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1 – 10 of 596Md Khokan Bepari, Shamsun Nahar and Abu Taher Mollik
This paper aims to examine the perspectives of auditors, regulators and financial report preparers on the effects of key audit matters (KAMs) reporting on audit effort, fees…
Abstract
Purpose
This paper aims to examine the perspectives of auditors, regulators and financial report preparers on the effects of key audit matters (KAMs) reporting on audit effort, fees, quality and report transparency.
Design/methodology/approach
The authors conducted 21 semi-structured interviews with stakeholders (13 Audit Partners, 5 Chief Financial Officers and 3 regulators) and thematically analysed the interviews. They use the frame of “Paradox of Transparency” to explain the findings.
Findings
Auditors perceive that the overall quality control of their audits has improved both in the planning and execution stages, and such improvement can mostly be attributed to the coercive pressures from professional bodies and regulators. Nevertheless, audit fee remains unchanged. Auditors disclose industry generic items and descriptions of KAMs, sometimes masking the real problem areas of the clients. Even after improving the performative audit quality, transparency of audit reporting has not improved. Issues that warrant going concern qualifications or audit report modifications are now reported as KAMs. Hence, KAMs reporting might make the audit report less transparent.
Practical implications
Localised audit environments and institutions affect the transparency of KAMs reporting. Without attention to corporate governance and auditors’ independence issues, paradoxically, performative improvement in audit quality (due to the KAMs reporting requirement) does not enhance the transparency of audit reports.
Originality/value
To the best of the authors’ knowledge, this study is the first to provide field-level evidence in Bangladesh and other developing countries about the perceptions of auditors, financial report preparers and regulators on the effects of KAMs reporting on audit efforts, fees, quality and report transparency.
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Ewald Aschauer and Reiner Quick
This study aims to investigate why and how shared service centres (SSCs) are implemented as well as how they affect audit firm practice and audit quality.
Abstract
Purpose
This study aims to investigate why and how shared service centres (SSCs) are implemented as well as how they affect audit firm practice and audit quality.
Design/methodology/approach
In this qualitative study guided by the theoretical framework of institutional theory, the authors conducted 25 semi-structured interviews in seven European countries, including 16 interviews with audit partners from Big 4 firms, 6 with audit team members, 2 with interviewees from second-tier audit firms and 1 with a member of an oversight body.
Findings
The authors show that the central rationale for audit firms to implement SSCs is economic rather than external legitimacy. The authors find that SSC implementation has substantial effects on audit practices, particularly those related to standardisation, coordination and monitoring activities. The authors also highlight the potential impacts on audit quality.
Originality/value
By exploring the motivation for and effects of SSC implementation amongst audit firms, the authors offer insights into the best practices related to subsequent change processes and audit quality.
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Naruanard Sarapaivanich, Erboon Ekasingh, Jomjai Sampet and Paul Patterson
This study examines how professional service firms' communication effectiveness (affiliative communications style, social dialogue and information provision), social cognitive…
Abstract
Purpose
This study examines how professional service firms' communication effectiveness (affiliative communications style, social dialogue and information provision), social cognitive capital and rapport established between an auditor and SME client are instrumental in influencing the latter's evaluation of the technical quality of an audit.
Design/methodology/approach
The study combines qualitative and quantitative methodologies to create a cross-sectional survey covering four geographic regions in an emerging economy – Thailand. The authors examine the hypotheses by employing social interaction theory.
Findings
A study of 744 SME executives plus post-survey interviews with three audit partners revealed that an affiliative communications style and information provision are positively associated with the rapport developed between financial auditor and client, and that rapport, in turn, had a strong association with client perceptions of audit quality. In addition, affiliative communication style, information provision and social cognitive capital had a direct (positive) association with perceptions of audit quality. The effects of communication effectiveness and social cognitive capital varied, depending on whether or not the SME client possessed formal accounting qualifications.
Originality/value
The study contributes to the literature on the business-to-business professional services, and accounting in particular, by explicating the important roles of communication effectiveness, rapport, and social cognitive capital in the relationship between an auditor and a client. Moreover, the paper reveals that the differences in educational background of clients result in differential impacts of communication effectiveness and social cognitive capital on rapport and perceptions of audit quality.
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Yulianti Yulianti, Mohammad Wahyudin Zarkasyi, Harry Suharman and Roebiandini Soemantri
This study aims to examine the effect of professional commitment, commitment to ethics, internal locus of control and emotional intelligence on the ability to detect fraud through…
Abstract
Purpose
This study aims to examine the effect of professional commitment, commitment to ethics, internal locus of control and emotional intelligence on the ability to detect fraud through reduced audit quality behaviors.
Design/methodology/approach
The analysis unit is the internal auditor in internal control unit at state Islamic religious higher education in Indonesia. Data processing used covariance-based structural equation modeling using Lisrel Software and the Sobel test to verify the direct and indirect effects.
Findings
This study found empirical evidence that professional commitment and emotional intelligence positively impact the ability to detect fraud. Commitment to ethics and emotional intelligence has a negative effect on reduced audit quality behaviors. Furthermore, this study also provides that commitment to ethics and emotional intelligence indirectly impacts on the ability to detect fraud through reduced audit quality behaviors.
Practical implications
The organization periodically monitors auditors’ behaviors, especially reduced audit quality behaviors, during the audit process and encourages regulators to formulate policies related to increasing the ability to detect fraud.
Originality/value
This study provides knowledge regarding the driving force of internal auditors to mitigate reduced audit quality behaviors and increase the ability to detect fraud.
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Piotr Rogala, Piotr Kafel and Maciej Urbaniak
This paper deals with external audits, which are now commonly used in many industries (e.g. food, automotive and electrical). This study aims to assess whether a given…
Abstract
Purpose
This paper deals with external audits, which are now commonly used in many industries (e.g. food, automotive and electrical). This study aims to assess whether a given organization meets the specific criteria. If the audit ends with a positive result, information about it is provided to selected interested parties, e.g. clients or contractors. Credibility is pivotal in adding value for all interested parties within the audit processes. This study seeks the factors which, in the opinion of the audited enterprises, have the most decisive impact on the credibility of external audits.
Design/methodology/approach
In keeping with the extant literature, research questions were developed regarding the factors influencing the credibility assessment of external audits. Data collected from 100 companies in the Polish food sector were used to construct the model and carry out statistical analyses. Linear regression analyses were also applied to determine the key factors influencing the credibility of audits.
Findings
This study is part of the research trend on the rationality of external audits and certification of quality management systems. This paper identifies nine main factors shaping the credibility of external audits. Two of them have the most decisive influence on credibility. The first one is the professional audit method (procedure). The second factor is the auditor’s knowledge of the specificity of the audited area.
Research limitations/implications
This study did not consider the impact that the image/credibility of the organization represented by the auditors may have on the reliability of audits. This is one of the fundamental limitations that should be considered when analyzing the obtained results. To recognize this type of dependence, additional research should be carried out. Another limitation is that the research covers the food industry only. It would be interesting to know the situation in other types of industries.
Practical implications
This paper looks at the possibility of increasing the added value for audited enterprises. The proposed model can be used by managers of organizations conducting external audits and auditors to effectively use resources for process improvement, influencing the maximization of credibility of activities in the area of conformity assessment.
Originality/value
The originality of this study lies in adopting the perspective of audited enterprises in assessing the credibility of audits. To the best of the authors’ knowledge, this is the first study that adopts this approach. This paper contributes to the literature, particularly to better understand audited enterprises’ behavior (trust in audit results, satisfaction with audits, etc.).
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Kriengkrai Boonlert-u-thai, Pattanaporn Chatjuthamard, Suwongrat Papangkorn and Pornsit Jiraporn
Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is…
Abstract
Purpose
Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is influenced by the discipline of the takeover market. External auditors and the takeover market both function as important instruments of external corporate governance.
Design/methodology/approach
The authors execute a standard regression analysis and run a variety of robustness checks to minimize endogeneity, namely, propensity score matching (PSM), entropy balancing, an instrumental-variable analysis, Generalized method of moment (GMM) dynamic panel data analysis and Lewbel's (2012) heteroscedastic identification.
Findings
The authors’ immense sample spans half a century, encompassing nearly 180,000 observations and 17 takeover-related state legislations, one of the largest samples in the literature in this area. The authors’ results suggest that firms with more takeover exposure are significantly less likely to use Big N auditors. Therefore, a more active takeover market results in poorer external audit quality, corroborating the substitution hypothesis. The discipline of the takeover market substitutes for the necessity for a high-quality external auditor. Specifically, a rise in takeover susceptibility by one standard deviation lowers the probability of using a Big N auditor by 4.29%.
Originality/value
The authors’ study is the first to examine the effect of the takeover over market on audit quality using a novel measure of hostile takeover susceptibility mainly based on the staggered implementation of state legislation. Because the enactment of state legislation is beyond the control of any firm individually, it is plausibly exogenous. The authors’ results therefore probably reflect a causal influence rather than merely a correlation.
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This study aims to examine how woman leadership (i.e., woman board chairperson, woman chief executive officer (CEO) and board gender diversity) affects audit fee and also…
Abstract
Purpose
This study aims to examine how woman leadership (i.e., woman board chairperson, woman chief executive officer (CEO) and board gender diversity) affects audit fee and also ascertained the interactive effect of woman leadership and gender diversity on audit committee on audit fee.
Design/methodology/approach
The study applied ordinary least square and fixed-effect estimators on the data of 21 universal banks in Ghana for the period 2010–2021 to estimate the empirical results.
Findings
It is revealed that under the leadership of women (woman CEO and board gender diversity), higher external audit quality is ensured as higher audit fee is paid. Interestingly, it was found that with the presence of women on the audit committee, the integrity of internal controls and internal audit procedures are enhanced, which leads to quality financial reporting, calls for lower audit effort, hence lower audit fee.
Practical implications
The result indicates that firms can rely on the leadership of women in ensuring quality external audit and quality financial reporting, which ultimately helps to minimize the information risk to all stakeholders.
Originality/value
The paper contributes to extant literature by establishing that, under the leadership of women in banking entities from a developing country context, external audit quality and financial reporting are achieved.
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Gianluca Ginesti, Rosalinda Santonastaso and Riccardo Macchioni
This paper aims to investigate the impact of family involvement in ownership and governance on the quality of internal auditing.
Abstract
Purpose
This paper aims to investigate the impact of family involvement in ownership and governance on the quality of internal auditing.
Design/methodology/approach
Leveraging a hand-collected data set of listed family firms from 2014 to 2020, this study uses regression analyses to investigate the impact of family ownership, family involvement on the board, family CEO and the generational stage of the family business on the quality of internal auditing.
Findings
The results provide evidence that family ownership is positively associated with the quality of internal auditing, while later generational stages of family businesses have the opposite effect. Additional analyses reveal that the presence of a sustainability board sub-committee moderates the relationship between generational stages of family businesses and the quality of internal auditing function.
Research limitations/implications
This paper does not consider country-institutional factors and other potentially family-related antecedents or governance factors that may affect the quality of internal auditing.
Practical implications
The results are informative for investors and non-family stakeholders interested in understanding under which conditions family-related factors influence the quality of internal auditing functions.
Originality/value
This study offers fresh evidence regarding the relationship between family-related factors and the quality of internal auditing and board sub-committees that moderate such a relationship in family businesses.
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Nathanaël Betti, Steven DeSimone, Joy Gray and Ingrid Poncin
This research paper aims to investigate the effects of internal audit’s (IA) use of data analytics and the performance of consulting activities on perceived IA quality.
Abstract
Purpose
This research paper aims to investigate the effects of internal audit’s (IA) use of data analytics and the performance of consulting activities on perceived IA quality.
Design/methodology/approach
The authors conduct a 2 × 2 between-subjects experiment among upper and middle managers where the use of data analytics and the performance of consulting activities by internal auditors are manipulated.
Findings
Results highlight the importance of internal auditor use of data analytics and performance of consulting activities to improve perceived IA quality. First, managers perceive internal auditors as more competent when the auditors use data analytics. Second, managers perceive internal auditors’ recommendations as more relevant when the auditors perform consulting activities. Finally, managers perceive an improvement in the quality of relationships with internal auditors when auditors perform consulting activities, which is strengthened when internal auditors combine the use of data analytics and the performance of consulting activities.
Research limitations/implications
From a theoretical perspective, this research builds on the IA quality framework by considering digitalization as a contextual factor. This research focused on the perceptions of one major stakeholder of the IA function: senior management. Future research should investigate the perceptions of other stakeholders and other contextual factors.
Practical implications
This research suggests that internal auditors should prioritize the development of the consulting role in their function and develop their digital expertise, especially expertise in data analytics, to improve perceived IA quality.
Originality/value
This research tests the impacts of the use of data analytics and the performance of consulting activities on perceived IA quality holistically, by testing Trotman and Duncan’s (2018) framework using an experiment.
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Olayinka Adedayo Erin and Barry Ackers
In recent times, stakeholders have called on corporate organizations especially those charged with governance to embrace full disclosure on non-financial issues, especially…
Abstract
Purpose
In recent times, stakeholders have called on corporate organizations especially those charged with governance to embrace full disclosure on non-financial issues, especially sustainability reporting. Based on this premise, this study aims to examine the influence of corporate board and assurance on sustainability reporting practices (SRP) of selected 80 firms from 8 countries in sub-Saharan Africa.
Design/methodology/approach
To measure the corporate board, the authors use both board variables and audit committee variables. Also, the authors adapted the sustainability score model as used by previous authors in the field of sustainability disclosure to measure SRPs. The analysis was done using both ordered logistic regression and probit regression models.
Findings
The results show that the combination of board corporate and assurance has a positive and significant impact on the sustainability reporting practice of selected firms in sub-Saharan Africa.
Practical implications
The study places emphasis on the need for strong collaboration between the corporate board and external assurance in evaluating and enhancing the quality of sustainability disclosure.
Originality/value
The study bridged the gap in the literature in the area of corporate board, assurance and SRP of corporate firms which has received little attention within sub-Saharan Africa.
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