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This study examines the effect that client size has on the relation between industry‐specialist auditors and fraudulent financial reporting. Most of the major accounting firms have organized their audit practices along industry lines, reflecting a belief that industry specialization leads to higher quality audits. Furthermore, regulatory bodies and extant research suggests that larger clients have greater bargaining power and are more likely to be able to convince the auditor to acquiesce to aggressive accounting. Also, it may be more difficult for an auditor to possess industry expertise for larger clients who are likely to be more complex and operate in more than one industry. Consistent with previous research, we generally find a significant negative relation between auditor industry specialization and client financial fraud. Also, as expected, the negative relation between auditor industry specialization and financial fraud is weaker for larger clients. This study provides evidence that the positive benefits of auditor industry specialization in deterring financial fraud is affected by client size.

The purpose of this paper is to investigate the impact of certain audit quality attributes, namely auditor size, auditor industry specialization and auditor tenure on a client firm's cost of equity capital.

The paper uses empirical data to construct a measure of ex ante cost of equity capital for each firm and year using analyst forecasts. Independent audit quality measures used are auditor size, auditor industry specialization and auditor tenure. Firm cost of equity capital is regressed against the three independent variables and appropriate control variables.

The paper finds that auditor size (auditor is a member of the BigX), auditor industry specialization and auditor tenure are negatively associated with the client firm's cost of equity capital. However, the paper finds that this effect is limited only to small client firms, potentially reflecting the poor information environment associated with such firms.

The study highlights the importance of audit quality attributes in determining the firm's cost of capital. It also highlights ways in which firms (especially small firms) can reduce the cost of equity capital by improving their information environment through the judicious selection of auditors.

This is believed to be the first paper to examine whether the effects of three audit quality attributes (auditor size, auditor industry specialization and auditor tenure) on a firm's cost of capital are dependent on the client's size. The paper empirically shows that such effects are more pronounced for smaller clients.

We investigate whether auditor size is associated with the disclosure of internal control exceptions among Circular A-133 audits of nonprofit healthcare organizations. Our analysis is motivated by recent growth and transparency concerns within the sector. Using a sample of 1,180 audit reports from 2004 to 2008, we find evidence that audits performed by Big 4 firms are less likely to disclose internal control weaknesses than those performed by smaller firms. Additional analyses indicate this relation only remains statistically significant for a subsample of small organizations, possibly due to greater selectivity or lower efforts by the Big 4 auditors. We discuss the implications of these findings from an audit quality, market dominance, and client size perspective. The results are relevant to hospital financial managers seeking high quality audits at low cost.

The purpose of this paper is to demonstrate a deeper understanding about the reasons behind difference in previous studies’ results in the field of audit quality determinants.

A meta-analysis method is employed in which 52 studies including 40 international studies from authentic scientific articles during the year 2000–2015 and 12 national studies out of authentic national scientific articles from 2001 to 2015 are taken to account as sample studies. Audit firm size, auditor tenure and auditor specialization are set as independent variables and audit quality is the only dependent variable in the current paper.

The results indicate that audit firm size and auditor specialization are positively associated with audit quality. In other words, contracting with larger audit firm and specialized auditor results in delivering higher quality audit services.

The current study is the first study to be conducted in the field of audit quality determinants. The results may be beneficial both for standard setters as well practitioners in a way that it provides evidence that contributes to basis policy and audit-standard makers about domination and determinants of audit quality.

This paper aims to examine the role of Blockchain in the accounting and auditing literature and profession. Specifically, the paper investigates auditors' perceptions about the role of blockchain in accounting and auditing and the perceived potential benefits and challenges of blockchain-based accounting systems in Egypt. Moreover, what are the capabilities required for successfully implementing blockchain-based accounting systems?

A mixed-method approach was adopted to achieve the research objectives. The qualitative study included 11 in-depth interviews with external auditors, and the results of the interviews and the literature review helped develop a survey collected from 58 auditors.

The findings revealed low-to-moderate awareness of Blockchain-based accounting systems. Also, there were significant differences between auditors from large audit firms and small-and-medium audit firms regarding the benefits and challenges associated with Blockchain-based accounting systems.

The results provide valuable insights for practitioners, researchers and policymakers.

Understanding blockchain-based accounting systems and the benefits and challenges associated with their application is crucial for developing effective strategies and frameworks to overcome barriers and realize the transformative potential of blockchain in the accounting and audit market.

The use of choice-based, matched, and other stratified sample designs is common in auditing research. However, it is not widely appreciated that the data analysis for these studies has to take into account the non-random nature of sample selection in these designs. A choice-based, matched or otherwise stratified sample is a nonrandom sample that must be analyzed using conditional analysis techniques. We review five research streams in the auditing area. These streams include work on determinants of audit litigation, audit fees, auditor reporting in financially distressed firms, audit quality and auditor switches. Cram, Karan, and Stuart (CKS) (2009) demonstrated the accuracy of conditional analysis, compared to unconditional analysis, of nonrandom samples through the use of simulations, replications, and mathematical proofs. Papers since published have continued to rely upon questionable research, however, and it is hard for researchers to identify what is the reliability of a given work. We complement and extend CKS (2009) by identifying audit papers in selected research streams whose results will likely differ if the data gathered are analyzed using conditional analysis techniques. Thus research can be advanced either by replication and reanalysis, or by refocus of new research upon issues that should no longer be viewed as settled.

PurposeAuditor independence is fundamental to public confidence in financial reporting and the auditing profession. The study aims to provide further understanding of the factors influencing auditor independence from the perspective of commercial loan officers. Loan officers formed the sample as they are relatively sophisticated financial statement users who would understand the importance of audit report and the issues related to auditor independence.Design/methodology/approachThe study examines the perceptions of commercial loan officers in Malaysian‐owned commercial banks and a total of 86 officers responded to the self‐administered questionnaire.FindingsResults indicate that smaller audit firms, audit firms operating in a higher level of competitive environments, audit firms serving a given client over a longer duration, larger size of audit fees, audit firms providing managerial advisory services, and, the non‐existence of an audit committee, are perceived as having a higher risk of losing independence. Audit firm size appears to be the most important factor that affects the auditor independence, followed by tenure, competition, audit committee, audit firms providing managerial advisory services and size of audit fee.Originality/valueThe paper provides important insights into the factors affecting auditor independence and contributes towards better understanding on the ways to improve the confidence in financial reporting and credibility of the auditing profession.

Prior research finds evidence that audit quality is positively associated with the joint purchase of tax nonaudit services (NAS) and concludes that jointly provided tax services result in audit-related knowledge spillovers that lead to improved audit quality. We extend this line of research. We examine the relation between auditor-provided tax services and restatements and determine whether this relation differs when the auditor is a small or large accounting firm. We also examine whether the Securities Exchange Commission’s restrictions on certain tax consulting practices (SEC, 2006) altered this relation. Specifically, we measure whether the probability of financial statement restatements varies with (1) variation in accounting firm size (measured as PCAOB annually inspected firms versus PCAOB triennially inspected firms), and (2) the joint provision of audit and tax services. We find a negative relation between auditor-provided tax services and restatements which is consistent with prior research. We also find that this relation is significantly more negative when the auditor is a small accounting firm. Finally, we find that the lower probability of a restatement associated with the joint provision of audit and tax services persists regardless of auditor size after the SEC-imposed restrictions on certain tax consulting services in 2006. Our study provides evidence that accounting firms, and particularly small accounting firms, benefit from knowledge spillovers when jointly providing audit and tax services and these benefits lead to improved audit quality. Prior research concludes that large auditors provide higher audit quality and that the provision of tax services improves audit quality. Our results provide evidence that audit quality improvements are greater for small auditors and their clients. This improvement narrows that audit quality gap between large and small auditors. We do not find evidence that the SEC’s restrictions on certain tax consulting services altered the relation between audit quality and tax services.

De facto use of International Financial Reporting Standards (IFRS) is a particular form of voluntary compliance with International Accounting Standards (IAS). It is practiced when an enterprise uses a number (and not all) of international standards as a complement to overcome the unachieved nature of local generally accepted accounting principles. The purpose of this paper is to analyze, at first, whether the financial expertise of Tunisian audit committee’s members is associated with de facto use of IFRS. Second, it explores to what extent and in what direction this association evolves when the factor auditor’s size is introduced as a moderator variable.

Data spanning a seven-year period (2012–2018) was hand-collected for a sample of 497 firm-year observations. Further, regression analysis was used to test the study’s hypothesis.

Findings show that the proportion of financial experts who sit on the audit committee is positively associated with the de facto use of IFRS. Besides, the association between audit committee members’ financial expertise and the voluntary use of IFRS is more pronounced when the company is audited by at least one BIG 4 audit firm.

The paper’s findings have implications for regulatory bodies and standards setters who are concerned with the functioning of the audit committee, especially when it comes to enhancing the quality of the financial statements. The results also shed light on the role of financial experts on the audit committee and Big 4 auditors to enforce the de facto use of IFRS.

The findings of this study contain an important message for the drift toward national de jure convergence with IAS.

This paper aims to highlight the relationship between the attributes of external auditor companies and voluntary corporate social responsibility (CSR) disclosures of audited firms using a sample of Abu Dhabi Securities Exchange (ADX)-listed companies.

Based on a sample of 410 firm-year observations for the period 2010–2016, this study first computes an eight-item CSR disclosure index, then ran a multivariate regression analysis between CSR disclosure scores and external auditor attributes, along with client firm characteristics and additional control variables. Finally, this paper performs various additional robustness checks.

The results reveal that external auditor attributes have a significant impact on shaping the CSR disclosures of ADX-listed firms. Overall, auditor age, size, industry specialisation and portfolio diversification positively affect the level of customers’ CSR disclosures. By contrast, the magnitude of audit fees and auditor experience in the UAE has no impact on the CSR disclosures of ADX-listed firms. This study controls for client firm size, financial leverage, ownership concentration and the proportion of independent directors on companies’ board of directors. The results remain robust to additional sensitivity checks such as audit company CSR practices, extreme quartiles of CSR disclosures and the panel data estimation method.

The research exhibits some limitations. First, this paper uses a simple index to measure CSR disclosures based on previous empirical studies, especially those related to emergent markets, which are not free from bias due to the lack of voluntary disclosure transparency for some companies listed on ADX. Second, although this study uses a seven-year observation period, the total number of observations remains limited due to ADX size. Third, other context-specific disclosures should be included such as cultural and governance variables (royal families ownership).

The study highlights the role of external attributes that can affect companies’ CSR disclosure policy, rather than firm-specific factors. The study also reshapes the concept of auditor quality beyond the dichotomy (“Big Four”/non-Big Four) used in the current literature.

The research adds to the current literature on CSR by revealing the impact of external auditor attributes on client firm CSR disclosure policy in an emerging market, the ADX.