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1 – 10 of over 16000Sujie Hu, Yuting Qian and Sumin Hu
The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial…
Abstract
Purpose
The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial information disclosure potentially helps auditors make better assessments.
Design/methodology/approach
Using a sample of China’s listed firms from 2007 to 2021, the authors aim to find the relationship between customers’ financial restatements and their suppliers’ audit opinions. Heckman selection model, placebo tests and other robustness checks are used as well.
Findings
The findings reveal that customers’ financial restatements have a significant effect on the likelihood of suppliers receiving modified audit opinions. This relationship is pronounced when suppliers face a higher level of financial constraints, exhibit poorer accounting conservatism or receive more negative media coverage. Additionally, this effect occurs through increased business risk and information risk, which heightens auditors’ perceived audit risk. Moreover, the study highlights the influence of switching costs, auditor expertise and restatement severity on this relationship.
Practical implications
Risks originating from customers can spread along the supply chain, emphasizing the necessity for auditors to give heightened attention to both the audited firms and their customer information. Moreover, regulators should carefully consider the important impact of customer information disclosures to maximize the protection of the interests of external information users.
Originality/value
This study not only confirms the crucial role of customer information disclosures in annual reports for stakeholders and auditors but also contributes to the existing literature on customer–supplier relationships.
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Pavel Castka, Xiaoli Zhao, Phil Bremer, Lincoln C. Wood and Miranda Mirosa
Audits are an essential part of supply chain management, whether they be of a single supplier's facilities or the whole supply chain. Before the COVID-19 pandemic, auditors mainly…
Abstract
Purpose
Audits are an essential part of supply chain management, whether they be of a single supplier's facilities or the whole supply chain. Before the COVID-19 pandemic, auditors mainly conducted supplier audits in-person and on-site. Subsequent travel restrictions have meant that auditors have had to perform these audits remotely. The purpose of this paper is to conceptually describe the emerging phenomenon of remote audits and explore the implications of this change for the future.
Design/methodology/approach
This exploratory research used qualitative interviews with key stakeholders (firms, auditors and regulators) to provide an empirical basis for the study. A total of 60 interviews were conducted in two rounds with 40 respondents from 26 organizations. A process perspective lens was used to explore the fundamental changes in supplier audits.
Findings
The study provides an interpretative conceptual framework of remote supplier audits grounded in key factors (audit process, use of technologies, document and record sharing) and identifies a set of contingency factors (technological sophistication, reputation for integrity, maturity of internal audit processes, and level of complexities and risk involved) that affect the effectiveness of remote audits.
Originality/value
Remote supplier audits have radically changed how supply chains operate. This paper presents the first empirically-grounded study on remote auditing. It provides a springboard for future research in this domain and practical implications for managers to assist them with the development of remote auditing in their firms and supply chains.
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Where material and component suppliers are regarded as partners in theactivity of satisfying customers, the adversarial approach to supplierauditing is not appropriate. Describes…
Abstract
Where material and component suppliers are regarded as partners in the activity of satisfying customers, the adversarial approach to supplier auditing is not appropriate. Describes a method of supplier auditing, based on the ISO 9000 standard but aiming to resolve problems jointly. In this method, all aspects of the supplier’s business process, from receiving and reviewing and order, through manufacture to delivery, are reviewed by the auditor to ensure that they meet minimum acceptable standards and to identify opportunities to improve. The auditor acts as a fresh pair of eyes in reviewing the management system. This method aims to identify opportunities for improvement in the customer‐supplier relationship which will improve quality, delivery and service and has been used successfully by the author’s company for several years.
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Hanmei Chen, Weishi Jia, Shuo Li and Zenghui Liu
The purpose of this paper is to examine how the concentration of a specific customer type – governmental customer, affects the pricing of audit services in the USA.
Abstract
Purpose
The purpose of this paper is to examine how the concentration of a specific customer type – governmental customer, affects the pricing of audit services in the USA.
Design/methodology/approach
This paper applies a standard audit pricing model by regressing audit fees on governmental customer concentration and other common determinants of audit fees. This paper also adopts an instrumental variable approach and performs propensity-score matched sample analyzes to mitigate the potential endogeneity problem.
Findings
Using data from major customer disclosures of US publicly listed firms from 2000 to 2014, this paper finds that governmental customer concentration is positively associated with audit fees, suggesting that a higher level of governmental customer concentration increases a firm’s audit risks and audit effort. In addition, this paper performs cross-sectional analyzes and show that the association between governmental customer concentration and audit fees is more pronounced for firms with weak internal governance, weak external monitoring and high financial risks.
Originality/value
This paper furthers the understanding of the interactive relationships in supply chain systems and adds new evidence to the literature on customer concentration. Prior studies on customer concentration typically treat all customer types in a uniform manner. To the knowledge, this is the first study that separates governmental customers from other types of customers in an audit pricing setting. The findings highlight the importance of examining governmental customer concentration when assessing a firm’s audit risks and audit fees.
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Yinyin Cao, Benn Lawson and Frits K. Pil
Firms are accountable for upholding worker rights and well-being in their supply base. The authors unpack the evolution in lead firm thinking and practice about how to assure…
Abstract
Purpose
Firms are accountable for upholding worker rights and well-being in their supply base. The authors unpack the evolution in lead firm thinking and practice about how to assure labor conditions at suppliers.
Design/methodology/approach
The authors conducted interviews with the social sustainability leaders at 22 global corporations (“lead firms”) and their sustainability consultants to understand how they think about, and enact efforts, to support labor in their supply base. The authors complement this with an analysis of stated practice in proprietary supplier codes of conduct for the manufacturing and extractive-related firms in the S&P 500 and FTSE 350.
Findings
The authors’ interviews suggest firms follow two distinct and cumulative approaches: a transactional-based approach leveraging collective buyer power to enforce supplier compliance and a relational-based approach focused on mutual capacity building between lead (buyer) firms and their suppliers. The authors also see the emergence, in a small subset of firms, of a bottom-up approach that recognizes supplier workers as rights-holders and empowers them to understand and claim their rights.
Originality/value
The authors identify systematic convergence in supplier codes of conduct. While the transactional and relational approaches are well documented in the supply chain social sustainability literature, the rights-holder approach is not. Its emergence presents an important complement to the other approaches and enables a broader recognition of human rights, and the duty of Western firms to assure those rights.
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Amrou Awaysheh and Robert D. Klassen
This paper seeks to explore the integration of social issues in the management of supply chains from an operations management perspective. Further, this research aims to develop a…
Abstract
Purpose
This paper seeks to explore the integration of social issues in the management of supply chains from an operations management perspective. Further, this research aims to develop a set of scales to measure multiple dimensions of supplier socially responsible practices. Finally, the paper examines the importance of three dimensions of supply chain structure, namely transparency, dependency and distance, for the adoption of these socially responsible practices.
Design/methodology/approach
Drawing on literature from several theoretical streams, current best‐practice in leading firms and emerging international standards, four dimensions of supplier socially responsible practices were identified. Also, a multi‐dimensional conceptualization of supply chain structure, including transparency, dependency and distance, was synthesized from earlier research. Using this conceptual development, a large‐scale survey of plant managers in three industries in Canada provided an empirical basis for validating these constructs, and then assessing the relationships between structure and practices.
Findings
Multi‐item scales for each of the four dimensions of supplier socially responsible practices were validated empirically: supplier human rights; supplier labour practices; supplier codes of conduct; and supplier social audits. Increased transparency, as reflected in greater product visibility by the end‐consumer was related to increased use of supplier human rights, which in turn can help to protect a firm's brands. Organizational distance, as measured by the total length of the supply chain (number of tiers in the supply chain), was related to increased use of multiple supplier socially responsible practices. Finally, as the plant was positioned further upstream in the supply chain, managers reported increased use of supplier codes of conduct.
Practical implications
As senior managers extend, redesign or restructure their supply chains, the extent to which social issues must be monitored and managed changes. The four categories of supplier socially responsible practices identified help managers characterize their firm's approach to managing social issues. Furthermore, managers must more actively manage the development of supplier socially responsible practices in their firms when the supply chain has more firms; and when brands have stronger recognition in the marketplace.
Originality/value
The paper makes three contributions to the extant literature. First, the construct of social issues is defined and framed within the broader debate on sustainable development and stakeholder management. Second, social practices are delineated for supply chain management, and a set of scales is empirically validated for assessing the degree of development of supplier socially responsible practices. Finally, the link between supply chain structure and the adoption of supplier socially responsible practices is examined. This last contribution provides a basis for understanding, so that managers can extend and reshape current views about how social issues must be managed.
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Keith A. Houghton, Christine Jubb and Michael Kend
This paper seeks to focus on the issue of materiality judgements and the need for public disclosure of materiality levels. Insights about the concept of materiality are drawn from…
Abstract
Purpose
This paper seeks to focus on the issue of materiality judgements and the need for public disclosure of materiality levels. Insights about the concept of materiality are drawn from the words of users of audited financial reports, auditee managements, suppliers to the market for audit services and auditing standard setters and regulators.
Design/methodology/approach
This paper reports findings arising from face‐to‐face office interviews with individuals representing identified groups of stakeholders in the market for audit services about the issue of “materiality” as this concept is applied in auditing. The interviews canvassed many issues related to audit as part of a larger project entitled “The future of audit”.
Findings
In general, stakeholders perceive that the concepts involved in audit materiality are not well understood and they point to the difficulty in providing educative materiality about it, especially in relation to qualitative materiality, to retail investors in particular. There are mixed views as to whether the actual level of tolerable error, as per one of the meanings of materiality in the audit space, should be disclosed, with some feeling that it might be detrimental or dangerous.
Practical implications
If incremental information about materiality is to be disclosed, the issue of where, what to whom, by whom and when arise. Various suggestions are made by stakeholders in respect of these questions.
Originality/value
The paper concludes by drawing from the insights gained by the authors through the comments of participant stakeholders to make recommendations that deal with the issue of audit materiality.
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Nigel Wild and Li Zhou
The objective this paper is to develop and describe a conceptual framework for collaborative Ethical Procurement Due Diligence (EPDD) between International Aid Non‐Government…
Abstract
Purpose
The objective this paper is to develop and describe a conceptual framework for collaborative Ethical Procurement Due Diligence (EPDD) between International Aid Non‐Government Organisations (IANGOs) in Humanitarian Supply Chains (HSCs). Second, to explore EPDD relationships with IANGOs, IANGOs and their suppliers, IANGOs and their suppliers' suppliers, donors, IANGOs and IANGO suppliers.
Design/methodology/approach
The approach takes the form of qualitative research in the shape of a number of in‐depth interviews, and the collection of secondary information across 11 IANGO organisations with senior logistics and purchasing managers.
Findings
Supply chain co‐opetition strategies are being enacted by IANGOs to explore the formulation of EPDD. Concerns surrounding ethical risk in HSCs differ from commercial supply chains (CSCs) in relation to NGO relationships with donors and supplier networks. EPDD by IANGOs beyond the first tier of suppliers in HSCs is limited to Lead IANGO(s).
Research limitations/implications
The case study approach adopted restricts the generality of findings; however, the research explores ethical behaviour in a new direction, that of IANGOs in HSCs, and their relationships with donors and supplier networks. This has implications for the management of ethical risk strategies in HSCs.
Practical implications
The paper determines barriers and enablers to collaboration between NGOs and as such assists in the process of developing risk‐rating systems for ethical procurement in NGO HSCs.
Originality/value
This is the first study to investigate the issues surrounding collaborative ethical procurement in IANGO HSCs, and associated ethical procurement risk management strategies in relation to donors and supplier networks.
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Mohamad Zakaria, Zanda Garanča and Abdallah Sobeih
This paper seeks to identify the practical challenges of implementing a code of conduct in the supply chain management of multinational mobile phone industries from diverse…
Abstract
Purpose
This paper seeks to identify the practical challenges of implementing a code of conduct in the supply chain management of multinational mobile phone industries from diverse cultural and legal contexts by analysing critically how a multinational company manages the CSR concept in its supply chain.
Design/methodology/approach
This study is based on qualitative interviews, analysis of codes of conduct and the practices of Sony Ericsson as well as of one of its suppliers.
Findings
Codes of conduct should be perceived differently within different contexts. Therefore, cultural and legal issues have to be considered when formulating and implementing codes of conduct, and when assessing compliance. The development of codes of conduct in the mobile phone industry is an ongoing process. Both cultural and legal challenges have to be considered.
Originality/value
Each company should define its own standards and limits of responsibility within the context of ethical sourcing, while some basic codes of conduct compliance should be forced on the whole mobile phone industry.
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Mark Stevenson and Rosanna Cole
The purpose of this study is to examine how organisations report on the detection and remediation of modern slavery in their operations and supply…
Abstract
Purpose
The purpose of this study is to examine how organisations report on the detection and remediation of modern slavery in their operations and supply chains and to understand their approaches to disclosing information in response to modern slavery legislation.
Design/methodology/approach
An analysis of secondary data based on the statements is released in response to the 2015 UK Modern Slavery Act by 101 firms in the clothing and textiles sector.
Findings
Many firms use the same practices to detect and remediate modern slavery as for other social issues. But the hidden, criminal nature of modern slavery and the involvement of third party labour agencies mean practices need to either be tailored or other more innovative approaches developed, including in collaboration with traditional and non-traditional actors. Although five broad types of disclosure are identified, there is substantial heterogeneity in the statements. It is posited however that firms will converge on a more homogenous set of responses over time.
Research limitations/implications
The study is limited to one industry, responses to UK legislation and the information disclosed by focal firms only. Future research could expand the focus to include other industries, country contexts and stakeholders.
Practical implications
Managers must consider how their own firm’s behaviour contributes to the modern slavery threat, regulates both their stock and non-stock supply chains and ensures modern slavery is elevated from the procurement function to the boardroom. In making disclosures, managers may trade-off the potential competitive gains of transparency against the threat of information leakage and reputational risk should their statements be falsified. The managers should also consider what signals their statements send back up the chain to (sub-)suppliers. Findings also have potential policy implications.
Originality/value
The study expands the authors’ understanding of: modern slavery from a supply chain perspective, e.g. identifying the importance of standard setting and risk avoidance; and, supply chain information disclosure in response to legislative demands. This is the first academic paper to examine the statements produced by organisations in response to the UK Modern Slavery Act.
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