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Audit Quality: Insights from the Academic Literature
Abstract
This study presents a review of academic research on audit quality. We begin with a review of existing definitions of audit quality and describe general frameworks for establishing audit quality. Next, we summarize research on indicators of audit quality, such as inputs, process, and outcomes. Finally, we offer some suggestions for future research. The study should be useful to academics interested in audit quality as well as to the Public Company Accounting Oversight Board (PCAOB) and other regulators.
... For reviews of this literature see, for example, Watkins et al. (2004) and Francis (2011). Knechel et al. (2013) acknowledge the multidimensional properties of AQ, that its concepts have not been fully operationalised and that it is essentially an ambiguous social construct. Likewise, the UK's Financial Reporting Council declared that "The FRC recognises that audit quality is a dynamic concept and that the drivers and indicators of audit quality may change over time" (FRC, 2008, p. 2), while the International Auditing and Assurance Standards Board (IAASB) acknowledged the challenge of defining AQ (IAASB, 2014). ...
... This study seeks to fill the above research gaps by exploring how audit partners make sense of the term AQ, which is consistent with the recognition that AQ is both multifaceted and, more importantly, socially constructed, as highlighted by Knechel et al. (2013). The study's contributions are several. ...
... The aim of this section is not to present a comprehensive review of the AQ literature, but rather to illustrate the prevalent theoretical view of AQ that is relevant to the analysis and discussion of this study. Knechel et al. (2013) provide evidence of the diversity and divergence of AQ definitions (e.g. competence, independence, conformance of audit work to auditing standards, the client's reported earnings and audit litigation). ...
Purpose
This study provides insights into the meanings given to audit quality (AQ) by audit partners responsible for delivering audit services. It explores the influence of contextual factors in the auditing setting on constructing such meanings and its representations.
Design/methodology/approach
Drawing on a symbolic-interactionist framework, this study takes an interpretive approach, employing semi-structured interviews with audit partners from the United Kingdom (UK).
Findings
Three primary meanings of AQ are identified. First, in contradiction to that offered by “mainstream” AQ research, audit partners in this study predominantly regarded the meaning of AQ as an economic concept in the context of the “business” of auditing, delivering the service quality (e.g. value-added auditing and value-for-money) that is expected by their audit clients. Second, the audit partners also espouse the meaning of AQ to be “fit for purpose” audit documentation and adherence to quality control that meets the standards of compliance demanded by independent audit inspections. Third, and similar to the classic convention of AQ, audit partners consider “inputs” to AQ, attributes related to individual auditors (e.g. qualifications, experience and training) as one of the key AQ meanings. A range of stimuli underlies AQ meaning construction, including the audit firm's commercial interests, legitimacy, image management and social identity resulting from audit partners' interactions with audit clients, regulators, and their own self-reflexivity. Interestingly, this study identifies a considerable potential conflict between the meanings assigned to AQ, which suggests that auditors are struggling to strike a balance between the competing demands of those meanings.
Research limitations/implications
This exploratory study addresses only the audit partners' perceptions concerning the meaning of AQ. Findings of this study are relevant to auditors and other parties, such as regulators, in addressing competing dimensions of AQ and potential choices involving conduct and content in any individual audit engagement.
Originality/value
The study complements existing research into AQ by exposing the rationales and potential behaviours that underlie commitments to quality by those involved in commissioning audit engagements. It also adds detailed evidence of how contextual factors in the auditing environment interact with auditors' notions of AQ.
... Research surveys were used to determine the main attributes of the good audit quality from within the auditing profession and practice (Carcello et al., 1992;Ghafran and O'Sullivan, 2017;Samagaio and Felício, 2022). The results of prior studies identified the main attributes of audit quality as the compliance to the auditing standards, the on-time completion of audit, the number of the audit committee meetings, fair treatment with employees, partners appropriate workload and the additional disclosure in the financial statements (Herda and Lavelle, 2012;Knechel et al., 2013;DeFond and Zhang, 2014;Ghafran and O'Sullivan, 2017;Hegazy et al., 2020). The quality of the audit also includes the adherence to the code of ethics and the auditor being independent (Agusti and Pertiwi, 2013;Samagaio and Felício, 2022). ...
... The quality of the audit also includes the adherence to the code of ethics and the auditor being independent (Agusti and Pertiwi, 2013;Samagaio and Felício, 2022). On the other hand, one of the main negative signs of low audit quality level is the financial statement restatements as studies pointed out that this action is sending bad signals to investors and creditors of the company (Knechel et al., 2013;Cheng et al., 2021). Prior studies also used proxies for the audit quality like abnormal accruals, the number of the legal suits against the auditor, the going concern opinion and the audit fees. ...
... The other prominent issue in audit firm's performance evaluation is the efficient use of resources to decrease the total cost of the audit. Knechel et al. (2013) explain that the performance of the auditors in audit firms is divided into professional and commercial performance indicators. The first one is concerned with the contribution to the audit quality by the auditors and the second is concerned with the profitability and the growth of revenue along with keeping a good relationship with the clients. ...
Purpose
This paper aims to examine the effect of the auditors’ burnout determinates on audit quality and performance. It also analyses whether the demographic characteristics of gender, age group, education and job positions affect auditors’ decisions for burnout, audit quality and performance.
Design/methodology/approach
A questionnaire was distributed on a sample of auditors in the top ten auditing firms in an emerging market including the Big 4. Factor analysis, correlation matrix and structural equation modeling were used for the analysis of the collected data and testing the developed hypotheses.
Findings
The results show that burnout has negative consequences for both the auditor and the auditing firm. While good organizational climate has a negative significant association with audit quality, nonethical decisions and audit performance, role clarity has positive significant association with the audit quality and performance and has an insignificant association with nonethical decisions. Also, turnover intention has significant positive association with nonethical decision, audit quality and performance.
Originality/value
This research is among the first to focus on auditor’s burnout determinates on audit quality and performance in an emerging market characterized by different socioeconomic, political and cultural factors compared with those of developed markets. Auditors, regulators and professional policymakers can benefit from the results of this research.
... It is understood that a higher quality audit is related to brand or specialized auditors in the industry [10,13,14] claim that an auditor's experience, skills and specialized knowledge in the industry are positively related to audits quality. Outlined skills include communication and partnership, domain and process knowledge, professional development, personality traits as well as technical and auditing expertise and so on. ...
... The auditing environment is an additional quality influencing factor, directly or indirectly [3], since it may have significative interactive effects in the auditing entry process. It has been discovered that many contextual characteristics influence the auditing quality such as auditor-partner fee, non-auditing additional fees and auditor continuity [10]. ...
... Related to the auditing performance activities during the process including organization, strategy and planning, methodology selection, field work, results and reports, evidence based on decision-making processes, quality control and auditing improvement. Most quality-related issues are mainly the result of unacceptable auditing management process [12] as it depends on specific aspects in the auditing process and control procedures [10]. Within the auditing process a choice of tools, techniques, methodologies, and specific methods in the auditing team will follow. ...
Computer auditing quality has been defined by results obtained in the process. Meanwhile, multiple studies have been done to enhance it therefore, it continues to be a topic interest and research so it is worth mentioning that its quality relies on trained competent auditors and experts able to develop a process correctly, adapting to clients and to manage auditing inherent risks. According to results from the computer audit, low quality and security levels have been identified in terms of the human, technical and contextual factors, affecting audit quality. The objective of this investigation is to identify metrics and to determine their own corresponding factor applying an exploratory type of research. To achieve such aim, a targeted survey was designed and implemented at the Institute of Internal Auditors of Ecuador since they have the knowledge and expertise in the field. A factor analysis statistics technique was applied to data gathered to verify that it relates to the identified factors as dimensions are reduced, thus the most impacting metrics may assess the quality of computer audits. Analysis results yielded a mean score for each one of the assessed metrics, concluding that the technical factor is the most significative since it relates roles and task performance during the auditing process as well as control procedures. Finally, most auditing quality-related issues are mainly the outcome of an inferior management auditing process, therefore it is crucial that collegiate groups and professionals in the field validate the auditing process.KeywordsQuality controlFactor analysisMetric
... Inputs to audit quality: auditors, in implementing the audit process to produce audits with high grade (Knechel, Krishnan, Pevzner, Shefchik, & Velury, 2012). This statement is supported by the International Federation of Accountants (IFAC) which states that one of the key elements of audit quality is the audit process (IAASB, 2014). ...
... Indicators of audit quality is a key indicator that enables a high-quality audit carried out consistently by Public Accountant through the firm in accordance with professional standards and applicable legal provisions which consists of 1) Competency auditor 2) Ethics and independence of auditors 3) Use of key time for key personnel 4) Quality Control of engagement 5) Results of quality review or inspection of external and internal parties 6) Range of engagement control 7) Organization and governance of Public Accounting Firms 8) Service fee policy (IAPI, 2018a). Whereas Knechel et al., (2012) group audit quality indicators into 4 categories, namely input, process, output and context. According to Wooten (2003), indicators used to measure audit quality are 1) Detection of misstatements 2) Compliance with applicable General Standards 3) Compliance with SOP. ...
... Incorrect operational definition will lead to incorrect conclusions (Widiastuty & Febrianto, 2010). Source: (Knechel et al., 2012) 3. ...
In the past 5 years, there have been at least 5 major cases involving prominent public accounting firms in Indonesia and seizing public attention. This motivates the author to look back at the concept of audit quality that is understood in Indonesia. The author realizes that there has been no research on the concept of audit quality conducted by referring to scientific publications that have been published in trusted journals. The main objective of this study is to discover the concept of audit quality that has been generally understood in Indonesia and the factors that influence it. The study was conducted using a descriptive method with a qualitative approach so it could provide a broader understanding and also be able to assist other researchers to conduct research related to audit quality with a more comprehensive understanding. This study reviews a total 47 empirical studies and academic publications in Indonesia ranging from year 2015 to year 2019. Data sources in the form of academic publications were obtained from the Digital Referral Gate website (GARUDA), a portal that contains Indonesian academic references and is under the auspices of the Ministry of Research, Technology and Higher Education (Kemenristekdikti). Based on the analysis, the review reveals that (1) the majority of researchers in Indonesia consider audit quality from an input-outcomes perspective developed from the definition of audit quality according to DeAngelo (1981), (2) the use of a variety of audit quality indicators used in research in Indonesia shows that audit quality is hard to measure objectively, (3) the factors that influence audit quality that are most frequently studied are internal factors, and (4) the majority of research related to audit quality is conducted using a quantitative approach. However, quantitative approach is unable to capture the actual audit practices which is necessary to understand audit quality. (5) cases that occur in Indonesia and the results of this study indicate that audit quality must be seen as a whole construction, from input, process, output and context. Audit quality cannot be obtained only with competent human resources, but must be accompanied by an audit process that is in accordance with standards, results of audits that are comprehensive and in context.
... This distinguishes it from more recent work with narrower foci. For instance, Francis (2006) is designed to comment on a specific piece of research, Habib (2012) limits perceptions studies to those based on earnings response coefficients, Hay (2017) focuses on non-audit fees embedded in a review related to audit fees, Knechel et al. (2013) embed it in a broader review related to audit quality, Sun and Habib (2021) only regard tax consulting fees, and Tepalagul and Lin (2015), Velte and Loy (2018), and Yakubu and Williams (2020) look at further independence threats. In addition, this study includes a critical discussion of the applied research methods. ...
... Financial reporting quality is determined by audit quality and the quality of pre-audited financial statements and, thus, a joint product of management and the auditor. A further limitation of this line of research is that audit quality cannot easily be separated from financial reporting standard quality (Knechel et al., 2013). Zhang et al. (2007) showed that US firms are more likely to be identified with an internal control weakness if NAS fees are low, and Hermanson and Ye (2009) . ...
The paper gives an overview of the results of a structured literature review. It covers archival studies on the relationship between non-audit services (NAS) fees and factual as well as perceived audit quality published in journals included in the accounting subject category of the SCImago Journal Ranking. It also includes a critical evaluation of the research methods applied in prior research and offers avenues for future research. The provision of NAS to audit clients creates threats to auditor independence. Consequently, regulators have focused on the simultaneous provision of audit and NAS for many years and restricted it over time. This paper aims to assess which regulatory actions are justified in light of related archival research findings. Overall, prior research does not clearly prove a negative impact of non-audit services on factual audit quality. However, it demonstrates a negative relationship between non-audit fees and audit quality perceptions. Moreover, it also reveals that tax consulting fees are less problematic
... Prominent scholars such as Knechel et al. (2013) and Watkins et al. (2004) pointed out the lack of research on talent management (TM) in the audit setting. Past studies have only examined a few practices or have been fragmented in nature, commonly focusing on training and development, supervision and work-life balance (WLB) practices (Khavis and Krishnan, 2020;Hoopes et al., 2018;Kang et al., 2017;Noviyanti and Winata, 2015;Kasigwa, 2014). ...
... How auditors are managed is a vital component of ensuring proper auditor performance. Considering a set of constructs, such as hiring and training practices, supervision and professional conduct, is imperative in a study of TM in audit firms (Knechel et al., 2013;Hussein and Hanefah, 2013;Watkins et al., 2004). The ISQC 1 specifies various practices (in the form of policies and procedures) relating to human resources, encompassing recruitment, training and development, as well as supervision and review, that should be implemented as part of an audit firm's quality control (IAASB, 2009). ...
Research aim: Recent occurrences of accounting failures have raised concerns over the quality of auditors’ performance. While there have been numerous studies on audit quality, there are limited research on what attributes constitute proper auditors’ performance. Thus, the objective of this study is to examine auditors’ performance attributes perceived to be important to achieve audit quality by auditors in practice. Design/ Methodology/ Approach: Data were obtained from 307 survey questionnaires received from auditors of large firms, small and medium-sized firms, and sole proprietors. Research finding: The study respondents perceived auditors’ performance related to competencies to perform the audit effectively and performing the audit in accordance with standards and regulations as the most significant attributes. These two key attributes were significant regardless of the types of audits performed (i.e. PLC or SME) and the position of the auditor (management or staff levels). On the other hand, attribute relating to providing individualised attention to clients was perceived to be of the lowest importance to the respondents. Theoretical contribution/ Originality: This study examined various behavioural and individual attributes for proper auditors’ performance, which enhances the literature on audit quality. Practitioner/ Policy implication: Key attributes and behaviours for auditors’ performance can be used by researchers and audit practitioners to set their performance benchmark and also used to assess any shortcomings. Research limitation: The respondents were mainly auditors of small and medium-sized firms and sole proprietors.
... Management often uses this profit arrangement to maximize its interests, so it is feared that it can harm shareholders in the future. The cause of earnings management is agency problems where there are differences in interests and information asymmetry between management (agents) and shareholders (Knechel, Krishnan, Pevzner, Shefchik & Velury, 2013). Information asymmetry is an imbalance of information obtained by management and shareholders. ...
... Audit quality is much-debated but little understood (Knechel et al., 2013). Auditing standards define that audit quality is achieved by issuing appropriate audit reports on the client's compliance with generally accepted accounting principles. ...
This study aims to examine the effect of internal corporate governance on earnings management with Big4 as the moderating variable. This study uses a quantitative method using secondary data in the form of financial and annual reports of companies conducting Initial Public Offerings (IPOs) on the Indonesia Stock Exchange (IDX) from 2010 to 2017. Data obtained from www.idx.co.id and the website company official. Based on purposive sampling, the final sample was 251 observations. The results of this study contribute to the investment decision that it is necessary to be careful on shares that have just been IPO and a few years after. The results show that the implementation of internal governance in IPO companies has no effect on earnings management. In addition, the services of big4 auditors in IPO companies are not able to show better audit quality. So that investors do not need to consider these factors in investment decisions.
... Such a depiction is useful to the provider of audit services as a guide to ensure higher audit quality, and to increase the awareness of stakeholders of the important factors that enhance audit quality (IAASB, 2014). Knechel et al. (2013) have compiled an academic review of prior audit quality literature. They also categorise audit quality into input, process and output factors based on their review of prior literature. ...
... They also categorise audit quality into input, process and output factors based on their review of prior literature. However, Knechel et al. (2013) do not propose a framework. Moreover, the AQF by IFAC could be deemed more authoritative as it is issued by IFAC, and it is the most recent AQF. ...
The International Federation of Accountants issued the Audit Quality Framework (AQF) in 2014. This framework portrays the factors that enable a quality audit as a systematic process. This paper provides an Islamic perspective to the AQF, specifically on the input factors. Since the analysis is from an Islamic viewpoint, primary Islamic sources are referred to. Moreover, a diagram of the main characteristics is included for simplification. The analysis reveals that although the AQF is reasonably comprehensive, there are some other considerations that Muslim auditors must make in performing an audit of quality, for example their intention. Then, the qualities of ‘morality’ and ‘proficiency’, have augmented significance compared to the original AQF. The proposed model could be useful to regulators and audit firms in Muslim countries. Also, these factors should be considered by Muslim auditors and practiced. Furthermore, researchers could test the model empirically in future.
... Asumsi model risiko audit yang mendorong perencanaan audit dan pengumpulan bukti adalah bahwa risiko (yaitu ketidakpastian) dari setiap klien adalah unik. Risiko klien tergantung pada kompleksitas transaksi dan sistem akuntansi yang ada dan dapat dipengaruhi oleh insentif manajemen untuk menghasilkan laporan keuangan yang andal (Knechel et al., 2012). Berdasarkan hal tersebut hipotesis yang diajukan adalah: H1: Risiko Audit berpengaruh positif terhadap Kualitas Audit ...
... Skeptisisme profesional dapat mengurangi kegagalan selama proses audit apabila auditor menjaga tanggung jawabnya untuk selalu memiliki pikiran yang selalu mempertanyakan dan penilaian kritis terhadap bukti (Arens et al., 2013). Dalam (Knechel et al., 2012) auditor yang menggunakan tingkat skeptisisme profesional yang lebih tinggi lebih mungkin untuk menghadapi klien atau melakukan prosedur tambahan ketika timbul penyimpangan risiko tinggi (Shaub dan Lawrence 1996), lebih mungkin untuk mendeteksi kecurangan (Bernardi 1994), menunjukkan penilaian bukti yang berkualitas tinggi. (Hurtt et al. 2008), dan kurang mempercayai klien, dan lebih cenderung berinvestasi dalam upaya audit tingkat tinggi (Bowlin et al. 2012). ...
Penelitian ini bertujuan untuk melihat pengaruh risiko audit, bukti audit, kelangsungan hidup usaha, peristiwa kemudian dan skeptisisme profesional auditor terhadap kualitas audit pada masa pandemi Covid-19. Populasi dalam penelitian ini adalah Akuntan Publik yang bekerja pada Kantor Akuntan Publik yang berada di wilayah DKI Jakarta dan terdaftar pada direktori kantor akuntan publik yang diterbitkan pada tahun 2020. Teknik pengambilan sampel menggunakan purposive sampling dan data dikumpulkan dengan menyebarkan kuesioner. Selanjutnya sampel yang diperoleh untuk analisis data adalah sebanyak 132 responden merupakan auditor pada 12 KAP Wilayah DKI. Hasil penelitian menunjukkan bahwa risiko audit, kelangsungan hidup usaha dan skeptisisme profesional berpengaruh terhadap kualitas audit pada masa pandemi Covid-19, sedangkan bukti audit dan peristiwa kemudian tidak berpengaruh terhadap kualitas audit pada masa pandemi Covid-19
... In accordance with the requirements of laws and regulations in many developed and developing countries, companies operating in the countries are not allowed to issue FR until they are approved by an external auditor and the audit report is issued (Abernathy et al., 2017;Raweh et al., 2019). Where it was indicated in the previous literature related to FR, their quality and timing, that each of them is important in order to work to enhance the credibility and appropriateness of external audit operations (Singh et al., 2022;Abdillah et al., 2019;DeFond & Zhang, 2014;Knechel et al., 2013). Therefore, the researchers add to the above such as Abdillah et al. (2019) and Singh et al. (2022) indicated that the inability of users to independently check the information provided by businesses undermines its credibility, necessitating work to increase that material's reliability through a verification and review procedure carried out by an impartial and knowledgeable third party, and as a result, there is a greater need for the services of an external auditor to assist in acquiring accurate and timely financial information. ...
This study aimed to examine the characteristics of audit committees (ACs) on the short delay in issuing audit reports. Using data for 97 companies in the industrial and service sectors in the Jordanian context, for the period between 2017 and 2021. The results of this study showed that the independence of ACs has an important and negative impact on reducing the delay in issuing financial reporting (FR). However, the study did not find the importance of the rest of the characteristics related to ACs to reduce the delay in issuing audit reports between Jordanian companies. The study concluded that the mechanisms of corporate governance in Jordanian companies are not effective, compared to the more developed countries. Thus, policy makers are supposed to enforce governance practices in Jordanian companies in substance, rather than simply adhering to practices in form.
... In other words, audit quality is the inverse of audit failures (Francis, 2004). Audit quality definitions vary depending on the assessment of different people (Knechel et al., 2013;Wooten, 2003). This study applies the purpose of audit quality from practitioner literature. ...
This study aims to measure the direct and indirect impacts of time budget pressure, workplace-family conflict, and role ambiguity on work stress and two dimensions of dysfunctional audit behavior, including reduced audit quality practices and underreporting time. Work stress has been considered a mediating factor leading to low audit quality among auditors. Data was collected by interviewing 486 auditors (including external and internal auditors) currently working in auditing firms, state audits, banks, and other enterprises in Vietnam. The study uses a non-probability sampling method with the support of questionnaires. Structural Equation Modeling (SEM) analyzes factors’ direct and indirect influence. The results confirmed that audit time pressure, role ambiguity, and workplace-family conflict significantly affect two dimensions of dysfunctional audit behavior. In addition, the mediating role of work stress in the relationship between the following variables has been explored 1) workplace-family conflict and reduced audit quality practices; 2) workplace-family conflict and under-reporting time; 3) role of ambiguity and reduced audit quality practices; 4) role of ambiguity and under-reporting time; 5) time budget pressure and reduced audit quality practices, and 6) time budget pressure and under-reporting time. This study provides evidence between time budget pressure, role ambiguity, and workplace-family conflict to dysfunctional audit behavior through the mediating role of work stress. Especially in the case of Vietnam, there has not been any research applying the SEM model to explore the role of mediators in dysfunctional audit behavior.
... Based on the definition by De Angelo (1981), Asmara (2016) enhanced the definition, by pointing out that audit quality is associated with the quality of work, qualified expertise, timely completion, the adequacy of evidence, attitude, and independence. Lee et al. (2016), Knechel (2013), Abbot et al. (2016 and Supriyatin, Ali and Indradewa (2019) defined audit quality in terms of competence and independence. Competency is derived from the achievement of expertise that begins with the knowledge gained from a formal education and skills in auditing practices while independence is the mental attitude of an auditor who is free from the influence of others (Mardijuwono, 2018). ...
Audit quality at the Inland Revenue Board Malaysia (IRBM) is a crucial element in the audit process to ensure no violation of tax reporting by the taxpayers. Hence, it is important to understand whether tax auditors perceive audit quality equally. Furthermore, recognizing the level of audit quality is also important to assist the tax authority in strategizing their efforts. This triggers researchers to embark on this exploratory study through document review and interviews. Data gathered were analysed using descriptive and thematic analysis. Results indicate that there is different perception of audit quality among tax officers, namely competency to detect the amount of audit settlement, audit settlement within the time frame and the achievement of the given key performance indicators (KPIs). The findings further indicate that the level of audit quality is quite alarming particularly with reference to the number of aging cases. The findings from this study provide an insight to the IRBM in their effort to streamline the direction of the tax auditors in improving audit quality.
... The quality of audit is the level of quality of audit results determined by the absence of material misstatements/ procedures, the achievement of audit objectives through methodologies or guidelines prepared by the auditor, legally accountable in court, carried out in accordance with the applicable code of ethics and regulations and does not cause problems/ unrest in the community (DeAngelo, 1981;Arrunada, 1999;GAO, 2003;Hayes et al., 2005;Gul, Wu, & Yang, 2013;Lee, 2016). Based on the opinions of several experts and previous researchers (FRC, 2008;Francis, 2011;Knechel et al., 2012), the measurement of the quality of investigation audit variable uses several dimensions and indicators, namely: 1) Auditor Competence (have a certificate of investigative auditing expertise, having the ability to conduct audits and investigations, and having experience doing investigation audits); 2) Process of Implementation Investigative Audit (understanding the audit risk, following the standards/guidelines that have been set, and infrastructure that supports the implementation of investigation audits); 3) Reporting the Investigative Audit Result (reveal any irregularities, disclose the parties related to irregularities, and disclose the impact of deviations that occur). According to Sekaran and Bougie (2013), the hypothesis is logically conjectured relationship between two or more variables expressed in the form of a testable statement. ...
Quality audits are important not only for investigators but also for auditors when advancing as experts in court. Therefore, the formation of MIA to handle investigative examinations is BPK's answer to the phenomena that occur in society related to the quality of the results of BPK investigations. However, even after the formation of MIA, there were still complaints from the public regarding the quality of the results of investigative examinations. BPK received a lot of attention because of actions that were not in accordance with the BPK auditors' code of ethics, namely integrity violations that resulted in arrest by law enforcers and undergoing trial at the Corruption Court. For this reason, auditors must always maintain an attitude of mental independence, in all matters relating to the provision of audit services, to improve audit quality. This study aims to analyze how independence and integrity can increase the quality of investigation audit. This study involved 267 investigators of Law Enforcement Agencies as respondents using a questionnaire. Furthermore, the data were analyzed using descriptive statistical analysis and SEM techniques. The results of this study provide empirical evidence that independence and integrity have a significant positive effect on the quality of investigation audit.
... Many researchers have tried to define AQ (DeAngelo, 1981;Knechel, Krishnan, Pevzner, Shefchik, and Velury, 2013). Although there are a variety of definitions no definition has achieved universal recognition and acceptance since they vary among stakeholders. ...
The purpose of this study was to examine the relationship between corporate governance (CG) and audit quality (AQ), and the moderating effect of ownership concentration (OC) for Vietnamese listed companies. We used the logistic regression model on a sample of 622 Vietnam listed firms data over the period 2014-2018, with a total of 2667 firm-observations collected. The regression result showed a negative association between CG and AQ. The collected evidence suggested that internal controlling and monitoring was related to external AQ. Our study used finite proxies to measure CG and AQ in Vietnam, but there is an extensive diversity of other indicators which may help in the outcome being more precise and explicit, so that future research can extend the measurements in a more detailed manner and on a larger scale. This study primarily contributes to the literature on CG, AQ, OC and exposes the association between CG and AQ.
... The demand-side (the auditee's) viewpoint suggests higher audit fees will result when effective audit committee members demand extensive audit coverage/effort/quality from external auditors (Carcello et al., 2002;Knechel et al., 2013;Zaman et al., 2011). On the other hand, the supply-side (the external auditor's perspective) argues that audit fees will be lower when auditors have fewer motivations to conduct more audit work in the presence of effective governance mechanisms and when audit risk is perceived to be low and vice versa (Lobanova et Generally, on corporate boards, gender diversity continues to be an important research issue for academicians and policy-makers. ...
The paper examines the role of dual-class share structure on the nexus between the presence of at least one female member on the audit committee (gender diversity) and audit fees. The study estimates a regression model using 2,519 firm-year observations for 475 public U.S. firms, and in line with the view that gender diversity helps firms to be more attentive and committee members act within their control to ensure a higher level of audit coverage, the study finds that gender diversity is associated with higher audit fees. Further, this study reports that the interaction of dual-class share structure and gender diversity is associated with lower audit fees. This highlights the merits of dual-class share structures which continue to be a subject of much debate. This study also contributes to the literature that provides insight into how context or situational factors moderate the impact of gender diversity on audit fees.
... The effect of auditor's competency and independence on audit … system and report them in the audited financial statements. Where in carrying out their duties, an auditor must be guided by auditing standards and the relevant code of ethics for public accountants (Knechel et al., 2013). The objectives to be achieved in this study are to determine and explain the Effect of Auditor Competence and Independence on the Audit Quality of the Halu Oleo University Internal Supervisory Unit. ...
span>The purpose of this study was to determine the effect of auditor competence and independence on the audit quality of the Halu Oleo University Internal Supervisory Unit. The sample in this study was 51 audites. The data used in this study are qualitative data and quantitative data. Data collection methods are questionnaires and documentation. Methods Data analysis used descriptive analysis and multiple linear regression analysis. The results of the analysis show an R value of 0.859 which means that the correlation between the independent variables of competence and independence on audit quality at the internal supervisory unit of Halu Oleo University is strong because the value is above 0.75. Furthermore, the value of R2 (R-Square) is 0.800. This means that the diversity of auditor competence and auditor independence variables on audit quality can be explained by the model by 80% and the remaining 20% is explained by other variables outside this research model, so that this research model has a good accuracy or accuracy model. Simultaneous test results obtained a significance value of F or probability of 0.000 <0.05 at the 95% confidence level. These results indicate that both auditor competence and auditor independence variables simultaneously have a positive and significant effect on audit quality at the internal supervisory unit of Halu Oleo University. The results of this study can also prove from the standardized coefficient value and t-value that the independence variable has a greater value than the auditor's competence. This means that auditor independence is the dominant variable in influencing audit quality compared to the competence of auditors in the internal supervisory unit of Halu Oleo University.</span
... The conformity of audit planning procedures with audit objectives, an acceptable limit of audit failure, and the auditor's ability to detect fraud and report it in audit reports are all components of investigative audit quality [2,[7][8][9][10]. It is made up of components that have the potential to influence the quality of the outcomes, such as the auditor's level of professionalism and independence, the auditor's personal credibility, and the sufficiency of the audit evidence to support audit reports [11][12][13]. ...
The increased public awareness of the impact of fraudulent activities has put pressure on corporations to practise better corporate behaviour. As a result, their stakeholders demanded that corporations increase the level of transparency that pertains to their corporate behaviour and provide them with sustainable assurance. One of the ways that they can improve the way they conduct business is by ensuring that their investigative audits are of a high quality. In this study, we investigate the factors that influence the quality of investigative audits. In particular, two factors are chosen, namely, auditor competency and digital forensic support. Using a questionnaire survey as the research instrument, the questionnaires were distributed to 150 investigative auditors who worked for the Indonesian Audit Investigative Board (BPK). This study shows that both factors significantly and positively influence investigative audit quality. The findings of this study can help related parties to better understanding the factors that contribute to investigative auditing and, as a consequence, suggest ways to improve the investigative audit quality. For BPK, which has the authority to conduct audits of the management and accountability of state finances, the findings serve as a fundamental insight into sustaining work integrity and professionalism.
... Culture influences attitudes and behaviors such as coaching, consulting, compliance, correction, innovation, and continuous improvement that are critical to audit quality. Similarly, the Audit Quality Framework of the Board of International Standards on Auditing and Assurance notes that values, ethics, and attitudes are influenced by a culture of factors that contribute to audit quality assurance (19)(20)(21)(22)(23). ...
Background: The quality of auditing and how it is performed has always been the subject of audit research. Quality of audit is important
because of the increased reliability of the financial results. The quality of auditing is remarkable because it can have a tremendous impact
on the decisions of investors, employees, employees, and employees.
Objectives: The purpose of this study is to investigate the role of culture in auditors’ social norms and audit quality in Iran’s environmental
conditions.
Methods: The research method was descriptive and structural equations. The statistical population of this study consisted of all auditors
working in member firms of auditors in Iran. According to the unlimited statistical population, with the help of Cochran’s formula, a
sample size of 384 was obtained, and finally, by sampling in a questionnaire, 380 were collected. The research tools included innovative
questionnaires for activating social norms, audit quality, and auditor culture. Analytical analysis methods were used for the data.
Results: The fit indices of the research model were in good condition. Activation of social norms (ethical reasoning, responsibility, honesty,
and fairness) significantly affected audit quality. The mediating role of culture in auditors’ social norms and audit quality has also been
investigated. Among the hypotheses of mediator sub-relationships, the mediating role of ethical culture (ethics at work) in the relationship
between (activating the auditor’s ethical reasoning and audit quality) and the mediating role of Islamic culture in the relationship between
(auditor’s sensitivity in accountability and audit quality) became.
Conclusions: The activation of social norms significantly affected audit quality. The auditor culture had a significant effect on the
relationship between the activation of social norms and audit quality.
Keywords: Audit Quality; Culture; Social Norms; Accounting; Iran
... In prior academic literature, local public audit has been highlighted as underresearched (Hay & Cordery, 2018). Previous studies have stressed the importance of audit standards in securing high-quality auditing in public and private sector audits (Francis, 2004;Knechel et al., 2013). The literature examining voluntary adoption of the International Standards on Auditing (ISA) is scarce (Boolaky & Soobaroyen, 2017). ...
IMPACT
This article will be useful to policy-makers and public sector managers in terms of understanding how public audit regulation affects audit practitioners in determining applicable audit standards. Over 70% of chartered public finance auditors in Finland were found to voluntarily adopt the International Standards on Auditing (ISA) despite a regulatory environment where the ISA were not strictly required in local government audits.
ABSTRACT
A growing literature has identified several factors differentiating public and private sector auditing, which might advocate differences in audit regulation between these sectors. This article contributes to the existing literature by examining the voluntary adoption of International Standards on Auditing (ISA) in local government audits. The empirical data in this article is based on a survey of all Finnish authorized public sector auditors. The results show that voluntary adoption of ISA in local government audits is increasing, which can be explained using the institutional theory of influencing forces.
... Lastly, Big N is included to test whether being audited by a Big 4 accounting firm (namely, Deloitte, Ernst & Young, KPMG, and Pricewa-terhouseCoopers) mitigates EM. Many studies show that the Big 4 serve as an effective barrier against EM practices (DeFond et al., 2016;Knechel et al., 2012;Krishnan, 2005). ...
This paper examines whether the financial reporting quality of audit clients is affected more by the national culture of the home country of an international parent audit firm or the national culture of its affiliates’ host country. The study uses 111,949 firm-year observations for 16,444 unique industrial firms across 51 countries from 2009 to 2019. Financial reporting quality is proxied by accrual-based earnings management. The national culture of the countries in which the parent firm’s head office and foreign affiliates are located is represented by the Hofstede Model of Cultural Dimensions. The results demonstrate that the national culture of parent firm’s home country has a more significant impact on earnings management than the national culture of the foreign affiliates’ country. Findings also support the homogeneity hypothesis on the association between international parent firms and their affiliates. The global audit network, which is dominated by this international parent firm, has common cultural characteristics. The results remain unchanged after the different home country assumptions, alternative sampling procedures, endogeneity, and firm- and country-level factors are controlled.
... According to audit theory, the efficacy of external auditing is contingent on audit quality (Kausar et al., 2016;Knechel et al., 2013). Various characteristics are proposed in prior research to evaluate auditors' competency, including audit firm size. ...
The study explores the moderating role of audit quality in the relationship between environmental, social, and governance (ESG) factors and corporate financial performance (CFP) in Western European countries. The research sample includes 620 firms headquartered in Western Europe, including Austria, Belgium, France, Germany, Luxembourg, Monaco, the Netherlands, and Switzerland from 2010 to 2019. Panel data estimations are used to examine the direct and moderating effects. The results show that ESG has a significantly negative effect on a firm’s financial performance as measured by the return on assets (ROA), supporting the trade-off hypothesis in which investing in ESG activities increases the cost of business. Additionally, we find that ESG’s adverse influence on CFP is more evident at enterprises that are certified by Big Four accounting firms. However, ESG has a significantly positive effect on revenue, suggesting that customers are more attracted to firms that invest in ESG. The analysis of the subcomponents of ESG supports the main results. The results are robust to alternative model specifications and alternative measures of CFP and audit quality and are free of endogeneity issues. The findings contribute to the existing knowledge on ESG by elucidating the effect of external auditor quality on the ESG-CFP relationship. We also examine overall ESG scores as well as individual ESG characteristics (environmental, social, and governance).
... This study makes several contributions to the audit literature. Recent surveys of the audit literature tend to focus almost exclusively on financial statement audits and do not recognize the presence of SOC audits, which is a gap this study fills (e.g., DeFond and Zhang 2014;Knechel et al. 2013;Knechel and Willenborg 2016;Rajgopal et al. 2021). In contrast to financial statement audits, SOC audits are intended primarily for the audit client's corporate customers and not investors, which provides new empirical support for the longstanding proposition that audits facilitate relationships between firms and stakeholders (e.g., Watts and Zimmerman 1983). ...
Firms routinely manage their financial reporting systems on external cloud platforms that are susceptible to cyberattacks and data integrity issues. Therefore, the AICPA developed a special type of voluntary audit called a “Service Organization Control” audit (SOC audit) that evaluates this risk. This study conducts one of the first systematic analyses of the benefits and costs of these voluntary audits. Using hand-collected data from public firms, I find that (1) 29% of firms in the S&P 500 (representing $10.9 trillion in market value) receive these audits; (2) business-model exposure to technology predicts a firm’s decision to receive these audits; (3) the scope of these audits includes internal controls over data integrity; and (4) these audits are one of the largest predictors of the variation in audit-related fees, amounting to a $900,000 average annual increase in these fees at the firm level (by comparison, tax preparation fees average about $1.3 million). SOC audits are thus an important and concrete example of the broader social and governance mandates of new stakeholder-focused reporting frameworks, such as the SASB’s Conceptual Framework.
... To achieve the mission of adding values and improving an organization's operations, internal auditors must have insightful knowledge to provide assurance and advices on different aspects of operations. Auditors with better audit knowledge could result in better audit conclusions because they could make more appropriate judgments (Knechel et al., 2013). Furthermore, Duh et al. (2020) evidenced that sharing of knowledge within audit firms increased both audit quality and audit efficiency. ...
Internal audit is crucial to improve the effectiveness and efficiency of internal controls, governance, and risk management processes in organizations. For an internal audit organization, to benefit from the knowledge of its staff, it is vital to identify the knowledge that is needed to complete quality and efficient internal audits. Knowledge management is a system that is concerned with using to the best advantage knowledge and experience. In internal auditing, knowledge management is increasingly recognized as a tool to effectively manage not only the knowledge of individuals, but also the collective knowledge in the organization. Research on internal audit has appeared since the 1980s and brought many benefits to internal audit activities, but these studies have not explained how knowledge is created during an internal audit. To address the research gap, this study looks into how knowledge is managed in an internal audit process. The applied methodology is to conduct qualitative case study research by using in-depth interviews, observations, and documentary analysis in the internal audit field. Findings from empirical analysis of the case together with the literature review provide useful insights to construct a potential model of knowledge management in internal audit. During an internal audit process, there are three key elements including data, information, and knowledge that internal auditors need to consider. Data is a series of separate observations, measurements, or events in the audited company. Information is the organized data that has been arranged with relevance and purpose for better comprehension of the internal activities. The knowledge generated and applied by internal auditors can be thought of as a collection of specific and broad information sets and experience in similar audit situations. The process of knowledge management in internal audit involves four sub-processes: collecting data, analyzing data to get information, synthesizing information to create knowledge, and improving knowledge by putting knowledge into practice. The research findings imply that the process of internal auditing requires internal auditors to apply not only analysis capacities but also empirical experience in their work. In the internal audit, it requires collaboration from within the auditing organization and from the auditee’s sources to enable a valuable outcome for all involved.
... [2] said that audit quality is the probability that the auditor discovering a major misstatement and/or violation, as well as the probability of the auditor reporting the misstatement and/or violation. According to [3], discovery of misstatements in the audit process needs enough resources that can clasified as input and process. Example of input are professional skepticism, knowledge, and competence. ...
External auditors play a major role in supporting governments and global organizations in implementing their plans for achieving sustainable development goals. The current research determines the factors that affect audit quality of a company. The authors reviewed research articles related to the topic published in the last 30 years (1980– 2020) to identify the factors that affected audit quality. Data were analyzed using the Leximancer software. It was found that the internal control system and audit tenure are the two variables that had a significant effect on audit quality. The internal control system had a relationship level of up to 92%, while the audit tenure had a level of 22%. Additionally, work rotation, workload, reputation, audit committee, and provided services were variables that had a high level of relevance with a level range of 16–19%. Keywords: audit quality, Leximancer, determinant of audit quality
... The possibility of pair-matching pre-audit and audited financial statements of the same company gives us an advantage over similar research that is restricted only on data from audited financial statements and limited to proxy both audit quality (AQ) and FRQ with quality measures based only on audited financial statements. Yet, FRQ and AQ are distinct constructs, and research can provide greater insights into each if it recognizes the distinctions between them (Knechel et al. [2013], DeFond and Zhang [2014], Gaynor et al. [2016]). Specifically, DeFond and Zhang [2014] emphasize that it is critically important for empirical models to disentangle these constructs. ...
We use a paired sample of Croatian listed companies’ pre-audit/audited financial statements to directly assess statutory auditors’ contribution to financial reporting quality through their year-end adjustments. To carefully disentangle audit quality from financial reporting quality, we develop a sequential analytical framework which exploits the specificities of our research setting. We find that audited earnings are significantly lower than pre-audit earnings, audited absolute total accruals are significantly higher than pre-audit absolute total accruals while operating cash flow does not differ significantly across the groups. Estimated earnings quality measures (persistence, predictive ability and accrual quality) indicate that pre-audit earnings are not overstated because of earnings management. Instead, auditors increase the level of conservatism in audited financial statements. Although our results may be interpreted as evidence of auditor conservatism, our analysis shows that conservatism is more likely induced by greater compliance of audited financial statements with IFRS provisions.
... According to Knechel et al. (2012), Audit quality must be supported by a good quality of financial reports. Ningrum (2001) stated audit quality results from a well-designed systematic examination process that adheres to generally accepted standards and a competent and independent auditor's judgment (skepticism and professional judgment) in implementing the audit process to produce a high-quality audit. ...
This study examines audit quality as a dependent variable and auditor competence, skepticism, self esteem, role complication and religiosity as independent variables. This study aims to analyze the influence of independent variables to the dependentent variable in this study. The test was conducted on 125 auditor respondents who have been certified or not yet certified in North Sumatra provincial government environment and the data is complete and can be analyzed. Variable testing techniques using multiple linear regression techniques. The results showed that auditor competence, skepticism, role conflict and religiosity have a significant effect on audit quality, while self esteem does not affect audit quality. The results of the study are expected to contribute empirically that auditor competence, skepticism, role complicity and religiosity determine the quality of audit and the results of this study are also expected to provide input to the local government the importance of increasing the value of competence, the maximum role and most importantly good spiritual qualities must be excavated by giving training and education.
... The literature has established the role of external auditing as a corporate governance mechanism in enhancing financial reporting quality, reducing agency cost and reducing information asymmetry between principals and agents (Chan et al., 2012;Hope et al., 2012;Knechel et al., 2013;Anginer et al., 2018;Salehi et al., 2019). However, the importance of external auditing in lending credence to financial reporting depends on the quality of audit engagement and its associated fees. ...
Purpose
This study aims to examine the mediating role of audit seasonality on the association between audit fees and audit quality in Nigerian deposit money banks.
Design/methodology/approach
The sample comprises 14 banks with annual financial statements between 2008 and 2020. The modified Baron and Kenny’s (1986) causal mediation model by Iacobucci et al. (2007) through the use of bootstrapped partial least square structural equation modelling and Sobel’s (1986) z -test is adopted to achieve this study’s objective.
Findings
The results of the causal mediation analysis show evidence of a fully mediating role of c between audit fees and audit quality in the Nigerian banking industry.
Research limitations/implications
This study extends the body of knowledge by demonstrating how audit fees influence audit quality through audit seasonality as a mediator in line with the job demands-and resources and conservation of resources theories. Regulatory authorities should be wary of policies that will further increase the workload of already burdened personnel of audit firms as the uniform fiscal year-end of 31 December introduced in the Nigerian banking system has unintended consequences on audit fees and audit quality.
Originality/value
To the best of the author’s knowledge, this is one of the first studies to provide evidence on the indirect association between audit fees and audit quality.
... That is, if information asymmetry reflects the quality of the information environment, firms with high levels of information asymmetry are more likely to be associated with greater risk of material misstatement. In order to lower the overall audit risk, auditors need to increase audit effort and audit quality (i.e., the quantity and the quality of audit evidence) to lower detection risk (Knechel et al., 2013;PCAOB, 2010;Rosati et al., 2019), thereby increasing fees charged. This leads us to our research hypothesis which is stated as follows: ...
This study investigates whether and how information asymmetry in the stock market affects the quantum of audit fees paid by auditees. It is based on a sample of 218 US publicly traded companies and adopts two well‐established proxies for information asymmetry, namely bid‐ask spread (BAS) and probability of informed trading (PIN). Empirical results provide evidence that, after controlling for all main audit fees determinants, information asymmetry is positively related to the quantum of audit fees paid. Overall, evidence supports the contention that less transparent companies convey higher audit risk, and therefore auditors require higher compensation.
... While there are multiple empirical proxies used in the literature to assess audit quality, financial restatements are Is artificial intelligence improving the audit process? considered to be one of the most robust and universally applicable indicators of low audit quality (Knechel et al. 2013;DeFond and Zhang 2014;Christensen et al. 2016;Aobdia 2019). In their recent study, Rajgopal et al. (2021) analyze specific accusations related to audit deficiencies detailed in 141 AAERs and 153 securities class action lawsuits over a period of almost 40 years and conclude that restatements consistently predict the most cited audit deficiencies. ...
How does artificial intelligence (AI) impact audit quality and efficiency? We explore this question by leveraging a unique dataset of more than 310,000 detailed individual resumes for the 36 largest audit firms to identify audit firms’ employment of AI workers. We provide a first look into the AI workforce within the auditing sector. AI workers tend to be male and relatively young and hold mostly but not exclusively technical degrees. Importantly, AI is a centralized function within the firm, with workers concentrating in a handful of teams and geographic locations. Our results show that investing in AI helps improve audit quality, reduces fees, and ultimately displaces human auditors, although the effect on labor takes several years to materialize. Specifically, a one-standard-deviation change in recent AI investments is associated with a 5.0% reduction in the likelihood of an audit restatement, a 0.9% drop in audit fees, and a reduction in the number of accounting employees that reaches 3.6% after three years and 7.1% after four years. Our empirical analyses are supported by in-depth interviews with 17 audit partners representing the eight largest U.S. public accounting firms, which show that (1) AI is developed centrally; (2) AI is widely used in audit; and (3) the primary goal for using AI in audit is improved quality, followed by efficiency.
... Audit quality is imperative as it will impact the audit quality and affect the confidence level of the investors and stakeholders. Audit quality is measured by earning management indicators, the restatement of financial statements, and audit reports (Knechel et al., 2013;Langli & Svanström, 2014). However, since it is difficult to measure the earning management indicators, an alternative approach has been suggested by Svanström (2016) to capture the dimensions of audit quality by questioning auditors on their quality reduction acts. ...
Audit quality is becoming a concern and a problematic issue due to corporate scandals in the business sector. The auditors were accused of incompetence and lack of independence in detecting fake financial reporting, which led to the company's failure. The dysfunctional auditors' behaviour has an impact on audit quality. As a result, this study aims to scientifically investigate and analyse the elements that may lead to dysfunctional auditor conduct and decreased audit quality. The factors addressed include time constraints, task complexity, and client importance on dysfunctional auditor behaviour and audit quality in the Malaysian setting. A total of 133 respondents were involved in this survey, selected by the snowball sampling method. The results reveal the propensity of individual auditors to accept dysfunctional behaviour due to time, budget pressure, and task complexity. Surprisingly, client importance does not impair auditors' independence. Auditors play an essential role in maintaining the quality of audit reports and restoring public trust in the audit profession since auditors are granted credibility to assure financial accounts. As a result, this paper has important implications. It provides valuable insight for Malaysian regulators and audit firms to identify factors influencing dysfunctional auditor behaviour and deterioration of audit quality and develop various approaches to address these issues while maintaining the value of an audit for external users.
The audit profession has experienced a digital transformation over the last decade with a rapid shift towards remote auditing forced by the recent COVID pandemic. This shift has led to changes related to the way auditors work and perceive. Through a survey of external auditors, this study addresses how the changes from on‐site audits to remote audits affect audit success (i.e., audit quality, audit efficiency, and auditors' job satisfaction); we also explore dispositional and situational factors that contribute to remote audit success. Our results show that working remotely leads to high audit efficiency. Auditors' flexibility management competency leads to high remote audit quality and efficiency; and a physical working environment conducive for concentrating on audit tasks is positively associated with audit efficiency and auditors' job satisfaction for remote audits. We also found that working remotely could enhance audit quality and efficiency when the audit firm provides sufficient support to auditors. Our study provides insights for audit firms, regulators, and other stakeholders as they evaluate the many challenges the audit profession faces in achieving remote audit success.
We apply game theory to model how alternative mandatory audit firm rotation regimes can affect the strategic interaction between auditee and auditor firms, and analyze potential consequences on detection risk and impairment of auditor scepticism. The major results suggest that: (1) relative to an initial state with no rotation requirement but high probability for impaired auditor scepticism, imposing either short‐term or long‐term mandatory audit firm rotation will remove the threat to auditor scepticism and lead to higher audit fees and lower detection risk; (2) relative to long‐term mandatory audit firm rotation, imposing a short‐term rotation will lead to lower audit fees and higher detection risk, resulting from greater informational frictions. We further find that imposing supplementary regulatory instruments, such as increased regulatory scrutiny of the auditee and/or auditor, can be used to lower the detection risk and increase audit quality. We discuss implications of these findings for empirical research.
This paper investigates whether seasonal affective disorder (SAD) influences audit quality. On the one hand, a SAD‐induced negative mood can render auditors risk‐averse in auditing. On the other hand, SAD can lower their cognitive ability and efficiency at work. Our results show that absolute discretionary accruals and the likelihood of restatements are lower when the level of SAD is higher during the audit period, thus suggesting that SAD lowers auditors' willingness to accept aggressive reporting. Other tests show that the relationship between SAD and audit quality is not significantly different between the fall and winter or between industry expert and non‐industry expert auditors. We also find that the association between SAD and audit quality is more pronounced for auditors located in northern states than southern states. Lastly, our results hold after controlling for management reporting choices, auditor busy season, auditor locality and other robustness tests. Overall, this paper contributes to the auditing literature by highlighting the effect of environmental factors on auditors' professional judgement from a psychological perspective.
We examine the impact of product recalls on audit production. Product recalls are events that increase engagement risk associated with greater audit effort, and by extension, greater audit quality. Consistent with this conclusion, we find firm-years with a product recall have a lower likelihood of being subsequently restated and lower levels of accrual error. While a positive association generally exists between audit effort and audit fees, prior literature shows firms experiencing economic stress negotiate lower audit fees and auditors accept lower fees to earn future returns. We expect that to increase the likelihood of retaining a client, auditors will agree to lower fees when the short-term economic stress associated with a recall injects downward pressure into fee negotiations. Supporting this conclusion, we find product recalls are associated with lower audit fees-a relation attributable to differing magnitudes of temporal fee increase. We also show the effects are transitory, the higher levels of audit quality are attributable to specialist audit offices, and the lower levels of fees are attributable to engagements where the client has greater bargaining power. While a positive association typically exists between audit effort and audit fees, our paper identifies a firm-specific event that weakens this relation.
Although there are studies by academics and various national and international authorities on determining audit quality indicators and establishing a quality framework in auditing, a consensus has not been reached yet. In addition, most of these studies are related to external auditing and the internal audit quality framework has not been sufficiently focused. In this study, a ten-year retrospective content analysis was carried out on the annual reports of three public and three private banks operating in Turkey, and the concepts that banks focused on when evaluating the functioning and quality of internal audit were revealed. Thus, the issues that banks focus on in their internal audit evaluations have been systematically conceptualized and analyzed through annual reports, containing vital data on this subject. Fifty-four codes were determined, and the codes were classified into five categories (input-process-output-outcome-external factors) in accordance with the internal audit quality framework in the literature. Both private banks and public banks focus more on the process dimension (approach, method, methodology) of the internal audit quality framework in their evaluations, and in the last ten years, the process dimension has taken first place among the five dimensions, and the input dimension (qualification of the audit team) has taken the last place. The most emphasized topics are as follows; (1) in the inputs; the number of auditors and training, (2) in processes; risk-based auditing, remote auditing and process audits, (3) in the outputs; reports/meetings submitted to the management and follow-up of findings, (4) in the outcomes; providing accurate and reliable information and being a preventive/deterrent, (5) In external factors; legal regulations and organizational structure. In addition, it has been observed that deposit banks closely follow many current audit approaches in Turkiye. The internal audit quality framework, which is of great importance in terms of identifying and conceptualizing issues that may affect audit quality, can increase awareness of this issue by providing transparency and comparability in internal auditing.
“EXTENDED ABSTRACT”
“INTRODUCTION”:
Various authorities, especially institutions such as the IAASB and PCAOB, are working on determining audit quality indicators and audit quality framework. Similarly, there are studies conducted by many academicians on this subject. However, an absolute consensus has not yet been reached even on the dimensions in which audit quality indicators are classified. For example, the PCAOB identified 28 audit quality indicators and classified them into three dimensions: input-process-result. The IAASB, on the other hand, considers the indicators it determines in five dimensions as input-process-output-interaction-contextual factors. Apart from the international authorities, it is seen that some national authorities also carry out studies and create different frameworks to identify potential indicators that can be used in audit quality measurement. Although there are studies conducted by some academics (Trotman & Duncan, 2018; Turetken, Jethefer & Ozkan; 2020) to create an “internal audit quality framework” by taking these studies related to independent auditing as a reference, more studies are needed on this subject. Because it is possible to detect and prevent risks early by increasing the quality of internal audit, and this will also reduce external audit costs. In addition, with internal audit, more detailed and continuous audits can be carried out on a company-specific basis. Therefore, establishing a comprehensive internal audit quality framework will also increase awareness of internal auditing and internal audit quality.
In the banking sector, where audits are significant, traditional internal audit practices may also change over time (Sarıkale & Kandemir, 2022: 137). It is obligatory to publish information on the functioning of the internal audit units of the bank and the evaluations of the audit committee in the annual reports. Therefore, these documents contain reliable and quite comprehensive information and evaluations on the subject. In this study, content analysis was performed on the internal audit-related sections of the bank's annual reports, and the codes identified were classified under the five dimensions specified in the internal audit quality framework (Trotman & Duncan, 2018). Thus, the focus (potential internal audit quality indicators) that banks focus on when assessing their internal audit quality has been systematically conceptualized and analyzed. Subjects such as which dimension of internal audit quality in banks are focused on and which elements are emphasized, whether new approaches are applied in bank internal audit units, changes in the focused elements according to years, differences in public and private bank audits have been researched. The internal audit quality framework in the banking sector has been revealed through the evaluations of the banks in their annual reports. The research is limited to the evaluations made in the annual reports of the internal audit units of deposit banks in Turkiye.
"METHOD":
In this study, content analysis was carried out through document scanning of the sections related to internal audit (evaluations related to internal auditing and the functioning of internal auditing) in the annual reports of banks. Categories and codes have been adapted based on previous studies (Trotman & Duncan, Knechel, IAASB, PCAOB, CAQ, FRC etc.), and we have created a coding guide for this. As Trotman and Duncan (2018) stated in the multi-stakeholder internal audit quality framework, audit quality has 5 dimensions (input-process-output-outcome-contextual factors). The categorization was made in accordance with the audit quality framework dimensions in the literature. In the determination of the codes, the existing literature and suggested quality frameworks were examined, the codes under these 5 dimensions were determined, and a coding guide was created in order to ensure the objectivity of the research. While a preliminary coding list suitable for internal audit was determined from the literature, necessary updates were made in the code list and coding guide for the codes that emerged during the document analysis process, and they were finalized. After all the data were read and coded in accordance with the coding guide, frequency analysis and categorical analysis (Tavşancıl & Aslan, 2001: 87-99) were performed. The MAXQDA program was used for coding and analysis. In addition, various Excel tables were created from these data, and analyzes were carried out according to years and public-private distinction. As a result of the analysis of the evaluations in the annual reports of the banks regarding the functioning of the internal audit units; comparisons on which aspect of the audit quality framework is focused on, comparison of public and private banks, analysis of the trend in the focus areas by years, comparison of the quality framework in the literature and the results obtained from the annual reports (similarities and differences), comparison of the legal regulations and banks' internal audit evaluations, interpretations on the basis of indicators and evaluations have been made about whether current audit approaches are applied in banks.
Result and Discussion
A content analysis was made with the perspective of the internal audit quality framework, and an internal audit quality framework consisting of 5 dimensions and 54 potential audit quality indicators was reached. According to this, in the evaluations regarding internal audit included in the annual reports, banks mostly focus on the "Process" dimension of the internal audit quality framework. The least emphasized dimension was the "Input" dimension. According to the dimensions, the most focused issues are; "in the input dimension; number of auditors and training", "in the process dimension; risk-based control, remote audit and process analysis", "in the output dimension; reports/meetings submitted to the management and follow-up of findings", "in the outcome dimension; providing accurate and reliable information, being preventive/deterrent", "in the dimension of external factors; legal regulations and organizational structure".
Considering the changes over the years in the focus areas in the internal audit evaluations included in the Bank's annual reports; In the last 10 years, "Process" has always taken first place among the five dimensions, and "Input" has always taken the last place. It is seen that matters such as finding tracking, technology-supported auditing and process analysis have started to take place relatively more in the annual reports in recent years. Some new concepts related to the technology-assisted audit approach, such as digital transformation, machine learning, image processing and data modeling algorithms, and using artificial neural networks in auditing, have begun to be mentioned. In addition, while data security and data mining issues were not emphasized in previous years, these issues have begun to be emphasized, albeit a little, in the annual reports of recent years.
While public banks and private banks focus on the process dimension of the internal audit quality framework in the first place in their evaluations on the functioning of internal audit, the last category was the inputs in both groups. Other dimensions took place in different ranks in public banks and private banks. Looking at the encodings under these dimensions; the subjects of providing a qualified workforce, professional attention and care, contribution to profitability, contribution to corporate reputation, auditor turnover and access to information are only mentioned in the annual reports of public banks. On the other hand, it has been observed that objectivity and independence, data mining and sampling issues are only included in private bank activity reports. In addition, relatively; it has been determined that public banks place more emphasis on “deterrence, recommendations, consultancy, auditing from an organizational perspective” and private banks emphasize more on “skills and qualifications of auditors”. When the annual reports are examined, it is seen that many current audit approaches are applied in deposit banks in Turkiye.
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ÖZET:
Denetim kalitesi göstergelerinin tespit edilmesi ve denetimde kalite çerçevesi oluşturulmasına yönelik akademisyenlerin, ulusal ve uluslararası düzeydeki çeşitli otoritelerin çalışmaları bulunmakla birlikte henüz bir uzlaşı sağlanamamıştır. Ayrıca bu çalışmaların çoğu bağımsız denetimle ilgili olup iç denetim kalite çerçevesine yeterince odaklanılmamıştır. Bu çalışmada Türkiye’de faaliyet gösteren üç kamu bankası ve üç özel bankanın faaliyet raporlarındaki iç denetimle ilgili bölümlere on yıl geriye dönük olarak içerik analizi yapılmış ve bankaların iç denetimin işleyişi ve kalitesini değerlendirirken odaklandıkları kavramlar ortaya çıkarılmıştır. Böylece bankaların iç denetim değerlendirmelerinde odaklandıkları hususlar bu konuda oldukça önemli veriler içeren faaliyet raporları üzerinden sistematik olarak kavramsallaştırılıp analiz edilmiştir. Toplam 54 kod belirlenmiş ve kodlar literatürdeki iç denetim kalite çerçevesine uygun olarak beş kategoride (girdi-süreç-çıktı-sonuç-dışsal faktörler) sınıflandırılmıştır. Hem özel bankalar hem de kamu bankaları değerlendirmelerinde iç denetim kalite çerçevesinin süreç boyutuna (yaklaşım, yöntem, metodoloji) daha fazla odaklanmakta olup son on yılda süreç boyutu beş boyut içerisinde ilk sırayı, girdi boyutu (denetim ekibinin niteliği) ise son sırayı almıştır. Üzerinde en fazla durulan konular ise girdi boyutunda denetçi sayısı ve eğitim; süreç boyutunda risk odaklı denetim, merkezden denetim ve süreç analizleri; çıktı boyutunda yönetime sunulan raporlar/toplantılar ve bulgu takibi; sonuç boyutunda doğru ve güvenilir bilgi sağlama ile önleyici/caydırıcı olma; dışsal boyutta ise yasal düzenlemeler ve organizasyonel yapı olmuştur. Ayrıca birçok güncel denetim yaklaşımının ülkemizdeki mevduat bankaları tarafından yakından takip edildiği görülmüştür. Denetim kalitesini etkileyebilecek hususların tespit edilip kavramsallaştırılması açısından büyük öneme sahip olan iç denetim kalite çerçevesi, iç denetimde şeffaflık ve karşılaştırılabilirlik sağlayarak bu konudaki farkındalığı artırabilecektir.
Auditing financial derivatives is complex and contentious. Our study examines the impact of derivative use on the risk premium charged by auditors of bank holding companies (BHCs). We find that audit fees are higher regardless of whether derivative instruments are used for hedging and trading. This implies that auditors charge BHCs that use derivatives a risk premium to compensate for additional risk related to these instruments. We also find that trading derivatives tend to have a higher risk premium than hedging derivatives. Our results suggest that auditors price risks related to derivatives and trading derivatives are perceived to be higher risk relative to hedging derivatives.
Abstract: This article aims to shed light on the benefits of adopting ISAs in a national context and to explore its effect on audit quality in the light of the existing literature. The analysis shows that the development of Algerian auditing standards by reference to international standards marks an important stage in the evolution of the auditing profession in Algeria. However, the implementation of these standards faces several impediments that could compromise the auditor's compliance efforts in his engagement. There is therefore still a long way to go to raise audit practices to an international level and make Algerian standards a true lever for audit quality.
Purpose: (i) Analyze and test the effect of auditor independence and complexity on audit quality; (ii) Analyze and test the effect of auditor reputation in mediating independence and audit quality. Methodology: This study uses descriptive analysis, a type of quantitative research, which, when viewed from the data analysis method used, uses a Likert scale measurement. This study uses primary data sources. The survey method is distributing questionnaires to auditors who work at BPK RI Representatives of South Sumatra. Findings: Audit independence has a positive and significant effect on audit quality. the increasing independence of auditors will improve audit quality, audit independence has a positive and significant effect on the reputation of the institution. This is with increasing auditor independence will improve the reputation of the institution, the complexity of the audit has a positive and significant effect on audit quality means that every increase in audit complexity will improve audit quality, audit complexity has a positive and significant impact on the reputation of the institution. This condition means that every increase in audit complexity will increase the reputation of the institution. , Audit quality has a positive and significant effect on the reputation of the institution. The condition means that every increase in audit quality will improve the reputation of the institution Originality/Value: This study is to improve the quality of the financial auditing agency in the South Sumatra region in terms of contributions regarding the independence and complexity of auditors on audit quality and their impact on the reputation of the auditor institution where it is necessary to increase audit complexity in connection with improving audit quality in addition to audit complexity. in accordance with the hypothesis, therefore the formulation of further research for. The recommendations are expected to be why audit complexity is proven to provide an increase in audit quality and not the other way around. As for the variables of independence and audit quality, it is proven to have a positive effect on the reputation of the institution, thus recommendations to the agency to improve the reputation of the institution in terms of independence and audit quality.
SUMMARY
Introduction
Accounting, which provides healthy, complete and accurate information about the past, is a guide in making future
plans, taking correct, effective and real decisions, perceiving opportunities and threats, and determining the
strengths and weaknesses of the business.. The way to successfully conclude these transactions is through the
people who adopt the accounting profession to receive a good educationIt is expected that the self-confidence and
verbal communication skills of the professionals who have received a good accounting education are high, based
on the principle that knowledge is power. The fact that communication in accounting is so important that it cannot
be ignored has made it inevitable for those who carry out this profession to improve themselves in communication..
Therefore, the quality of accounting education in universities determines the quality of the accounting profession.
The way to train a successful and expert accountant is to provide students with verbal and written communication
skills as well as professional and technical knowledge during university education..
Purpose
This study aims to investigate the effect of accounting education on students' verbal communication anxiety.
Method
In the study, the students were divided into two groups as students who are at the entry stage to the accounting
education program and who are about to graduate from the program, who are studying in the Departments of
Economics and Administrative Sciences, where accounting education is intense, and students who are educated in
other departments where accounting education is relatively less.. The data used in the study were obtained by
applying a 24-question questionnaire prepared by McCroskey (1984) to measure verbal communication anxiety to
students studying at Ağrı İbrahim Çeçen University and Iğdır University Faculty of Economics and Administrative
Sciences.. The total number of students participating in the survey is 168. The questionnaire consists of four
groups: public speaking, group discussions, meeting and paired questions, each group contains six questions.. In
the study, communication concerns of students who have just started to take accounting education and students
who receive intensive accounting education, as well as students studying in the department of business
administration, which has intensive accounting education, and students studying in other departments of
economics and administrative sciences faculties with few accounting courses, were compared by t-test analysis. It
was examined whether there was a significant difference between the groups. The data used in the study were
normally distributed and the reliability rate of the questionnaire (Cronbach's alpha α) was 0.627. Since this rate is
above 0.60, we can say that the reliability of the survey is high.
Findings
According to the results of the t-test (Independent-Samples T Test), which was applied to measure whether there
was a significant difference between the groups in the study, it is determined that there was no significant and
significant difference between the groupsAccording to the results obtained from the study, it can be said that
accounting education has no effect on the development of communication skills by reducing students' verbal
communication anxietyIn the study, no difference was found in terms of verbal communication skills and
communication anxiety between the students of the Department of Business Administration, where accounting
courses are intense, and the students of other departments, where accounting courses are few. To the total score of
the questionnaire and each group separately, no significant difference was found between the students who are at
the stage of entering and finishing the accounting education program and the student groups studying in the
department of business administration and other departments.
Conclusions
Nowadays, thanks to the rapidly developing technology, the methods of obtaining and collecting information are
carried out with arguments that require high communication skills such as oral presentations and video
conferences. Therefore, accounting education and our education system should change the methods that do not
require verbal communication skills, such as measuring learning by testing. This system should replaced by rote
learning, helping students to develop their verbal communication skills; case studies, oral presentations and group
discussions. Since communication skills are of critical importance in order to be successful in the accounting
profession, first of all, verbal communication anxiety and fear that prevent verbal communication should be
reduced in order to improve students' verbal communication skills. It is also possible for students to overcome the
fear of verbal and written communication; The approach of accounting instructors is very important and they have
a responsibility in this regard, Accounting educators can help students overcome these fears and participate
actively in the classroom by providing positive encouragement. It is recommended that communication skills be
taught professionally by integrating them into the curriculum in basic accounting programs, rather than just being
a part of general education or taking a communication course with a special course.
This work empirically examined the determinants of audit rotation in Nigeria. Specifically, the study examined the effect of audit fee, audit firm size, audit tenure, on audit rotation of quoted companies in Nigeria. A multiple regression estimation approach was employed on information extracted from a sample consisting of one hundred and nineteen (119) quoted companies in Nigerian Stock Exchange between the years 2015 to 2020. Panel Least Square (PLS) regression technique was employed in estimating the data and testing the formulated hypotheses. The findings revealed that there is a significant relationship between audit tenure, audit delay, company size, change in management and audit rotation. The results also show that there is a negative and insignificant relationship between audit fee, a rotation among Nigeria quoted companies. In line with the findings, the study recommends that auditor who engages in the act of frequent audit delay should be disengaged. And there should be stiffer penalty for any audit firms found wanting.
Abstract: This work empirically examined the determinants of audit rotation in Nigeria. Specifically, the study examined the effect
of audit fee, audit firm size, audit tenure, on audit rotation of quoted companies in Nigeria. A multiple regression estimation
approach was employed on information extracted from a sample consisting of one hundred and nineteen (119) quoted companies in
Nigerian Stock Exchange between the years 2015 to 2020. Panel Least Square (PLS) regression technique was employed in
estimating the data and testing the formulated hypotheses. The findings revealed that there is a significant relationship between
audit tenure, audit delay, company size, change in management and audit rotation. The results also show that there is a negative
and insignificant relationship between audit fee, a rotation among Nigeria quoted companies. In line with the findings, the study
recommends that auditor who engages in the act of frequent audit delay should be disengaged. And there should be stiffer penalty
for any audit firms found wanting.
en Academics and practitioners agree that there are substantial barriers to systematically transferring audit research knowledge to policy-makers. We adopt a design science approach to investigate the efficacy of employing a research synthesis, embedded in an interactive process with audit standard setters, to transfer such knowledge. We identify a standard-setting issue that, we argue, is typical of the class of problems encountered by both parties when attempting knowledge transfer. Following design science prescriptions, we evaluate the pragmatic validity of our prototype research synthesis and its creation process. We provide initial evidence (“proof of concept”) that a research synthesis process can effectively and efficiently facilitate academic research knowledge transfer to inform audit standard setters' deliberations. Finally, we provide evidence that the problem of academic research knowledge transfer in accounting standard setting and evaluation continues. Our study and findings reflect how design science facilitates change in real-world problem contexts through research-based proofs of concept.
RÉSUMÉ
fr Élaboration de normes d'audit fondées sur des données probantes : exploration de l'utilisation des données et du transfert de connaissances
Les chercheurs et les praticiens reconnaissent qu'il existe des obstacles importants au transfert systématique des connaissances issues de la recherche en audit auprès des décideurs. Les auteurs de la présente étude adoptent une approche de science de la conception pour étudier l'efficacité de l'utilisation d'une synthèse de recherche, intégrée dans un processus interactif avec les normalisateurs d'audit, pour transférer ces connaissances. Ils identifient un problème de normalisation qui, selon eux, est typique pour la catégorie de problèmes rencontrés par les deux parties lorsqu'elles tentent de transférer des connaissances. En s'appuyant sur la science de la conception, les auteurs évaluent la validité pragmatique de leur prototype de synthèse de recherche et de son processus de création. Ils fournissent des données initiales (« preuve de concept ») indiquant qu'un processus de synthèse de recherche peut, de façon efficace et efficiente, faciliter le transfert de connaissances issues de la recherche universitaire afin d'éclairer les réflexions des normalisateurs d'audit. Enfin, ils fournissent des données montrant que le problème lié au transfert des connaissances issues de la recherche universitaire persiste dans le domaine de l'élaboration et de l'évaluation des normes comptables. Cette étude et les résultats qui en découlent reflètent la manière dont la science de la conception facilite le changement dans les contextes de problèmes réels grâce à des preuves de concept basées sur la recherche.
This study uses semistructured interviews to gain insights from 19 practicing Canadian audit partners into the practical implications of the Engagement Partner Identity (EPI) mandate requiring firms to disclose the identity of the engagement partner(s) auditing Canadian publicly traded companies. Building on prior literature that suggests accountability can reach a ceiling, we explore whether audit partners perceive incremental increases in accountability pressures to be effective in increasing audit quality. Based on existing literature, we propose a nonlinear relation between accountability and performance (audit quality, in the current context), reflecting this ceiling effect. We find partners believe they are reaching, or are at, a ceiling level of accountability and that further initiatives to increase their accountability are ineffective in eliciting procedural changes in the audit or the audit’s outcome. Contrary to regulators’ motives for the disclosure, our interviewed partners do not believe the transparency of publicly disclosing their names will further increase their level of accountability or overall audit quality. We document that one possible reason for the disconnect is that partners are less concerned with managing external reputation than with managing internal reputation, which they believe has a more direct impact on their careers. We also discuss partners’ perceptions of the required disclosure’s impact on individual reputations, client risk choices, personal safety, and partner recruitment. We offer suggestions for future research building on the partners’ insights. This article is protected by copyright. All rights reserved.
This paper studies whether creditors trust and use IFRS‐based information in the context of private firm loan decisions. Through an institutional theory lens, and based on information collected from 108 bankers, we find that IFRS numbers are more trusted and used than local‐GAAP (non‐IFRS Standards‐based) numbers. Differences in countries’ formal and informal institutions are related to observed cross‐country differences in trust and use of financial information. We also find that mandatory IFRS Standards adoption in a country is associated with higher use of these numbers than when countries permit the adoption of IFRS Standards.
شهد العالم فى الآونة الأخيرة العديد من المناقشات المرتبطة بالنشاط الزراعي، الذى يُعد أحد أهم الأنشطة الاقتصادية على مستوى العالم الواجب تنميته وتطوير كافة النواحي المتعلقة به، سواء أكانت نواحي إدارية أم تشغيلية (زكى، 2014؛ على، 2015). ونتيجة لاعتبار القوائم المالية لشركات الانتاج الزراعى والحيوانى بمثابة أداة رئيسية لتلبية احتياجات أصحاب المصالح من المعلومات المحاسبية بها، أوجد ذلك الحاجة لضرورة الاعتماد على آلية فاعلة لضمان سلامة ونزاهة عملية إعداد القوائم المالية لتلك الشركات.
ولإضفاء الثقة على المعلومات المحاسبية الواردة بالقوائم المالية لشركات الانتاج الزراعى والحيوانى، كمعلومات الأصول البيولوجيةBiological Assets ، أشار البعض(Nawaiseh (زكى، 2018et al., 2016; إلى الاعتماد على عملية المراجعة الخارجية لهذا الغرض، خاصة إذا كانت ذات جودة، نتيجة لاعتبارها بمثابة آلية للمتابعة والرقابة على تصرفات الإدارة، فضلاً عن قدرتها على اكتشاف التحريفات الجوهرية بالقوائم المالية، والعمل على تخفيض مستوى عدم تماثل المعلومات والحد من ممارسات السلوك الانتهازي للإدارة.
وحتى يفى مراقب الحسابات بمسئولياته المهنية أثناء أدائه لعملية المراجعة الخارجية والعمل على الإرتقاء بجودتها، فإنه يسعى دائما لتنمية مهاراته وقدراته العلمية والعملية وتبنى العديد من الآليات المواكبة للتطورات فى بيئة الأعمال. ونتيجة لديناميكية بيئة الأعمال الحالية الآن وتوجه العديد من عملاء مهنة المحاسبة نحو رقمنة عملياتهم وتبنى العديد من أدوات التحول الرقمى Digital Transformation (DT)، فيمكن اعتبار ذلك التحول بمثابة أحد أهم متغيرات بيئة ممارسة مهنة المحاسبة الآن.
وبالتركيز على التحول الرقمى فإنه فرض على مهنة المحاسبة عدة تداعيات، من أهمها على الإطلاق ضرورة تبنى مراقب الحسابات للعديد من أدوات التحول الرقمى (كأدوات الذكاء الاصطناعىArtificial Intelligence (AI)، أسلوب التعلم العميقDeep Learning، وتقنية الطائرة بدون طيار Drone) بإعتبارها من أهم إجراءات المراجعة الخارجية المواكبة لبيئة التحول الرقمى (Almaleeh, 2019; Khanon, 2020).
وفى ذلك الصدد وبشأن مراجعة حسابات الشركات كثيفة الأصول البيولوجية أشار البعض (Appelbaum and Nehmer, 2017; Christ et al., 2020; Uddin, 2020) لإمكانية الاعتماد على تقنية الطائرة بدون طيار (والمعروفة بالطائرة من دون طيار أو الدرون أو الزنانة) فى التحقق من مدى وجود Existence واكتمال Completeness الأصول البيولوجية، لأن ذلك سوف ينعكس إيجابا على جودة أداء عميلة المراجعة الخارجية لهذه الشركات. ونحن نعتقد بوجود ندرة فى الدراسات الأكاديمية والمهنية ذات الصلة، لذا ظهرت الحاجة المُلحة لتضييق الفجوة البحثية فى ذلك المجال البحثى، وكان هذا دافعا لنا لإعداد هذه الورقة.
In this paper a theory of technology dominance is formulated as a means of cohesively understanding the decision aid research that has been completed to date and the relationships between key factors that impact the success or failure of intelligent decision aids. The theory consists of three sequential stages. The first stage explores factors that determine the likelihood that a decision maker will choose to rely on an available decision aid. The second stage explores the conditions under which a decision maker using an intelligent decision aid is susceptible to dominance by the technology. Implications for decision aid design are also embedded in the theoretical development. The third and final stage explores the long-term impact of intelligent decision aid use on deskilling domain experts and impeding epistemological evolution.
We develop a model of auditor-client accounting negotiation, using the elements of negotiation examined in the behavioral negotiation literature, elaborated to include accounting contextual features indicated in the accounting literature and suggested by interviews with senior practitioners. We use a questionnaire structured according to the model to describe the elements, contextual features and associations between the two groups in a sample of real negotiations chosen by 93 experienced audit partners. The paper demonstrates important aspects of the sampled accounting negotiations and makes suggestions for further empirical and model development research.
Research indicates that justifiability of a decision is a key determinant of work quality. In this paper, we investigate whether and how the requirement for preparers to justify an audit conclusion to a reviewer with task preferences that are similar to or dissimilar from their explicitly stated initial task preferences determine the nature and extent of justifications documented in their workpapers, and how this effect is moderated by their technical and tacit managerial knowledge. Results of an experiment with auditors as participants indicate that auditors use different forms of justifications under different circumstances. Auditors with high tacit managerial knowledge and high technical knowledge have a higher proclivity to enumerate more pro versus con reasons, and to consider a wider breadth of issues when they are required to justify their conclusions to reviewers with dissimilar task preferences. In contrast, high tacit managerial knowledge auditors required to justify to reviewers with similar initial task preferences have a greater tendency to employ an evidence framing approach, in which language is used to emphasize consistent evidence by downplaying associated inconsistent evidence. In additional analyses, we find that these three specific forms of justifications are positively associated with evaluations of work quality.
Accrual-based earnings is considered superior to cash flows. Accruals allow managers to communicate their private and inside information and thereby improve the ability of earnings to reflect underlying economic value. However, managers could engage in aggressive reporting of accruals that would seriously undermine the informativeness of reported earnings. Since outsiders cannot directly observe earnings, high-accrual firms face greater agency costs relative to low-accrual firms. Auditing plays an important role in mitigating these agency costs by constraining opportunistic management of accruals. This study examines whether there is a linkage between audit quality and pricing of discretionary accruals. The findings indicate that the association between stock returns and discretionary accruals is greater for firms audited by Big 6 auditors than for firms audited by non-Big 6 auditors. Further, discretionary accruals of clients of Big 6 auditors have a greater association with future profitability than discretionary accruals of clients of non-Big 6 auditors.
Observers of the auditing profession have long expressed concern that client fee pressures pose a threat to auditor independence. Concerns about impaired independence may be warranted if auditors alter their audit plans in response to client fee pressure. The purpose of this study is to examine whether audit managers' planning decisions are influenced by client fee pressure and by the preferences of the audit partner. I experimentally examine these issues by having audit managers complete a case in which they were asked to determine how the work performed by a client's internal audit department will affect planned external audit procedures, in an environment where the quality of the internal audit department is questionable. Client and partner preferences are manipulated between subjects. I operationalize client preferences as an explicit preference for: (1) lower audit fees (i.e., high fee pressure), or (2) quality audit work; and I operationalize audit partner preferences as an explicit preference for: (1) efficiency and profitability, or (2) audit quality and professional skepticism. The results indicate that audit managers encountering clients who impose a high level of fee pressure rely on the internal audit's work to a greater extent than do audit managers encountering clients who emphasize a concern for audit quality. Partner preferences also influence audit managers' reliance decisions; however, the results do not provide evidence of an interactive effect of client fee pressure and partner preferences on managers' reliance decisions. These results, which raise concern about the potential negative effects of client fee pressure on auditor independence and audit effectiveness, suggest the need for continued investigation of these important issues.
Prior research has examined the incidence of questionable acts by auditors using a direct method (DM) of inquiry. A potential problem with the use of the DM of eliciting responses to sensitive issues is respondent bias. This study assessed the degree of respondent bias by examining auditor premature sign-offs using both the DM of inquiry and the randomized response technique (RRT) proposed by Greenberg et al. (1971). The findings using the RRT were that, on the average, auditors prematurely signed off almost ten times over a period of one year. Over 78 percent of the auditors admitted to having prematurely signed off at least once. A significantly lower incidence of premature sign-offs was reported by auditors who responded to the DM of elicitation. While the DM of inquiry is an acceptable approach for examining many types of issues, the results suggest that the RRT is a preferred method for eliciting sensitive information.
While the concept of audit quality is broad, it can ultimately be defined in terms of the probability that material financial misstatement, if it exists, will be identified and, if necessary, reported by the audit firm. Consideration of audit quality raises questions about effective and efficient ways to obtain beneficial levels of audit quality, including possible roles for various regulatory regimes. This paper models auditing as a multiperson social dilemma, in which the fees earned by auditors depend on the audit quality provided by all auditors in prior periods. In this setting, firms can signal quality only as a member of a group. The defining characteristic of the social dilemma is that audit firms are best off in a single period by providing a low-quality audit, but all firms are best off in a multiperiod setting when all provide high-quality audits. A series of laboratory experiments is conducted to gather data on multiperiod cooperative decisions in settings without regulation and with professional self-regulation. The data analysis demonstrates the difficulty of obtaining a high level of audit quality without a regime of voluntary self-regulation. Low-quality auditing dominates in an unregulated laboratory setting, while availability of a self-regulatory coalition effectively raises both average quality level and the consistency with which high-quality auditing is provided. These results strongly support one role for professional organizations such as the Securities Exchange Commission Practice Section and the AICPA. Such organizations can improve the quality of auditing when there exist effective, quality ensuring mechanisms such as fines and sanctioning powers.
This paper tests whether documenting the rationale for an audit decision can mitigate the recency effects in sequential audit judgment that have been identified in prior experimental research. It is hypothesized that the documentation task stimulates greater effort, attention, comprehension and recall of information relevant to the formation of audit judgments, causing those judgments to be less subject to recency bias. Seventy-five experienced audit professionals participated in an experiment involving judgments and decisions relating to the going-concern issue for a hypothetical audit client. Consistent with prior research, a recency effect did arise in the audit judgments of the no-documentation subjects. However, as predicted, this recency effect disappeared among subjects who performed the documentation task. This result suggests that, contrary to prior research, auditors are not likely to bias their judgments in real audit settings in response to the order in which they receive and evaluate evidence.
This paper reports the results of an experiment that examines the influence of uncertainty about the probability that a future loss will occur ("ambiguity") on auditors' and financial statement users' judgments about appropriate reference to contingent losses in audit reports. Application of Einhorn and Hogarth's (1985) ambiguity model suggests that, with respect to losses of low (high) probability, both auditors and users will act as if an ambiguous probability of loss is higher (lower) than a precise probability of the same magnitude, thus demonstrating a conservative (unconservative) reaction to ambiguity. In addition, since auditors may jeopardize client relations when they unnecessarily make audit report reference to contingent losses, auditors may react less conservatively to ambiguity than do users. The results of the experiment support these predictions.
Many decisions are based on beliefs concerning the likelihood of uncertain events such as the outcome of an election, the guilt of a defendant, or the future value of the dollar. Occasionally, beliefs concerning uncertain events are expressed in numerical form as odds or subjective probabilities. In general, the heuristics are quite useful, but sometimes they lead to severe and systematic errors. The subjective assessment of probability resembles the subjective assessment of physical quantities such as distance or size. These judgments are all based on data of limited validity, which are processed according to heuristic rules. However, the reliance on this rule leads to systematic errors in the estimation of distance. This chapter describes three heuristics that are employed in making judgments under uncertainty. The first is representativeness, which is usually employed when people are asked to judge the probability that an object or event belongs to a class or event. The second is the availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development, and the third is adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available.
Important issues concerning generalizations drawn from heuristics research that depict humans as highly prone to a number of judgmental biases have been raised in recent years. Some researchers have argued that the tasks and subjects examined do not adequately represent the contexts to which generalizations are made, citing evidence of improved performance for expert judges working realistic, familiar tasks. This article presents additional evidence on these issues by reviewing experimental research on certain heuristics and biases in professional auditor judgments. In general, the significance of generalizability issues is underscored. Although certain biases seemed to persist in auditor judgments, they were often mitigated or modified in studies that used expert subjects performing familiar tasks.
This paper investigates auditors' assessments of earnings manipulation risk and corporate governance risk, and their planning and pricing decisions in the presence of these identified risks. To conduct this investigation, we use engagement partners' assessments of their existing clients made during the participating public accounting firm's client continuance risk assessment process. We find that auditors plan increased effort and billing rates for clients with earnings manipulation risk, and that the positive relationships between earnings manipulation risk and both effort and billing rates are greater for clients that also have heightened corporate governance risk. These findings provide evidence that auditors assess situations involving both an aggressive management and inadequate corporate governance, and that there is a relationship between those assessments and auditors' planning and pricing decisions.
Due to recent technological advancements such as online workpapers and email, audit firms have alternative methods of workpaper review that they did not have in the past. While audit workpaper preparers typically know they will be reviewed, and know the form their review will take, prior research has focused on comparing the judgments of auditors who expect to be reviewed with auditors who expect to remain anonymous. This study examines the effects on preparers of using two different methods of review: face-to-face and electronic review. The study also compares both review groups to a no-review control group. Consistent with the Heuristic-Systematic Model, we find that the method of review affects preparer effectiveness and efficiency. Specifically, preparers anticipating a face-to-face review are more concerned with audit effectiveness, produce higher quality judgments, are less efficient at their task, are less likely to be influenced by prior year workpapers, and feel more accountable than preparers in both the electronic review and no-review conditions. Interestingly, electronic review preparers generally do not differ from the no-review group. These results suggest that how a review will be conducted, and not merely the expectation that a review will occur, affects the decision-maker's judgments and perceptions.
This study experimentally examines how industry specialization affects auditors' inherent risk assessments and their confidence in those risk assessments. Two groups of participants - experienced banking specialist auditors and equally experienced nonbanking auditors -provided inherent risk assessments for a hypothetical banking client for two financial statement accounts. They assessed inherent risk for an industry-specific account (loans receivable) and for a nonindustry-specific account (property and equipment). The results indicate that nonbanking auditors assessed inherent risk significantly higher than industry specialists for all but the valuation assertion for the loans receivable account. However, the difference between the nonbanking auditors' and banking specialists' inherent risk assessments was not as great for the property and equipment account. Further, nonspecialists were less confident about the appropriateness of their inherent risk assessments compared with industry specialists. Potential implications for research and practice are discussed in light of the study's findings.
Professional skepticism is an important concept in audit practice, as evidenced by its prominence throughout the auditing standards. In this paper I propose that professional skepticism is a multi-dimensional individual characteristic. As an individual characteristic, professional skepticism can be both a trait (a relatively stable, enduring aspect of an individual) and also a state (a temporary condition aroused by situational variables). I develop a scale designed to ex ante measure an individual's level of trait professional skepticism based on characteristics derived from audit standards, psychology, philosophy, and consumer behavior research. I conduct a rigorous and iterative scale validation process using students and professional auditors. The final 30-item professional skepticism scale with instructions for use is included, as well as suggestions for future research.
We report on an experiment in which experienced auditors (1) determine whether to allow a client to adopt an aggressive reporting method when the auditors have an incentive to do so, and (2) justify aggressive reporting by their interpretations of financial accounting standards. In the experiment, the appropriate reporting method depends upon whether an amount can be "reasonably estimated" as that term is used in an applicable accounting standard. The accounting standard relevant to determining the appropriate reporting method was manipulated between subjects (thus varying whether judging that an amount can be reasonably estimated would justify an aggressive or conservative method), as was engagement risk. The results indicate that the auditors responded to moderate engagement risk by permitting the aggressive reporting method and justified their choice with aggressive interpretations of accounting standards. When faced with high engagement risk, the auditors responded by requiring conservative reporting and justified their choice with conservative interpretations of accounting standards.
Despite the allegations of audit failure and the enormous publicity surrounding Arthur Andersen's indictment, there is no systematic empirical evidence on characteristics of accounting information of clients of Arthur Andersen vis-à-vis other Big 6 auditors. I examine whether earnings of Andersen's Houston-based clients are timely in reporting bad news about future cash flows. I find that relative to a control group consisting of Houston-based clients audited by other Big 6 auditors, earnings of Andersen clients are less timely in reporting bad news. Further, it appears that operating accruals of Andersen clients are less effective in accelerating the timely recognition of bad news than operating accruals of non-Andersen clients. The findings suggest that the clients of Andersen's Houston office engaged in aggressive accounting practices, including delayed recognition of publicly available bad news.
SYNOPSIS
The purpose of this paper is to analyze the PCAOB's inspection reports of large, annually inspected accounting firms. The inspection reports identify audit deficiencies that have implications for audit quality. By examining the inspection reports in detail, we can identify the nature and severity of audit deficiencies; we can track the total number of deficiencies over time; and we can pinpoint common, recurring audit deficiencies. We focus on large accounting firms because they play a dominant role in the marketplace (i.e., they audit public companies that comprise approximately 99 percent of U.S.-based issuer market capitalization). We document a significant, downward linear trend in the number of deficiencies from 2004 to 2009. We also identify common, recurring audit deficiencies, determine the financial statement accounts most often impacted by audit deficiencies, and isolate the primary emphasis of the financial statement impacted. Our findings generally are consistent comparing Big 4 and second-tier accounting firms, though a few differences emerge. In addition, we make comparisons with findings that have been documented for small, triennially inspected firms.
Data Availability: The data are available from public sources.
This study investigates whether workload pressures, as proxied by the audit busy season (i.e., December fiscal year-end date) and auditor workload compression (i.e., relative concentration of companies with the same fiscal year-end date in an auditor's client portfolio), affect audit quality. Using a sample of 8,384 firm-year observations during the period 2006-2009, we find that busy season companies exhibit greater magnitudes of abnormal accruals and are more likely to meet or beat certain earnings benchmarks. Additional tests show that these associations are enhanced by the degree of auditor workload compression. Prior experimental and survey research indicates that workload pressures lead to dysfunctional behaviors and lower audit quality among individual auditors. Our archival findings suggest that these pressures can transcend the quality control mechanisms of a firm, affecting quality at the audit engagement level.