence lower intensity of competition in the product market. The second measure of industry competition intensity is LNN, the natural logarithm of the total number of public companies in the same industry of a client firm. A larger value of LNN indicates a larger number of competitors in the industry, and a higher level of competition intensity. Following the literature (Kale and Loon, 2011), the authors use Lerner index (or price-cost margin (PCM)) to measure the listed company’s competitive advantage. It is actually a measure of a firm’s power to influence product prices in the industry. The authors adopt the Peress (2010) method to estimate Lerner index as net operating income, divided by sales, i.e. PCM=(Sales–COGS–Selling expenses–Administrative expenses)/Sales. A higher value of PCM indicates more product pricing power and a higher competitive advantage of a company. The authors also use Lerner index ranking (R_PCM) to measure the competitive advantage of a company in the industry. The authors sort PCM values in ascending order in each industry and divide into ten groups. Then, the authors assign a value from one to ten to each listed company within each group in each industry. A higher R_PCM value represents higher market power and higher competitive advantage of a company. Based on Simunic (1980) framework, the authors develop the following model to test the relationship between product market competition, competition advantage and audit fees: LNAFit01 PMCit2 SIZEit3 INVit4 RECit5 GROWTHit6 PRELOSSit7 LEVit8 QUICKit9 OPINit10 IBIG4it11 DBIG10it12 SWITCHit13 LOCATEit14 STATEit+∑β YearDummiesit.

Findings

Using a sample of 6,709 firm-year observations from the Chinese stock market for the period of 2007–2011, the authors find that the product market competition intensity has a negative impact on audit fees, which means that agency cost effect is dominant in audit pricing at industry level. In addition, a company’s competitive advantage in the industry has a significant and negative impact on audit fees, which means that business risk effect also plays a critical role in audit pricing of individual engagement. The findings indicate that, in determining audit fees, auditors in the emerging market of China consider both the competition intensity of their clients’ product market at the industry level and the competitive advantage of the specific clients within the industry.

Originality/value

The findings indicate that, in determining audit fees, auditors in the emerging market of China consider both the competition intensity of their clients’ product market at the industry level and the competitive advantage of the specific clients within the industry.

Details

Asian Review of Accounting, vol. 28 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

1 – 10 of over 12000