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Article
Publication date: 30 December 2021

Dessalegn Getie Mihret, Monika Kansal, Mohammad Badrul Muttakin and Tarek Rana

This study aims to examine the setting of International Standards on Auditing (ISA) 701 on disclosing key audit matters (KAMs) to explore the role of standard setting in…

Abstract

Purpose

This study aims to examine the setting of International Standards on Auditing (ISA) 701 on disclosing key audit matters (KAMs) to explore the role of standard setting in maintaining or reconstituting the relationship of the auditing profession with preparers and users of financial reports.

Design/methodology/approach

This study draws on concepts from the sociology of the professions literature and the regulatory space metaphor. Data comprises comment letters and other documents pertaining to the setting of ISA 701.

Findings

The study shows that the KAM reporting requirement is part of the ongoing re-calibration of the regulatory arrangements governing auditing, which started in the early 2000s. This study interprets standard setting as a site for negotiating the relationships between linked ecologies in the audit regulatory space, namely, the auditing profession, preparers of financial statements and users of audited reports. This study identifies three processes involved in setting ISA 701, namely, reconstitution of the rules governing auditors’ reports as a link between the three ecologies, preserving boundaries between the auditing profession and preparers and negotiation aimed at balancing competing interests of the interrelated ecologies.

Originality/value

The study offers insights into the role of regulatory rule setting as a central medium through which the adaptive relationship of the profession with its environment is negotiated.

Details

Qualitative Research in Accounting & Management, vol. 19 no. 1
Type: Research Article
ISSN: 1176-6093

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Book part
Publication date: 18 September 2017

Teresa Stephenson, Gary Fleischman and Mark Peterson

This research explores the expectation gap between tax clients’ motivations to hire tax preparers versus tax preparers’ perceptions of those client motivations. The study…

Abstract

This research explores the expectation gap between tax clients’ motivations to hire tax preparers versus tax preparers’ perceptions of those client motivations. The study builds on limited previous research by examining preparers primarily from local firms rather than focusing solely on large international firms. The Gaps Model of Service Quality provides the theoretical lens for the paper. We employ the recently developed Taxpayer Motivation Scale (TMS) to measure four client motivations to hire a preparer: (1) saving money, (2) saving time, (3) legal compliance, and (4) protection from the IRS. We measure expectation gaps for those four motivations using matched tax preparer–tax client dyads.

We employ statistical sub-group analyses to investigate the effects of both clients’ and preparers’ demographic characteristics that influence tax-expectation gaps. Results suggest client gender plays a noteworthy role in predicting many of the gaps. In addition, complexity of tax returns, children in the home, and client perceptions of tax-preparer advocacy help explain gaps. Finally, female preparers appear to be relatively more sensitive to client needs. We conclude that tax preparers need to (1) better understand their clients’ motivations for hiring them and (2) reexamine marketing efforts to educate clients about preparer credentials and potential strategy options for tax preparation.

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Book part
Publication date: 16 June 2008

Peter J. Westort and Richard Cummings

The impact of paid tax return preparers on the horizontal equity (HE) of the federal tax system has significance for regulatory and tax policy reasons. Using multiple…

Abstract

The impact of paid tax return preparers on the horizontal equity (HE) of the federal tax system has significance for regulatory and tax policy reasons. Using multiple analytical techniques to consider data from the Statistics of Income Division's 2000 Individual Model File (IMF), this study shows that the HE measure is generally greater (implying less HE) for the paid-preparer returns than for the self-prepared returns, even after controlling for complexity and other variables that may differ systematically by tax preparation mode.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-84663-912-8

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Article
Publication date: 28 August 2021

A.M.I. Lakshan, Mary Low and Charl de Villiers

The international integrated reporting framework encourages organisations to disclose material information that affects their ability to create value. This paper aims to…

Abstract

Purpose

The international integrated reporting framework encourages organisations to disclose material information that affects their ability to create value. This paper aims to investigate the challenges and techniques preparers of integrated reports use to determine the materiality of non-financial information.

Design/methodology/approach

This paper uses an exploratory interpretive thematic analysis and an archival research approach. Qualitative semi-structured interviews were conducted with 55 integrated reporting (IR) preparers in 12 publicly listed companies, supported by the perusal of the companies’ integrated annual reports over a three-year period.

Findings

IR preparers find materiality determination for non-financial information challenging. This study found that preparers convert challenges into opportunities by using materiality disclosures as image-enhancing marketing tools, which causes concerns regarding weak accountability and a deviation from the International Integrated Reporting Council’s objective of improving information quality. This study found that IR preparers use various techniques in conjunction to determine materiality levels, as well as whether to disclose non-financial information in their integrated reports. The institutional isomorphism lens used in the study highlighted the issues IR preparers faced in their determined efforts of IR materiality levels under mimetic and normative isomorphism pressures.

Research limitations/implications

The challenges and techniques identified can contribute to the development of a framework for materiality level determination for non-financial information.

Practical implications

Regulators who are concerned with ensuring sufficient information to improve investor decision-making will be interested in the techniques IR preparers use to determine materiality levels for non-financial information, to improve their regulations and frameworks.

Originality/value

This study contributes to the literature regarding challenges with materiality level determination in integrated reports and techniques used by IR preparers. The application of an institutional isomorphism lens led to greater insight and understanding of IR preparers’ challenges and techniques in materiality determination. This paper makes a number of significant contributions to the IR literature. First, it identifies the usefulness of material information for decision-making and the influence stakeholders have on the materiality determination of non-financial information, which have not been mentioned in the prior literature. Second, the literature is silent on how organisations relate materiality to value creation for the purposes of determining the materiality content of an integrated report; this research provides empirical evidence of the use of value creation criteria in materiality determination. Third, the study highlights that materiality is a combination of efforts that involves everyone in an organisation. Further, the strategy should be linked to IR and preparers have indicated that integrated thinking is required for materiality determination.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 24 May 2019

Brandon Ater, Christine Gimbar, J. Gregory Jenkins, Gabriel Saucedo and Nicole S. Wright

This paper aims to examine the perceptions of auditor roles on the workpaper review process in current audit practice. Specifically, the paper investigates how an…

Abstract

Purpose

This paper aims to examine the perceptions of auditor roles on the workpaper review process in current audit practice. Specifically, the paper investigates how an auditor’s defined role leads to perceived differences in what initiates the workpaper review process, the preferred methods for performing reviews and the stylization or framing of communicated review comments.

Design/methodology/approach

A survey was administered in which practicing auditors were asked about workpaper review process prompts, methods and preferences. The survey was completed by 215 auditors from each of the Big 4 accounting firms and one additional international firm. The final data set consists of quantitative and qualitative responses from 25 audit partners, 33 senior managers, 30 managers, 75 in-charge auditors/seniors and 52 staff auditors.

Findings

Findings indicate reviewers and preparers differ in their perceptions of the review process based on their defined roles. First, reviewers and preparers differ in their perspectives on which factors initiate the review process. Second, the majority of reviewers and preparers prefer face-to-face communication when discussing review notes. Reviewers, however, are more likely to believe the face-to-face method is an effective way to discuss review notes and to facilitate learning, whereas preparers prefer the method primarily because it reduces back-and-forth communication. Finally, reviewers believe they predominantly provide conclusion-based review notes, whereas preparers perceive review notes as having both conclusion- and documentation-based messages.

Research limitations/implications

This paper advances the academic literature by providing a unique perspective on the review process. Instead of investigating a single staff level, it examines the workpaper review process on a broader scale. By obtaining views from professionals across all levels, this work intends to inspire future research directed at reconciling differences and filling gaps in the review process literature. The finding that reviewers and preparers engage in role conformity that leads to incongruent perceptions of the review process should encourage the consideration of mechanisms, with the potential to be tested experimentally, by which to reconcile the incongruities.

Practical implications

Results support recent regulator concerns that there are breakdowns in the workpaper review process, and the findings provide some insight into why these breakdowns are occurring. Incongruent perceptions of review process characteristics may be the drivers of these identified regulatory concerns.

Originality/value

This is the first study to examine current workpaper review processes at the largest accounting firms from the perspective of both preparers and reviewers. From this unique data set, one key interpretation of the findings is that workpaper preparers do not appear to recognize a primary goal of the review process: to ensure that subordinates receive appropriate coaching, learning and development. However, workpaper reviewers do, in fact, attempt to support preparers and work to create a supportive team environment.

Details

Managerial Auditing Journal, vol. 34 no. 4
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 29 May 2018

Alessandro Lai, Gaia Melloni and Riccardo Stacchezzini

The International Integrated Reporting Council claims that integrated reporting (IR) can enhance corporate accountability, yet critical and interpretative studies have…

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Abstract

Purpose

The International Integrated Reporting Council claims that integrated reporting (IR) can enhance corporate accountability, yet critical and interpretative studies have contested this outcome. Insufficient empirical research details how preparers experience accountability while constructing IR; to fill this gap, the purpose of this paper is to analyse how the preparers’ mode of cognition influences the patterns of accountability associated with IR.

Design/methodology/approach

A functionalist approach to narratives helps elucidate the role that the IR preparers’ narrative mode of cognition plays on accountability towards stakeholders. The empirical analysis particularly benefits from in-depth interviews with the IR preparers of a global insurer that has used IR since 2013.

Findings

The preparers’ narrative mode of cognition facilitates dialogue with IR users. It addresses accountability tensions by revealing the company’s value creation process. Preparers’ efforts to establish a meaningful dialogue with a growing variety of stakeholders through broader and plainer messages reveals the potential of IR as a narrative source of a socializing form of accountability. However, financial stakeholders remain the primary addressees of the reports.

Research limitations/implications

This paper focusses on preparers’ views; further research should integrate users’ accountability expectations.

Originality/value

This paper offers new insights for dealing with corporate reporting and accountability in a novel IR setting.

Details

Accounting, Auditing & Accountability Journal, vol. 31 no. 5
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 March 2014

Judith Harris, Karen S. McKenzie and Randall Rentfro

Using tax abatements to spur economic development can be controversial. The potential benefits are stressed when abatements are granted, but subsequent reporting may be…

Abstract

Using tax abatements to spur economic development can be controversial. The potential benefits are stressed when abatements are granted, but subsequent reporting may be insufficient for citizens to hold governments accountable for actual results. We solicited perspectives on tax abatements from three user groups (citizens representing advocacy groups, county board members, and financial analysts) and county officials involved in financial reporting, budgeting, or property tax administration. Users and preparers expressed generally similar views about the need for reporting; however, some differences were evident in the degree of support for reporting specific information items and the format for making information available. We also found that much information desired by users is not available to them currently, and governments may need to create mechanisms to collect information.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 26 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 19 December 2018

Akrum Helfaya, Mark Whittington and Chandana Alawattage

The purpose of this paper is to provide a multidimensional model for assessing the quality of corporate environmental reporting (CER) incorporating both preparer- and…

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1685

Abstract

Purpose

The purpose of this paper is to provide a multidimensional model for assessing the quality of corporate environmental reporting (CER) incorporating both preparer- and user-based views.

Design/methodology/approach

As opposed to frequently used researcher-chosen proxies, the authors used an online questionnaire asking preparers and users how they assess the quality of a company’s environmental report.

Findings

The analysis of the responses of 177 users and 86 preparers shows that quantity was not perceived as the most significant element in determining quality. Besides quantity, the respondents also perceived information types, measures used, themes disclosed, adopting reporting guidelines, inclusion of assurance statement and the use of visual tools as significant dimensions/features of reporting quality.

Research limitations/implications

The online questionnaire has some limitations, especially in terms of researcher being absent to clarify meanings and, hence, possibilities that respondents may misinterpret the questionnaire elements.

Practical implications

Considering that robust, reliable measurement of reporting quality is difficult, preparers, standard setters and policy makers need multidimensional quality models that incorporate both users’ perceptions of quality and preparers’ pragmatic understanding of the quality delivery process. These will make the preparers informed of whether their disclosure may be falling short of users’ expectations.

Originality/value

Amid, increasing complexity of CER, the research contributes to the growing body of literature on assessing the quality of CER by developing a less subjective, multidimensional, preparer–user-based quality model. This innovative quality model goes beyond the traditional quality models, subjective author-based quality measures. Focussing on the three dimensions of reporting quality – content, credibility and communication – it also offers a high-level resolution of meaning of CER quality.

Details

Accounting, Auditing & Accountability Journal, vol. 32 no. 1
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 26 July 2011

A.A. Ousama, A.H. Fatima and A.R. Hafiz Majdi

This paper aims to investigate preparers' and users' perceptions on the usefulness of intellectual capital (IC) information disclosed in annual reports of listed…

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1815

Abstract

Purpose

This paper aims to investigate preparers' and users' perceptions on the usefulness of intellectual capital (IC) information disclosed in annual reports of listed companies. In addition, it aims to examine the significant differences in the perceptions of usefulness of IC information and IC categories of the preparers and users.

Design/methodology/approach

The paper used a questionnaire survey method to collect the data (i.e. primary data). The questionnaires were distributed to companies (i.e. chief financial officers and accountants) as preparers, and brokers (i.e. analysts) and banks (i.e. credit officers) as users. The data were analysed using descriptive statistics, t‐test and ANOVA.

Findings

The paper found that both preparers and users perceive the IC information disclosed in the annual reports of listed companies to be useful for their decision making purposes. Furthermore, the paper found that there are significant differences in the perception of usefulness between preparers and users.

Research limitations/implications

The paper only focused on certain preparers' and users' perceptions. Nevertheless, it provides evidence that IC information is useful for decision‐making purposes. Future research on this issue may include more users.

Practical implications

The findings provide evidence that IC information disclosed by listed companies is perceived to be useful by preparers and users. In addition, it provides evidence that there is significant difference between the perceptions of the usefulness of IC information by preparers, users and amongst the different user groups. Thus, these findings could be useful for regulatory authorities in Malaysia (e.g. Malaysian Accounting Standards Board and Bursa Malaysia) for the improvement of the disclosure practices (e.g. voluntary basis) by the Malaysian listed companies and enhance transparency in the capital market.

Originality/value

The paper can be considered as the first empirical study to examine the usefulness of the IC information from both views; preparers and users in Malaysia. In addition it contributes to the limited literature on IC in Malaysia.

Details

Journal of Intellectual Capital, vol. 12 no. 3
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 25 May 2010

Javier Montoya del Corte, Francisco Javier Martínez García and Ana Fernández Laviada

The purpose of this paper is to provide evidence concerning the effective use of qualitative materiality factors (QMF) included in the new ISA 450, and its potential…

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1680

Abstract

Purpose

The purpose of this paper is to provide evidence concerning the effective use of qualitative materiality factors (QMF) included in the new ISA 450, and its potential consequences from the perspective of Spanish independent auditors and preparers of financial statements.

Design/methodology/approach

A specially designed questionnaire was distributed to a sample of both (352) auditors and (121) preparers in Spain. Frequencies and ranking comparisons, Student's t‐tests, and Mann‐Whitney tests were used to analyse the data.

Findings

Results show that the majority of auditors and preparers that participated in the study agree on the issuance of qualified audit reports when the financial statements contain uncorrected misstatements that are below the materiality levels but are related to QMF included in ISA 450. Furthermore, both groups accept that this situation would have important positive effects on the development and results of current practice in auditing, on the quality of financial statements, and on both users and society.

Research limitations/implications

First, as with all mail surveys, there are some limitations associated with individuals' responses. Second, the findings of this paper should be interpreted bearing in mind that the survey was conducted before the new ISA 450 was published in October 2008. Finally, this paper is limited to the Spanish context; thus, the findings may not be applicable elsewhere.

Practical implications

The findings of this paper have significant practical implications for auditors, as well as for policy makers, enabling them to better understand the importance of the qualitative side of materiality in auditing judgments.

Originality/value

From the perspective of both auditors and preparers, this paper provides evidence about the QMF included in the new ISA 450, effective for audits of financial statements for periods beginning on or after December 15, 2009.

Details

Managerial Auditing Journal, vol. 25 no. 5
Type: Research Article
ISSN: 0268-6902

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