Search results

This study aims to examine the effects of audit firm attributes on audit delay associated with financial reporting complexity (FRC).

The authors use regression models with a sample of public firms with distinct monetary eXtensible Business Reporting Language tags to test the research hypotheses.

The authors find that two audit firm attributes (audit firm tenure and non-audit services performance) moderate the effect of FRC on audit delay.

The study provides insights to regulators, practitioners and investors into how firms may reduce audit delay from FRC by keeping their long-tenured auditors and allowing their auditors to gain more knowledge about the firms by providing non-audit services. The results, therefore, have implications for mandatory audit firm rotation.

To the best of the knowledge, this study conducts the first comprehensive analysis of this topic, exploring the impact of three audit firm attributes on audit delay caused by FRC. It attempts to illustrate the impact of external audit firms on reducing the adverse consequences of FRC.

The purpose of the current study is to examine audit committee reports of a sample of companies listed on the NYSE to determine the extent to which these reports contain voluntary disclosures that would indicate compliance with the relevant requirements of the Sarbanes‐Oxley Act (SOX) and the rules imposed by the SEC and NYSE.

Reviewed the contents of the audit committee reports from the 2004 proxy statements of a random sample of one hundred companies from those listed on the NYSE. These companies were drawn from a variety of industries and represented a wide cross‐section of the total market. The content of audit committee reports was examined to see if the committees voluntarily disclosed, within the body of the report, compliance with the requirements of SOX.

The results reveal that there is a significant diversity in the form and content of the audit committee reports published in the sample. It appears that while some audit committees treat their report as more than just a regulatory requirement and provide more voluntary disclosure, many others continue to provide only the minimum required information in their report.

The study focused on the actual body of the audit committee reports to examine disclosures about the compliance with SOX. It is likely that in many cases, the disclosures that did not appear within the audit committee reports may appear elsewhere in the proxy statement. Also, the study only examined audit committee reports of a sample of NYSE companies. Future research might include audit committee reports of those companies in the NASDAQ system.

Readers of audit committee reports might view more favorably the performance of those audit committees whose reports contain more extensive disclosures of the compliance with the SOX requirements.

This paper fulfills a need to know if audit committees are meeting the requirement of SOX and disclosing it. It warns readers that in order to obtain complete information as to the functioning of audit committees, they might need to conduct a complete search of the proxy statements and not only the section relating to the audit committee report.

The purpose of the paper is to examine the corporate social responsibility (CSR) – earnings response coefficient (ERC) relation in the code-law tradition and the early stage of CSR practice to fill the research gap in the literature on CSR–ERC relation.

The authors use an association framework for the study. They use the firms listed on Korea Stock Exchange because Korea is classified as a code-law country and most of firms in Korea are in the early stages of CSR development, and Korean samples are considered credible and stable because of the effective financial reforms initiated by Korean government in the late 1990s. The authors collected data from the two data sources: KisValue and Korea Corporate Governance Service.

The authors find the following. First, CSR is negatively associated with ERC, which indicates that the ability of earnings to capture CSR implication is lower under the circumstances of the code-law and the early stage of CSR development. Second, political sensitivity (business group effect) is positively (negatively) associated with CSR–ERC relation, which means that the politically noticeable CSR concerns strengthen the CSR–ERC relation, and the inclusion of a firm in a business group weakens the CSR–ERC relation.

The paper derives theoretical implications on the quality of earnings reflecting CSR activities, provides practical implications to the investors who target international capital markets and is expected to help broaden the understanding of CSR–ERC relations in international capital markets.

The paper provides practical implications to the investors who target international capital markets. Regarding the interpretation of accounting earnings that contain information on CSR activities, the legal origin and the CSR development stages are considered as key factors. Specifically, in the code-law and the early CSR environment, the potential benefits of CSR activities tend to be evaluated optimistically and reflected aggressively in reported earnings. Thus, if investors are in a similar international investment environment, they may need to recalibrate estimates in their decision model with additional CSR information from non-financial sources (e.g. sustainability reports).

The paper is based on the international institutional theory and the discussion of CSR development stages. The international institutional theory states that the legal origin is one of the factors that can help explain the differential aggressiveness of reported earnings by country. In addition, the discussion of CSR stages argues that the CSR practices can be differentially implemented by CSR stages. The authors try to fill the gap in the existing literature by conducting an empirical study based on data from Korea Stock Exchange.

Examining research topics in a specific area such as accounting is important to both novice and veteran researchers. The present study aims to identify the research topics in the area of accounting and to investigate the research trends by finding hot and cold topics from all those identified ones in the field.

A new dependency-based method focusing on noun phrases, which efficiently extracts research topics from a large set of library data, was proposed. An AR(1) autoregressive model was used to identify topics that have received significantly more or less attention from the researchers. The data used in the study included a total of 4,182 abstracts published in six leading (or premier) accounting journals from 2000 to May 2019.

The study identified 48 important research topics across the examined period as well as eight hot topics and one cold topic from the 48 topics.

The research topics identified based on the dependency-based method are similar to those found with the technique of latent Dirichlet allocation latent Dirichlet allocation (LDA) topic modelling. In addition, the method seems highly efficient, and the results are easier to interpret. Last, the research topics and trends found in the study provide reference to the researchers in the area of accounting.

This paper aims to provide preliminary evidence on the determinants of non‐audit service provision and whether the provision of such services impairs auditors' independence in the context of Bangladesh.

Both univariate and multivariate regression methodologies are used to test the hypotheses. Signaling theory is used to test whether auditors from a non‐litigious environment are concerned about signaling their quality to the market by constraining clients' earnings management behavior.

Results show that larger firms, firms with more liquidity, firms having an audit firm with an international link as their auditor and multinational subsidiaries purchase more non‐audit services, while highly‐leveraged firms purchase less. With respect to non‐audit fees (NAF) causing auditors to sacrifice their independence, this study fails to find any relationship between NAF and discretionary accruals (DACCR) after controlling for factors that are expected to drive DACCR behavior.

Use of DACCR as an earnings management device has been criticized on the ground that managers could use DACCR to signal their own private information. Hence, future research should look at alternative proxies of earnings management to investigate the relationship between non‐audit services and earnings management.

The findings of this paper will be of use to financial reporting regulatory authorities in Bangladesh, such as the Securities and Exchange Commission of Bangladesh as well as the Institute of Chartered Accountants of Bangladesh, regarding the corporate governance role played by the auditors.

Use of DACCR to detect earnings management behavior in the context of Bangladesh is a novel idea. The findings that the purchase of non‐audit services does not lead to increased earnings management behavior in a developing country context further strengthens the notion that there is a spill‐over effect of providing non‐audit services.

For more than 25 years auditing research has examined whether knowledge spillovers or synergies exist from the joint provision of audit and non‐audit services as well as whether the audit client benefits from knowledge spillovers. However, empirical evidence on knowledge spillover remains mixed and elusive. This article seeks to contribute to this debate, using a large sample covering both the pre‐ and the post‐Sarbanes‐Oxley Act (SOX) era. A post‐SOX focus can be potentially informative because SOX has fundamentally changed the mix of audit and non‐audit services that can be offered to audit clients.

A two‐stage least squares regression model is used to control for simultaneous bias due to the joint determination of audit and non‐audit fees. A panel dataset is also used.

A strong and significant negative relationship is found between audit fees and non‐audit fees. The results suggest that knowledge spillover flows from non‐audit to the audit side, as well as from the audit side to the non‐audit side. For the overall sample, a 1 percent increase in non‐audit fees is associated with a 0.59 percent decrease in audit fees. Similarly, a 1 percent increase in audit fees is associated with a 0.49 percent decrease in non‐audit fees.

Though a comprehensive set of determinants of audit and non‐audit fees is used, it is possible that the model may not include some other unknown determinants of fees paid to auditors.

The study contributes to the debate on whether regulators should ban all non‐audit services. It is found that when the same audit firm performs both audit and non‐audit services, there are synergies, i.e. insight learned from performing one function helps the other.

At the economy level, the findings suggest that cost savings, due to knowledge spillover, are partly passed on to the clients, particularly by Big 4 auditors.

The findings on the existence of knowledge spillover in the post‐SOX era are potentially informative to regulators, auditors, audit clients, and audit committee members.

This study seeks to examine the relation between non‐audit services provided by incumbent auditors and an important aspect of earnings quality – conservatism, using New Zealand data. Conservatism is defined as the adoption of accounting policies that accelerate expenses towards the current period and/or defer revenues to later periods. If the provision of non‐audit services undermines auditor independence and encourages the condoning of clients' aggressive accounting practices, this will be revealed by a reduction in accounting conservatism.

The method aims to determine whether Basu's conservatism is affected by the level and proportion of non‐audit services, where the dataset is partitioned into multiple levels of these services.

Using 528 firm‐year observations, evidence is presented for the existence of earnings conservatism in New Zealand. However, no evidence of a negative association between non‐audit services and earnings conservatism is found.

Although widely accepted in the conservatism literature, the Basu model still suffers from some drawbacks. Issues of endogeneity may also contribute to the insignificant results.

The results are consistent with factors such as reputational penalties and litigation risk constraining auditor behaviour. Auditors in New Zealand may therefore still maintain their independence “in fact”, irrespective of the level of non‐audit fees (NAFs) purchased by clients.

This paper contains the first tests of conservatism using New Zealand data. It adds to the body of knowledge about the relationship, or the lack thereof, between NAF and desirable attributes of accounting.

This study aims to examine the association between non-audit fees and audit quality by using the context of gender-diverse audit committees. Further, the authors assess whether this link is moderated by industry-specialist auditors.

This study used non-financial FTSE-350 firms over the period of seven years. In addition, the authors use ordinary least squares regression to test the research hypotheses.

The authors find that female directors on audit committees are negatively related to non-audit fees, suggesting that non-audit fees reduce audit quality. Moreover, the results indicate that industry-specialist auditors positively moderate the link between gender-diverse audit committees and non-audit fees. This suggests that non-audit fees improve audit quality when the auditor is an industry-specialist.

The study does not support blanket restrictions on non-audit fees. It recommends regulators to consider industry expertise of auditors when devising non-audit fee restrictions. Moreover, the findings of this study have implications for firms aiming to understand whether non-audit fees could be used for enhancing audit quality.

By using the context of female directors on audit committees, the authors conclusively assess the link between non-audit fees and audit quality. Further, this study provides a more robust evidence on whether industry-specialist auditors affect the relationship between non-audit fees and audit quality.

This experimental study investigates the connotative (measured) meaning of the concept “auditor independence” within three audit engagement case contexts, including two acknowledged in the literature to represent significant potential threats to independence. The study’s research design utilises the measurement of meaning (semantic differential) framework originally proposed by Osgood et al. (1957). Findings indicate that research participants considered the concept of independence within a two factor cognitive structure comprising “emphasis” and “variability” dimensions. Participants’ connotations of independence varied along both these dimensions in response to the alternative experimental case scenarios. In addition, participants’ perceptions of the auditor’s independence in the three cases were systematically associated with the identified connotative meaning dimensions.

The paper aims to examine the relation between fees paid to auditors and audit quality during the period of 2000‐2003.

The paper constructs a measure of auditor profitability that is used as a proxy for auditor independence. The methodology is grounded in the notion that auditor independence is influenced by effort and risk‐adjusted fees, rather than the level of fees received from clients. Since, risk and effort are unobservable, the paper uses proxies based on client size, complexity and risk to estimate abnormal fees. Abnormal fees are derived using a fee estimation model drawn from prior literature. The paper employs two metrics to assess audit quality – the standard deviation of residuals from regressions relating current accruals to cash flows and the absolute value of performance‐adjusted discretionary accruals.

The paper documents a statistically significant negative association between total fees and both audit quality proxies over all years. These findings are robust to a variety of additional tests and several alternative design specifications. The results (pre‐ and post‐SOX) are consistent with economic bonding being a determinant of auditor behavior rather than auditor reputational concerns.

The possibility that the empirical tests do not completely capture the impact of unobserved risk cannot be ruled out, though the paper attempts to do so by employing alternative specifications and sensitivity tests.

Policy makers should note that current restrictions on the provision of non‐audit services may not sufficiently resolve the issue of economic bonding and its impact on auditor independence.

In contrast to previous studies whose results are ambiguous, the paper finds a statistically significant positive association between several measures of total fees (it uses size‐adjusted and abnormal fees) and two metrics of accruals quality in all years (2000‐2003), consistent with economic bonding being a determinant of auditor behavior rather then auditor reputation concerns.