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This paper aims to examine the effect of audit quality of consolidated financial statements on the accuracy of analysts’ earnings forecasts from the viewpoint of users of financial statements.

This paper investigates the effect of dependence on the work of other auditors on error in analysts’ earnings forecasts based on samples from 2011 to 2012 (the period since implementation of the International Financial Reporting Standards in Korea). In addition, this paper examines the effects of use of Big 4 auditors, use of auditors with industry expertise and the proportion of overseas subsidiaries in relation to all subsidiaries on the association between dependence on the work of other auditors and error in analysts’ earnings forecasts.

This paper finds a positive relation between dependence on the work of other auditors and error in analysts’ earnings forecasts, suggesting that more dependence on the work of other auditors decreases the quality of the audit of consolidated financial statements; thus, to the extent that low-quality audits decrease reporting reliability, analysts’ forecasts are less likely to be accurate. This paper also finds that the positive relationship between dependence on the work of other auditors and error in analysts’ earnings forecasts is weakened when the principal auditor is a Big 4 auditor or one with industry expertise, because such auditors provide higher-quality audit services. However, the positive relationship between dependence on the work of other auditors and error in analysts’ earnings forecasts is further strengthened in cases where the proportion of overseas subsidiaries to all subsidiaries is higher. These results suggest that the complexity of the consolidation process increases as the proportion of overseas subsidiaries increases.

The findings are useful in analyzing the effects of adoption of the New ISA, implemented in 2014, which does not allow the division of audit responsibilities between principal auditors and other auditors. This paper also provides insights for regulators and practitioners to improve the auditor appointment system in the future.

This paper aims to examine whether Andersen’s audit quality in the five years preceding its collapse lagged that of other Big-Five auditors.

This paper compares Andersen’s audit quality and the other Big-Five auditors using five methodologies, namely, earnings response coefficients, magnitudes of abnormal accruals, propensities to issue going-concern opinions, usefulness of going-concern opinions in predicting bankruptcy and the frequency of Accounting and Auditing Enforcement Releases. The comparisons are based on both pooled samples of all observations and propensity-score-based matched-pairs.

The preponderance of evidence shows that Andersen’s audit quality did not differ materially in audit quality from other Big-Five auditors prior to its failure. However, it was found that Andersen’s independence was compromised in the year leading to its collapse (2000), as indicated by the lower likelihood to issue going-concern opinions.

This paper complements and improves on Cahan et al. (2011) by using more measures of audit quality, as no one measure is perfect, showing that their results using discretionary accruals are sensitive to the model used and showing that there is a more powerful direct measure of audit quality, namely, going-concern opinions.

The purpose of this paper, using transaction cost economics as a theoretical framework, is to seek an understanding of a company's decision to purchase Management Advisory Services (MAS) from their external auditors and other consultants as opposed to assembling MAS internally within the company.

Data from annual reports for a pooled sample of 3,154 company years were collected for listed Australian companies to determine MAS from auditors. Data for a second sample were collected by undertaking a survey of listed companies to provide a figure for total management advisory services paid to auditors and other consultants. Ordinary least squares regression was used to analyse the data and predict companies' decision to outsource or internally generate MAS.

It is found that purchases of MAS from external auditors and other consultants are associated with, restructuring, number of controlled entities (subsidiaries), number of geographical segments, management change and frequency of contracting. Other company characteristics, including company's industry membership, short‐term growth, leverage, return on assets, use of a “big 5” auditor, type of audit report, and audit fees also explain the quantity of MAS purchased by a company from their external auditors and other consultants.

Transaction cost economics has not previously been applied to explain the decision to generate MAS internally by assembling knowledge within the company versus outsourcing from auditors and other consultants. The study makes use of unique data sets because it covers the period when regulations were not foreshowed restricting accounting firms supplying their audit clients with MAS.

I synthesize the extant experimental literature examining auditor evaluation of others’ credibility published in six top accounting journals over the last three-and-a-half decades. I adapt the original definition of credibility by Hovland, Janis, and Kelley (1953): the extent of perceiving someone as competent and trustworthy. Audit guidance requires auditors to consider credibility of management, internal auditors, and staff, yet the research literature on auditor evaluation of others’ credibility is fragmented and scarce, limiting our understanding of determinants and consequences of auditor evaluations. I develop a framework for analysis of research on auditor evaluation of others’ credibility and review extant literature by types of examined effects (determinants of credibility vs. consequences of credibility) and by examined credibility components (competence, trustworthiness, or both). Throughout the literature review I suggest areas for future research.

The effect of affect in accounting contexts has recently attracted interest, but numerous questions still remain. Given that affect can significantly impact a variety of accounting judgments and decisions in theoretically different manners, the purpose of this synthesis is to understand the state of extant accounting literature in affect and identify directions for future research.

This synthesis systematically reviews experimental accounting papers related to affect in both theoretical and functional respects. The authors first elaborate on the affect infusion theory as the theoretical foundation for the synthesis. The authors then present the sampling method. In Section 4, the authors conceptually and factually summarize affect accounting papers in terms of four major functional areas: auditing, managerial/corporate accounting, tax and financial accounting. The implications of moderators examined in some papers are also discussed. Finally, the authors conclude by revisiting the importance of affect in accounting contexts.

Throughout the synthesis, the authors provide future research opportunities with respect to theories, each functional area and other gaps in the accounting literature.

This synthesis contributes to the accounting literature by providing a pathway to understand the development of accounting research on affect, integrating theoretical foundations and offering future research opportunities to advance the literature.

This paper reviews studies that have examined how accounting information impacts commercial lending judgments. Issues discussed involve the usefulness of accounting data in lending decisions, effects of different accounting methods on lenders’ judgments, bankruptcy and default judgments, and decision processes pertaining to the use of accounting information in lending decisions. Additionally, the paper reviews the research on how audits and other forms of assurance influence commercial loan officers’ judgments. Topics include the way perceived auditor independence influences loan officers’ judgments, the impact of financial statement audits and audit opinions on lending decisions, how internal control reports and other CPA firm reports influence loan decisions, ways in which audit report disclosures and wording impact lending decisions, how perceived auditor quality affects lending decisions, and the effects of limited assurance engagements on loan officers’ judgments.

This chapter focuses on the international aspects of auditing in the context of the airline industry for the year 2018. This chapter finds that International Standards on Auditing have been widely adopted in the global context. This chapter also analyses several observations related to the composition of audit firms (Big 4 vs. non-Big 4), types of audit opinions, emphasis of matter, other matters, material uncertainty related to going-concern, and types of auditors (single or joint auditor). This chapter covers the frequency of the four elements of describing key audit matters (KAM) in the audit reports in the global and auditor context as well as the KAMs observed in the airline industry and classifies them as industry-specific KAMs and entity-specific KAMs. In addition, this chapter analyses the requirements of the expanded audit report of the UK which includes the declaration of materiality threshold and scope of the audit in connection with the materiality and KAMs considering UK and non-UK airlines.

This paper aims to investigate how auditors’ characteristics affect key audit matters (KAMs) in the new audit report. It also provides an understanding of the effect of the COVID-19 pandemic on different audit reporting decisions and audit quality in specific industries.

The paper uses a survey based on actual audit case studies extracted from the management letters of clients in an audit firm with international affiliation to test the proposed hypotheses. Kruskal–Wallis and Mann–Whitney tests are conducted to analyze variance in responses among different groups of auditors regarding their selection of audit report sections required for each audit matter. The Wilcoxon signed rank test analyses difference in the auditors’ responses pre- and post-COVID-19 implications.

Most of the developed hypotheses were only partially accepted where industry specialization, professional qualifications of the auditors and the effects of COVID-19 had some effects on the ability of auditors to recognize and disclose KAMs. Auditor position is the most factor that significantly influenced the recognition of KAMs in the new audit report resulting in higher audit quality. This was specially the case with auditors specializing in manufacturing and financial institutions.

The current research illustrates that during the pandemic, auditors were more effective in recognizing KAMs compared to other audit matters, thus enhancing users’ confidence in both the audit and the financial reporting processes. The results are useful to regulators and auditors as they provide a better understanding of the factors that may impact communicating KAMs in the new audit report under COVID-19.

This paper aims to chart Swedish auditors’ likelihood of issuing going concern warnings (GCWs), and to investigate the relationship between formal auditor competence, audit fees and audit firm, respectively, and the likelihood of issuing GCWs.

The empirical data are based on annual reports and audit reports for 2,547 limited companies that went bankrupt in 2010 in the wake of the financial crisis and had filed a financial statement in the year before the bankruptcy.

The findings indicate that Swedish auditors seldom issue GCWs. Moreover, there is a positive relationship between audit fee level and the likelihood of issuing GCWs, and Big 4 auditors being more likely to issue such warnings than other auditors. However, the analyses identify differences between audit firms (within the group of Big 4 firms and within the group of other audit firms) in terms of their predictions of client bankruptcies. This suggests a need for further investigation of firm-specific differences. Contrary to what was predicted, authorized auditors are not more likely to issue GCWs than approved auditors.

This paper did not investigate the impact of audit experience and tenure or the possibility that auditors may signal survival problems by resigning.

Levying appropriate audit fees creates opportunities for thorough audits, but auditors’ formal competence based on training and qualification is not a factor that enforces audit quality. Based on the findings, the authors also suggest some clarifications of existing standards to reduce ambiguity regarding the reporting of survival problems.

The Swedish setting is a context in which most companies are small, creditor interest in accounting and auditing is strong and auditors must issue a modified audit opinion if half of the shareholders’ equity is spent. This setting offers a unique research opportunity because the formal competence differs between Sweden’s two categories of certified auditors, and it allows exploration beyond the dichotomy of Big 4 versus other audit firms.

This synthesis covers academic research on the use of valuation, tax, information technology (IT), and forensic specialists on audit engagements. The importance and role of specialists on audit engagements have recently increased, and specialist use has garnered significant attention from regulators and academics. Given the PCAOB’s (2017b) recent proposal to revise auditing standards regarding specialists’ involvement, it is important to review the specialist literature as a whole. By integrating research across these four domains, I identify commonalities and differences related to: (1) factors associated with the use of specialists on audit engagements (including the nature, timing, and extent of use); (2) factors impacting auditors’ interactions with specialists (including specialists contracted by the auditor or management); and (3) outcomes associated with the use of specialists. This integrated analysis of the specialist literatures shows variation in the use of specialists, and various factors affecting both if and how they are involved and whether auditors use specialists internal or external to the audit firm. Additionally, research has sometimes (but not always) linked specialist involvement to higher audit quality. The commonalities and areas of variation identified are informative to audit research and practice, particularly as regulators and audit firms look to improve the quality of audits using specialists. Throughout the synthesis, I also provide a number of directions for future research.