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1 – 10 of over 2000
Article
Publication date: 5 November 2019

Soo Yeon Park and Hyun-Young Park

Based on 1,798 firm-year observations from 2009 to 2013, using publicly available disclosure data for Korean listed firms, this study aims to examine whether statutory internal…

Abstract

Purpose

Based on 1,798 firm-year observations from 2009 to 2013, using publicly available disclosure data for Korean listed firms, this study aims to examine whether statutory internal auditors influence firm-level stock price crash risk.

Design/methodology/approach

Based on the bad news hoarding theory of crash risk, the authors investigate the association between the quality of statutory internal auditors and one-year-ahead stock price crash risk. The quality of statutory internal auditors is measured as the compensation of statutory internal auditors and the financial expertise of statutory internal auditors. Stock price crash risk is measured as an indicator variable whether a firm experiences one or more crash weeks during the fiscal year period.

Findings

The authors find that higher quality of statutory internal auditors – measured through greater compensation and greater financial expertise – is associated with lower possibilities of future stock price crash risk. These results indicate that high-quality statutory internal auditors mitigate bad news hoarding of managers because of their greater capability and stronger incentive to lower litigation risk and preserve their reputation. The results are mostly robust to different measures for stock price crash risk and the quality of statutory internal auditors.

Practical implications

The findings of this study regarding stock price crash risk are important for investors because such risk can significantly affect investor welfare. The results indicate that statutory internal auditors play an important role in controlling future stock price crash risk and maintaining stability in the equity market.

Originality/value

This study adds to the extant literature on the determinants of stock price crash risk and is the first to examine the impact of internal auditors on stock price crash risk. Moreover, this study also contributes to the existing literature on internal auditor quality by showing that high-quality statutory internal auditors reduce risks in financial markets.

Book part
Publication date: 14 December 2015

Rute Abreu and Fátima David

This chapter discusses social responsibility taking into account the role of women as statutory auditors. Indeed, auditors are expected to confirm whether the financial statements…

Abstract

This chapter discusses social responsibility taking into account the role of women as statutory auditors. Indeed, auditors are expected to confirm whether the financial statements are true and fair and, in accordance with the law, adopt a responsible attitude to the society. Methodologically, this research relied on a two-track approach. The first takes the form of an editorial review and argument which allows the authors to explore social responsibility literature along with implications for the role of women as statutory auditors. The second takes the form of a field research based on an exploratory longitudinal analysis, over the period 1973–2013, and support of the legal regime of Portugal, with public available sources of statistics and reports relating to the statutory auditors. The authors provided a glimpse of the role of women in this profession and, in the last years, the results show a weak increase of women on the statutory audit exercise.

Details

Sustainability After Rio
Type: Book
ISBN: 978-1-78560-444-7

Keywords

Article
Publication date: 5 May 2015

Moon-Kyung Cho, Ho-Young Lee and Hyun-Young Park

– The purpose of this paper is to examine the effect of the characteristics of statutory internal auditors on operating efficiency.

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Abstract

Purpose

The purpose of this paper is to examine the effect of the characteristics of statutory internal auditors on operating efficiency.

Design/methodology/approach

This study investigates three characteristics pertaining to statutory internal auditors, namely, compensation, activity and expertise, based on 1,340 firm observations from 2009 to 2010 using publicly available disclosure data for Korean listed firms.

Findings

The authors find no evidence that statutory internal auditors’ compensation is positively associated with operating efficiency. This implies that compensation data on statutory internal auditors in Korea may not directly reflect their competence and ability to enhance operating efficiency. On the other hand, the authors find evidence for a positive association between full-time status for statutory internal auditors and operating efficiency and a positive association between the attendance at board meetings for statutory internal auditors and operating efficiency. The results also show a decrease in operating efficiency when statutory internal auditors are newly appointed. Finally, expertise of statutory internal auditors in financial or legal matters provides no advantage in terms of operating efficiency.

Practical implications

This study contributes to the extant literature on internal audit by examining the advisory role of statutory internal auditors and its effect on operating efficiency, which is one of the objectives established by the Committee of Sponsoring Organizations of the Treadway Commission.

Originality/value

While most prior research on internal audit depends on survey data from statutory internal auditors or experimental data based on a limited sample of firms, this study is based on a large sample of publicly available data of the Korean market.

Details

Managerial Auditing Journal, vol. 30 no. 4/5
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 24 May 2019

Hyun-Young Park, Ho-Young Lee and Jin Wook Kim

Based on 3,775 firm-year observations from 2009 to 2013 using publicly available disclosure data for Korean listed firms, this study examines whether and how firm-level governance…

Abstract

Purpose

Based on 3,775 firm-year observations from 2009 to 2013 using publicly available disclosure data for Korean listed firms, this study examines whether and how firm-level governance characteristics are associated with investment in internal auditing proxied by compensation and the number of statutory internal auditors.

Design/methodology/approach

The authors investigate the association between governance characteristics and investment in internal auditing proxied by compensation and the number of statutory internal auditors.

Findings

The authors find that firms with greater ownership of the largest shareholders and with a higher proportion of outside directors invest more in internal auditing. These results indicate that firms with higher incentive and demand for monitoring are more likely to invest more in internal auditing. The authors further find that the positive effect of the largest shareholder ownership (board independence) on investment in internal auditing is attenuated in firms with greater board independence (ownership of the largest shareholders) suggesting that the complementary effect of the two governance mechanisms associated with internal auditing weakens as they function simultaneously.

Research limitations/implications

The results provide regulators and investors with a clear picture of the governance characteristics of firms associated with investment in internal auditing. The results imply that both the largest shareholders and the outside board of directors play a significant role in resource allocation in internal auditing within a firm. The effect of allocation, however, can be attenuated contingent upon the combined characteristics of governance mechanisms.

Originality/value

Using large amounts of public archival data, this study adds to the extant literature on firm characteristics associated with investment in internal auditing. This study also contributes to the literature by expanding the scope of research on executive compensation to the locus of statutory internal auditors.

Abstract

Details

Quality Control Procedure for Statutory Financial Audit
Type: Book
ISBN: 978-1-78714-226-8

Article
Publication date: 1 July 2003

Norbert Tabone and Peter J. Baldacchino

Historically, as a former British colony, Malta has had its accounting and auditing practices highly influenced by UK regulation. However, in the last decade, departures have…

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Abstract

Historically, as a former British colony, Malta has had its accounting and auditing practices highly influenced by UK regulation. However, in the last decade, departures have steadily been occurring from a UK‐based regulatory framework to one increasingly influenced both by international standards and European Union requirements. One such departure relates to the retention of the statutory audit requirement for all Maltese companies, despite its earlier abolishment for small companies in the UK. This study evaluates the relevance of a mandatory annual statutory audit requirement for owner‐managed companies as perceived by two interest groups: the owner‐manager and the auditor. It also considers possible alternatives to such a requirement. Results indicate that for Maltese owner‐managed companies, the statutory audit fulfils two important roles: it bears relevance to outside third parties, and it has a positive effect on the owner‐manager and staff.

Details

Managerial Auditing Journal, vol. 18 no. 5
Type: Research Article
ISSN: 0268-6902

Keywords

Abstract

Details

Quality Control Procedure for Statutory Financial Audit
Type: Book
ISBN: 978-1-78714-226-8

Article
Publication date: 1 December 1998

Constantinos V. Caramanis

This paper employs a qualitative approach to assess the impact which the “liberalisation” of the Greek auditing profession in 1992 may have had on auditor behaviour. The…

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Abstract

This paper employs a qualitative approach to assess the impact which the “liberalisation” of the Greek auditing profession in 1992 may have had on auditor behaviour. The “liberalisation” was introduced by legislation and was the result of a long and intense intra‐professional conflict between a group of indigenous auditors and international accounting firms. Overall, the paper illuminates the deeply political and self‐interested nature of the Greek auditing profession and its socially constructed and contextually dependent character. The results also indicate that following the “liberalisation”, auditors gave significantly less emphasis to functions relating to: being independent; publicly communicating audit findings; protecting the interests of external stakeholders, and presenting “true and fair” financial statements. In contrast, auditors placed significantly more emphasis on providing management advisory services to audit clients. The significant changes in auditor behaviour are linked to the economic dependence of auditors on audited companies which resulted from the audit reform. These findings appear to question the received wisdom underpinning the internationally prevalent move towards privatisation and deregulation of statutory audit services. Finally, the paper has important methodological implications as it demonstrates the limitations of quantitative techniques vis‐à‐vis qualitative approaches to accounting research in politically charged contexts.

Details

Accounting, Auditing & Accountability Journal, vol. 11 no. 5
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 1 January 1994

Kenneth Mullan

In an earlier contribution to this journal, the author sought to analyse the legal implications of the recent decision by the liquidators of the Bank of Commerce and Credit…

Abstract

In an earlier contribution to this journal, the author sought to analyse the legal implications of the recent decision by the liquidators of the Bank of Commerce and Credit International (BCCI), Touche Ross, to issue writs against the Bank of England claiming damages on behalf of a small, representative number of depositors. This paper will seek to complement that analysis by examining the legal implications of a parallel decision by the liquidators of BCCI to issue writs against the auditors of BCCI, Price Waterhouse and Ernst & Young, the joint auditors of BCCI until 1987. These writs allege that the audited accounts would have indicated that BCCI was in trouble and that, as a result, a duty of care was owed to existing depositors and to potential investors. An examination of the case law on the range of duties owed by auditors in carrying out their statutory functions will conclude that the potential actions against Price Waterhouse and Ernst & Young are unlikely to succeed.

Details

Journal of Financial Crime, vol. 1 no. 4
Type: Research Article
ISSN: 1359-0790

Article
Publication date: 12 October 2010

Harold Hassink, Roger Meuwissen and Laury Bollen

The primary research question of this study is to what extent auditors comply with auditing standards once they encounter fraud and whether compliance is associated with…

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Abstract

Purpose

The primary research question of this study is to what extent auditors comply with auditing standards once they encounter fraud and whether compliance is associated with particular fraud characteristics (i.e. material versus immaterial fraud, management versus employee fraud, statutory versus voluntary audit and external versus internal fraud) as well as with auditor (experience) and audit firm characteristics (Big Four versus non‐Big Four). The study also aims to provide evidence on the role of auditors in redressing fraud. Redress refers to the auditee taking measures to nullify the consequences of the fraud, insofar as possible, and to prevent any recurrence of such fraud.

Design/methodology/approach

To gather data on the role of auditors in fraud cases, a survey was conducted among all audit partners of the top 30 Dutch audit firms. In total, 1,218 audit partners were selected and received a postal questionnaire. In total, 326 questionnaires were returned (27 per cent), of which 296 (24 per cent) were usable.

Findings

The results reveal that auditors fail to comply with some important elements of fraud standards. There are substantial differences among audit firms regarding compliance with the relevant auditing standards. Furthermore, auditors appear to encounter corporate fraud only incidentally. About half of the auditors believe they have a “significant” impact on redressing fraud.

Research limitations/implications

One of the main research findings is that it is difficult for individual auditors to build up expertise in fraud detection. There appears to be a need for specific training programs for auditors to help them to detect fraud, emphasizing the need for mandatory consultation with the technical department of the audit firm once “red flags” indicating fraud are found. Indeed, this need for change has been addressed by the Dutch professional accountancy body NIVRA as a direct result of the findings of this study.

Originality/value

This study extends existing research by investigating the compliance of auditors with fraud standards and it sheds light on the actual redress experiences of auditors. It focuses on the actions taken by auditors – or the lack thereof – in situations where auditors encounter fraud signals. The study indicates that in the absence of good oversight, auditors have mixed incentives when they are confronted with signals for fraud, resulting in actions that are not always in line with existing regulatory requirements.

Details

Managerial Auditing Journal, vol. 25 no. 9
Type: Research Article
ISSN: 0268-6902

Keywords

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