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The purpose of this study is to examine the individual and combined effect of managerial ownership and external audit quality, as two control mechanisms, on earnings management.

This study applies ordinary least squares estimates on fixed-time effects panel regression model to test the impact of the investigated variables on earnings management for the whole population of banks and insurance companies listed at Damascus Securities Exchange (DSE) during the period from 2011 to 2018.

The empirical evidence suggests a negative non-linear relationship between managerial ownership (as proxied by board of directors’ ownership) on earnings management. However, neither audit quality nor the simultaneous effect of the managerial ownership and audit quality (Big 4) affects earnings management.

DSE is dominated by the financial sector and the number of observations is constrained by the recent establishment of DSE and the small number of firms listed at DSE. In addition, the non-availability of data on executive directors’ and foreign ownerships restrict our ability to uncover the impact of different dimensions of ownership structure on earnings management.

First, it stimulates investors to purchase stocks in financial firms that enjoy both high managerial ownership, as they seem enjoying higher earnings quality. Second, the findings encourage external auditors to consider the ownership structure when choosing their clients as the financial statements’ quality is affected by this structure. Third, researchers may need to consider the role of managerial ownership when analyzing the determinants of earnings management.

It fills the gap in the literature, as it investigates the impact of both managerial ownership and audit quality on earnings management in a special conflict context and in an unexplored emerging market of DSE. It suggests that managerial ownership exerts a significant role in controlling earnings management practices when loose regulatory environment combines conflict conditions. However, external audit quality fails to counter earnings management practices when conditions are fierce.

This study investigates the relation between managerial ownership and the audit quality of the firm. In modern corporations, the separation of ownership and control creates incentives for managers to maximize their own wealth at the expense of shareholders (Jensen and Meckling 1976). Manager‐owners thus have an incentive to reduce associated agency costs by providing high quality auditing. High audit quality should thus be increasing as managerial ownership decreases. A related agency problem is that of entrenchment‐ whereby managers, by virtue of their increased voting power, have increasing power to shirk and procure perquisites at shareholders' expense. The associated increasing agency risk implies that, when the risk of entrenchment decreases, the need, and thus provision, of high audit quality should also decrease. Based on these arguments, and following prior empirical research, we posit and find that at low and high levels of managerial ownership (below 5% and above 25%), where entrenchment is not increasing, audit quality is decreasing in managerial ownership. At intermediate levels, where entrenchment arguably does increase, it is unclear which effect (divergence‐of‐interests or entrenchment) dominates. For our sample, we document a negative association in this region, a result consistent with the notion that divergence‐of‐interests is the primary agency‐related determinant of audit quality at all levels.

The purpose of the study is to examine the effect of managerial stock ownership on the relationship between material internal control weaknesses (ICW) and audit fees.

The paper uses multivariate regression analyses on a sample of 1,578 ICW and 1,578 pair-matched (based on both propensity score and managerial stock ownership) non-ICW firm observations for a period from 2004 to 2010 to investigate how managerial incentive at various stock ownership levels impacts the relationship between material ICW and audit fees.

For the firms with low managerial stock ownership (up to 5 per cent stockholdings), the authors find no significant effect of managerial ownership on the positive relationship between audit fees and ICW. However, the impact of managerial stock ownership on the relationship between ICW and audit fees is significantly positive when managerial ownership is medium, i.e. more than 5 per cent and less than or equal to 25 per cent stockholdings, and the managerial ownership effect is even higher when managerial stock ownership is high, i.e. more than 25 per cent stockholdings. The result is especially robust for the ICW firms with high managerial stock ownership (i.e. where managers hold more than 25 per cent equity stake in the firms). The additional analyses further show that this managerial ownership effect is more pronounced when the firms suffer from company-level material control weaknesses that have pervasive negative effect on financial reporting quality.

The results imply that in a low managerial ownership firms with substantial misalignment between manager and shareholder incentives, managerial stock ownership has little effect on the ICW and audit fee relationship. But when managers’ ownership interest is at a high level, they are more prone to purchase higher-quality audit service to reduce the risk of financial misstatements due to material ICW, which results in higher audit fees. The results add to the audit fee literature by suggesting that managerial incentive at various ownership levels is a critical governance factor that impacts auditor’s fee structure especially when higher reporting risk exists due to material ICW.

Prior literature documents that there is some relationship between managerial attributes and earnings quality; however, there is no substantive empirical evidence on the effect of managerial stock ownership on audit pricing when client companies face higher risk of financial misreporting as a result of material ICW. In this study, the authors seek answers to these empirical questions and fill the gap in the literature.

This study examines whether auditors’ pricing decisions on managerial ability are affected by auditor litigation risk (financial distress or financial crisis), auditor’s familiarity with their client or regulatory changes in the post-Sarbanes–Oxley Act of 2002 (SOX) era.

Building on the extant audit fee literature, this study constructs an audit fee determinants model to examine how context affects auditors’ pricing of managerial ability.

Auditors offer a larger fee discount to more able client management teams when auditors face lower litigation risks or are more familiar with the client. Furthermore, managerial ability has a more pronounced effect on audit fees in the post-SOX era when managers are mandated to play more active roles in financial reporting (i.e. certification of financial statements required by SOX 302).

Based on the audit risk model (Simunic, 1980), Krishnan and Wang (2015) show that the managerial ability of an audit client is relevant and important to auditors’ pricing decisions. This study demonstrates that managerial ability exhibits a non-linear relationship with audit fees and contextual factors, such as litigation risk, and that auditors’ familiarity with managers can alter the negative association between audit fees and managerial ability. This study extends Krishnan and Wang’s study by offering additional insights into auditors’ use of soft information such as managerial ability. Furthermore, the findings add to the literature on the impact of SOX on audit fees by suggesting that SOX has not only increased overall audit fees (Ghosh and Pawlewicz, 2009; Huang et al., 2009), it has also increased auditors’ price sensitivity to soft information (e.g. managerial ability).

This study provides insights for audit firms and client companies who are interested in understanding audit fee-pricing decisions. The findings also suggest that auditors need to be sensitive and responsive to various contextual factors when making pricing decisions.

Previous studies have not addressed the non-linear relationship between audit fees and soft information about managerial ability.

The purpose of this paper is to emphasize the relationship between managerial ability, earnings management, internal control quality and audit fees to establish whether or not there is a significant relationship between the variables of managerial ability, earnings management, internal control quality and the audit fees.

The study sample includes 190 listed companies on the Tehran Stock Exchange during 2009–2016. Research hypotheses were tested using the statistical methods of multivariable linear regression and data envelopment analysis pattern.

The obtained results indicate that there is a significant and direct relationship between managerial ability and internal control quality as well as real earnings management and internal control quality. Based on the results obtained from the second hypothesis, the authors could claim that there is an inverse and significant relationship managerial ability and audit fees. The third hypothesis also revealed that in companies with lower audit fees, there is a stronger relationship between managerial ability and internal control quality. The results of related tests show no significant relationship between accrual-based earnings management and internal control quality.

This paper is the first study in Iran whose main focus is on the relationship between managerial ability, earnings management, internal control quality and audit fees.

In order to stimulate the interest of company management in the business perspective of internal audit this paper aims to investigate the possibilities of using internal audit as a helpful managerial tool and describes the benefits of such use.

The benefits of IA as a managerial tool are investigated on a review of the relevant literature. Theoretically based findings are tested analytically using evidence from empirical research and empirically by a case study research.

Internal audit outcomes and benefits for management depend on the purpose of internal audit and on managers' support and expectations about it. The paper shows that in order to use internal audit as an effective managerial tool, internal audit has to be appropriately integrated within a strategic management system. The greatest benefits can be achieved by companies that are internally motivated to introduce the QMS which have a mature quality culture and QMS and their quality objectives linked to the business ones.

Discussing internal audit benefits from a managerial point of view is not a common approach in the professional literature on this topic. However, covering managers' needs by using quality tools is one of the most important issues companies should understand in order to make these tools attractive and beneficial. Showing the results of a real‐life case can convince managers from other companies that benefits of using IA as a managerial tool are tangible.

Internal audit purpose and results have been theoretically integrated within a broader managerial system of the company. This enables identification of possible business benefits resulting from appropriate implementation of internal audit itself and possible business benefits related to QMS and strategic management system of the company that can be affected through appropriate IA implementation.

The purpose of this paper is to investigate the relationship between some corporate characteristics, audit quality and managerial entrenchment in Tunisian companies.

The multivariate regression model is used for hypothesis testing using a sample of 224 listed observations on Tunisian Stock Exchange during 2014–2020. An exploratory factor analysis of four variables (chief executive officer (CEO) duality, CEO tenure, CEO seniority and CEO age) is used for calculating a unique index assessing the managerial entrenchment.

The results show a negative and significant relationship between audit quality and managerial entrenchment. The authors also find that firm characteristics affect management entrenchment. Precisely, corporate financial performance and firm leverage show positive connections with managerial entrenchment (ME). Additional analysis confirms the negative impact of the coronavirus disease 2019 (COVID-19) pandemic on managerial entrenchment level.

The study’s findings have practical implications that may be useful to different stakeholders, policymakers and regulatory bodies interested in reducing management entrenchment. This study offers signals to shareholders about specific governance attributes, namely audit quality, that control the extent of manager's entrenchment.

The originality of this paper consists in focusing on developing countries, namely the Tunisian context; while the managerial entrenchment phenomena has been widely examined in developed markets. Moreover, contrary to the overwhelming majority of previous studies that has used individual indexes for evaluating the entrenchment, the authors calculate a mixed index of managerial entrenchment using the principal component analysis based on four governance mechanisms (CEO duality, CEO age, CEO seniority and CEO tenure).

The purpose of this paper is to examine potential determinants of management’s agreement with internal auditor recommendations of an interim assurance engagement.

The experiment involved a 2 × 2 × 2 design with internal auditor gender, mode of communication and root cause variables randomly assigned to 228 experienced managers.

When the internal auditor includes a root cause for an identified deficiency in an internal audit report, management perceptions of the quality of that report improve. The gender of the internal auditor who communicates the audit finding with management does not significantly impact management’s perceptions. Additionally, communicating the internal audit report via e-mail instead of videoconference results in improved managerial perceptions of the quality of the internal auditor. While improvements in perceptions of internal auditor quality lead to greater agreement with internal auditor recommendations, improvements in perceptions of report quality lead to greater implementation of internal-auditor-recommended remediation strategies.

The operationalization of the manipulated variables of interest (communication mode, gender and root cause) may limit the generalizability of the study’s results.

The paper includes managerial implications for internal auditors’ choice of communication mode and inclusion of a root cause in interim internal audit reports.

This study provides evidence on the factors that could improve management’s perceptions of internal auditors’ work. The findings can help organizations, such as the Institute of Internal Auditors, to better understand how to address the needs of those who communicate with internal auditors.

The purpose of this paper is to investigate the association between corporate ownership structures and audit fees paid to external auditors by Malaysian companies listed on Bursa Malaysia. This study focusses on the extent of the auditor’s reliance on the client’s internal control inasmuch as the corporate ownership structures are varied, and, ultimately, affect the audit fees.

This study applies the agency theory in formulating three hypotheses that guide the results analysis. By employing a multi regression model for a sample of 345 Malaysian companies listed on Bursa Malaysia, this study examines the relationship of ownership structure, namely, managerial ownership, foreign ownership and government ownership with audit fees using data for 2010.

The results show a significant positive relationship between audit fees and firms with larger foreign ownership and government ownership but no significant relationship with firms with higher managerial ownership. This study contributes recent evidence concerning the relationship between corporate ownership structure and audit fees.

Regulators may consider ownership structure on the standards or regulation setting in order to be practical and operationalized in line with the impact associated with different ownership structures. The practitioners may also design appropriate methodologies and procedures for the different ownership structures for high-quality service and to standardize the risk mitigation process.

The ownership structures have different influences on the audit fees, as well as complexity of the firms and their profitability.

The study looks upon certain percentages of ownership structures, and how they affects audit fees, firms complexity and profitability.

The purpose of this study is to shed light on the relationships between the different types of ownership structure and tax avoidance activities and examine the moderating effect of audit quality.

This study used secondary data from the listed companies in Amman Stock Exchange (2009–2020). To obtain additional robust findings, this study used various proxies for measuring tax avoidance (effective tax rate [ETR] and cash flow effective tax rate [CFETR]).

Relying on various proxies for tax avoidance, the results reveal that family and managerial ownership lead to exacerbating tax avoidance activities. Although institutional and board ownership have a positive impact on ETR and CFETR, which indicate that these type of ownership have a negative impact on tax avoidance. Audit quality also has a significant role in moderating the ownership structure–tax avoidance relationships. Besides, the results reveal that audit firm size is not merely symbolic words, but it contributes to reducing and restricting tax aggressiveness.

This study has policy implications related to the policymakers in creating future tax policies to minimize and avoid tax avoidance activities. Results of this study can be used to improve awareness among the various owners and to reduce the tax avoidance practices in the developing countries. It also determines a good agenda for research in the relationships between ownership identities, audit quality and tax avoidance, which also can be used to encourage and guide future studies.

This research extends the existing literature by examining both the direct and indirect influence of ownership structure on tax avoidance in Jordanian firms by including audit quality as a moderating variable. This is a pioneering and unique study examining the joint influence of the different forms of ownership on tax avoidance. To the best of the author’s knowledge, this study is the first of its kind that examines the interaction influences between the various identities of ownership and audit quality on the tax avoidance activities in the Jordanian context.