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The Effects Of Significant Changes In Auditor Clientele And Auditor Client Mismatches On Audit Quality
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Book Synopsis The Effects of Significant Changes in Auditor Clientele and Auditor-client Mismatches on Audit Quality by : Kenneth L. Bills
Download or read book The Effects of Significant Changes in Auditor Clientele and Auditor-client Mismatches on Audit Quality written by Kenneth L. Bills and published by . This book was released on 2012 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Proceedings of the 2023 3rd International Conference on Enterprise Management and Economic Development (ICEMED 2023) by : Gaikar Vilas
Download or read book Proceedings of the 2023 3rd International Conference on Enterprise Management and Economic Development (ICEMED 2023) written by Gaikar Vilas and published by Springer Nature. This book was released on 2023-09-23 with total page 444 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is an open access book. 2023 3rd International Conference on Enterprise Management and Economic Development (ICEMED2023) will be held in Xi'an, China on May 12–14, 2023. Enterprise management is the general term for a series of functions such as organizing, planning, commanding, supervising and regulating the production and operation activities of enterprises. Relative to economic growth, economic development is the core concept of development economics. Economic development refers to the high-quality development of the economy, including quality and quantity, rather than merely the growth of quantity. Enterprise management covers economics, management, business management, financial management, human resource management and other aspects, and is a comprehensive interdisciplinary science that spans natural science, engineering science, technical science and humanities and social science. Enterprise management comes into being with the development of modern socialized mass production. The use of modern management means and methods to manage enterprises, ensure the survival and development of enterprises, and play a positive role in promoting economic development. ICEMED2023 will bring together experts and scholars from relevant fields to discuss the relationship between enterprise management and economic development. Reasonable enterprise management is an important way to promote the economic development of enterprises. Scientific and reasonable use of industrial and commercial enterprise management knowledge can reasonably carry out effective macro-control on the enterprise economy and ensure the stable progress and development of the enterprise economy.
Book Synopsis The Intersection of Auditor Independence, Objectivity, and Integrity in High-risk Audit Conditions by : George Kwadwo Baah
Download or read book The Intersection of Auditor Independence, Objectivity, and Integrity in High-risk Audit Conditions written by George Kwadwo Baah and published by . This book was released on 2016 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: The rich store of audit quality research and steady improvements to auditing standards over the decades have not yielded the desired impact on audit quality. While most litigations following corporate failure naming auditors as defendants tend to accuse auditors of lack of independence, objectivity and willful participation in fraud, the impact of these character dimensions on audit quality has not been fully explored. Professional accounting bodies impress upon their members to be independent in fact and in appearance, be objective and exhibit integrity in their decisions about their clients' financials statement, yet, not much is known about how independence, objectivity, and integrity impact audit quality. Secondly, not much is known about how auditors enact independence, objectivity, and integrity on an audit engagement. Also, inputs from auditors have been quite underutilized in audit quality research in recent years, yet auditors are the people who implement changes in auditing standards and regulations. This dissertation focuses on the very character dimensions that auditors tend to be accused of lacking to examine the impact of independence, objectivity, integrity, and environmental constraints on audit quality. Guided by institutional theory and the theory of negotiated order, a multi-staged, three-part sequential mixed methods study consisting of one quantitative and two qualitative studies were conducted using responses from audit managers. Survey responses from auditors in the United Kingdom and the United States were used to perform an exploratory theoretical study of the impact of Independence, Objectivity, Integrity, and Constraints on Audit Quality. The second study was conducted to identify a highly constrained business environment where the impact of Independence, Objectivity, and Integrity on Audit Quality could be validated. Following the second study, a third study was conducted to understand the effects of the institutional environment on audit quality and how auditors respond to the effects of the institutional factors. The research finds that auditors' integrity is a consistent determinant of audit quality. The positive significant impact of integrity on audit quality does not change when integrity interacts with environmental constraints. Contrary to the general notions about the importance of independence to audit quality, the research finds that independence and objectivity do not have a significant direct effect on audit quality. However, moderating independence on objectivity leads to a significant effect on audit quality. Independence strengthens the positive effect of objectivity on audit quality. But the positive impact of interacting independence and objectivity on audit quality reduces substantially when the interaction variable interacts with environmental constraints. Auditors tend not rely on their independence when the impact of environmental constraints are weak, and they tend to ignore or bend their interpretation and enactment of independence and objectivity and rather rely on their integrity when the environmental constraints are high. These findings show that agents resort to their inner core beliefs when making decisions under high-risk conditions. This dissertation makes theoretical and practical contributions to the literature. The quantitative research for the dissertation is the first known empirical analyses or validation of impact of external constraints, independence, objectivity, and integrity on audit quality using data from auditors. The research challenges the continued emphasis on independence as the core determinant of audit quality instead of the integrity of auditors. Also, study two of the dissertation is the first known study to find that aid project failure was mainly due to managerial failure though literature has blamed poor institutions, weak economies, and corruption as the culprits. Though prior audit quality studies have used responses from auditors, most recent researches in that domain have used data from sources other than auditors, yet auditors are the people who actually perform the work. The finding that auditors' perceptions about the core determinant of audit quality is integrity and not independence suggests that perhaps custodians of the profession have not focused on the fundamental character determinant of audit quality. This finding makes a contribution to theory and practice.
Book Synopsis Auditor-Client Compatibility and Audit Firm Selection by : Stephen V. Brown
Download or read book Auditor-Client Compatibility and Audit Firm Selection written by Stephen V. Brown and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine auditor switching conditional on the compatibility of clients and their auditors using a unique text-based measure of similarity of financial disclosures. We find clustering of clients within an audit firm based on this measure. We find that clients with the lowest similarity scores are significantly more likely (9.4%-10.6%) to switch auditors, and will change to an audit firm to which they are more similar. Regarding the effect on audit quality, we find that discretionary accruals are lower when similarity is higher. However, accounting restatements are more likely when text disclosures that are unaudited -- business description, and management discussion and analysis (MD&A) -- are more similar. We find no such similarity effect for the audited footnotes. Finally, we find that firms that are more similar are less likely to receive a going concern opinion (GCO), but the GCO reporting decision is more accurate. It is unclear if this reflects higher or lower audit quality since firms that are candidates for a GCO are intrinsically different from the average firm in an auditor's portfolio due to their financial distress. One implication of these results is that auditors might have greater involvement in the quality of the text disclosures that are currently not audited.
Book Synopsis Auditor Client Relationship and Audit Quality by : Suhaib Aamir
Download or read book Auditor Client Relationship and Audit Quality written by Suhaib Aamir and published by LAP Lambert Academic Publishing. This book was released on 2011-07 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: Different scandals around the globe during the past, in specific during the last decade, have intrigued the stakeholders to question the roles of both auditors and management. But most of the fingers since then have been raised on the role of auditors, because it is the auditors who are entrusted with the responsibility to detect any errors or frauds in the financial reports of the client-firm. Apart from this, the long-term auditor client relationship has been the center of attention in most of the discussions and debates as well. Numerous studies have been conducted by the academic researchers, financial and professional analysts, regulatory authorities and governing bodies, and in some cases by the auditors and the firms as well regarding the effects of long-term auditor-client relationship on audit quality, equity risk premium, financial reports quality, audit pricing etc. These studies provide us with different results, both with the positive and negative associations and effects of long-term auditor-client relationship on the basis of different factors and contexts. Therefore, we would be studying this relationship in between auditors and SME clients.
Book Synopsis Understanding Auditor-client Relationships by : Gary Kleinman
Download or read book Understanding Auditor-client Relationships written by Gary Kleinman and published by Gary Kleinman. This book was released on 2001 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work is intended to assist researchers, regulators, and practitioners who are interested in the topic of auditor independence. It presents a comprehensive model of the individual, work place, organization, inter-organizational, and organizational field level determinants of the topic.
Book Synopsis The Auditor-client Contractual Relationship by : Linda DeAngelo
Download or read book The Auditor-client Contractual Relationship written by Linda DeAngelo and published by . This book was released on 1981 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Do Individual Auditors Affect Clients' Real Activities Manipulation? Evidence of Learning and Auditor Quality by : Baolei Qi
Download or read book Do Individual Auditors Affect Clients' Real Activities Manipulation? Evidence of Learning and Auditor Quality written by Baolei Qi and published by . This book was released on 2016 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find empirical evidence that clients' real activities manipulation (RAM) varies across individual auditors. More specifically, both audit-firm and individual-auditor fixed effects on RAM are significant; yet only the latter remain significant in regressions including auditors' propensity to issue qualified audit opinions as an explanatory variable. This incremental effect of individual auditors on RAM is beyond what is proxied by qualified audit opinions. We also find that auditors' personal demographics have limited power in explaining RAM's variation. Taken together, these findings suggest that audit quality take root in individual auditors, who influence clients' economic decisions, not just accounting policy choices.
Book Synopsis Laboratory Study of the Effects of Auditor's Business Risk on Audit Scope by : Judith Christina Walo
Download or read book Laboratory Study of the Effects of Auditor's Business Risk on Audit Scope written by Judith Christina Walo and published by . This book was released on 1990 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effect of Magnitude of Client Reporting Error and Order of Multiple Issues on Auditor-Client Negotiations by : Richard C. Hatfield
Download or read book The Effect of Magnitude of Client Reporting Error and Order of Multiple Issues on Auditor-Client Negotiations written by Richard C. Hatfield and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study reports the result of an experiment examining the impact of the magnitude of the difference between an auditor's preferred balance and the client's unaudited balance as well as the order of issues discussed on the outcome of an auditor-client negotiation. Audit quality has been the focus of several streams of research as well as the object of recent and substantial changes in audit regulation. However, the influence of audit quality on the quality of the associated financial statements is contingent upon the discussions and negotiations between auditors and the client's management. This study considers two aspects of the auditing context that normatively should not influence financial statement account balances but that negotiation theory suggests will have an influence: magnitude of the client's unaudited balance and the order of potential adjustments discussed. Theory from negotiation literature suggests that negotiators' initial demands (e.g., client's unaudited balances) as well as feelings of reciprocity created by prior negotiations serve to create expectations for the current negotiation and, in turn, the outcomes of such negotiations. Results of an experiment using audit partners and managers as participants suggest that both the magnitude of the client's initial, and materially misstated, balance as well as the order of discussion of multiple proposed adjustments influences the auditor's expectations regarding the ensuing negotiation (e.g., goals, limits, and initial offer). Further, these manipulations influence the negotiated outcome and this influence is fully mediated by the auditor's starting point in the negotiation (i.e., initial offer). These results suggest that financial statement quality may suffer as a result of these common characteristics of discussions regarding the disposal of audit adjustments.
Book Synopsis Does the Timing of Auditor Changes Affect Audit Quality? Evidence from the Initial Year of the Audit Engagement by : Cory A. Cassell
Download or read book Does the Timing of Auditor Changes Affect Audit Quality? Evidence from the Initial Year of the Audit Engagement written by Cory A. Cassell and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We focus on the first year of the auditor-client relationship and investigate whether audit quality varies with the timing of the new auditor's appointment. We find that audit quality is not lower for companies that engage new auditors before the end of the third fiscal quarter than for companies that do not change auditors. However, companies that engage new auditors during or after the fourth fiscal quarter are more likely to misstate their audited financial statements than companies that engage new auditors earlier in the year and companies that do not change auditors. In additional tests, we find that the decrease in audit quality associated with late auditor changes is more pronounced for companies with complex operations (i.e., more operating segments). These results suggest that the extent to which audit quality suffers in the first year of audit engagements is affected by both the amount of time required to understand the client's business, assess risks, and perform the audit (all of which are driven by client complexity), as well as the amount of time available for auditors to perform these tasks.
Book Synopsis The Impact of Auditor Rotation on Audit Quality by : Diana Mohamed
Download or read book The Impact of Auditor Rotation on Audit Quality written by Diana Mohamed and published by LAP Lambert Academic Publishing. This book was released on 2012-04 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book intends to explain the impact of the extended auditor client relation on the audit quality and suggests the different methods to overcome the cons of such a relationship. The auditor rotation is suggested as way to overcome such cons if they exist. Results and responses of the questionnaire are taken from Egyptian auditors working in the offices of the BIG four audit firms which are operating in Egypt.
Book Synopsis When Big 4 Dominance is Broken by : Zixuan Lina Li
Download or read book When Big 4 Dominance is Broken written by Zixuan Lina Li and published by . This book was released on 2018 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: In 2013, audit firm mergers created two “Chinese” audit firms – Ruihua and BDO Lixin – that outranked EY and KPMG to become two of the four largest audit firms in China in terms of total audit revenue. In this thesis, I examine the impact of this change in audit industry structure on the economic behavior, i.e. audit pricing and audit quality, of these two large local audit firms – or Big L – relative to the Big 4 and the other local audit firms. Using a difference-in-differences design, I find that the pre-post change in audit fees for the Big L auditors is significantly higher than that for the Big 4 and the other local audit firms around the mergers. In addition, I find that the Big L firms had a significant improvement in audit quality after the mergers, relative to the Big 4 firms over the same period. That is, holding everything else constant, the Big L had higher propensity to issue modified audit opinions and their clients exhibited improved earnings quality in the post-merger period. In contrast, I find evidence of a decline in audit fees and deterioration of earnings quality for clients of the Big 4 auditors around the mergers. I interpret the results as consistent with a shift in the relative market power among the large audit suppliers in China and the development of brand name reputations by the Big L firms, which provided the ability and incentive for the Big L firms to conduct higher quality audits in the post-merger period. On the other hand, the Big 4 audit firms lost some market power and auditor independence as new large competitors emerged in the industry. This thesis answers calls by Francis (2011) and DeFond and Zhang (2014) for further research on the effects of changes in market structure in the audit industry. Implications for various regulators, including the Ministry of Finance of PRC, the European Commission, and the U.S. SEC, are discussed.
Book Synopsis The Effect of Accounting Regulation on Second-tier Audit Firms and Their Clients by : Magdy Farag
Download or read book The Effect of Accounting Regulation on Second-tier Audit Firms and Their Clients written by Magdy Farag and published by . This book was released on 2007 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: The accounting profession has recently been affected by major financial reporting scandals and regulatory changes. The Sarbanes-Oxley Act of 2002 made changes to several engagement-specific characteristics with the ultimate aim of improving auditor independence. Accounting research is currently investigating these recent regulatory changes and how they affect the accounting profession. Although the entire accounting profession has been affected by these regulations, most accounting research focuses only on Big-audit firms. This study examines the effect of recent regulatory changes on Second-Tier audit firms. Agency theory focuses on the relationship between the principal and the agent. The agent has certain obligations, which he fulfills for the principal by virtue of the economic contract. The important concept in the agency relationship is the selection of the appropriate governance mechanism between the principal and the agent that will ensure an efficient alignment of the principal's and the agent's interests. Therefore, agency theory is an appropriate framework to demonstrate and explain the effect of recent regulations on audit firms. Audit firms are expected to assist the principal (stockholders) in monitoring the agent (management) of the firm. I address four research questions that are motivated by agency theory. First, I examine whether clients of Second-Tier audit firms incur higher audit fees subsequent to the recent accounting regulation. My second research question is whether quality of audits provided by Second-Tier audit firms is expected to improve due to recent regulations and rulings, especially in the post-SOX period. Third, I investigate whether clients of Second-Tier audit firms experience a higher cost of capital compared to clients of Big-audit firms. Finally, I address the question of whether there is a relationship between clients of Second-Tier audit firms and the backdating of executive stock options (ESOs). I expect a positive relationship between concentration and audit prices of Second-Tier audit firms. Additionally, audit quality is expected to increase due to recent regulations, but it is possible that Second-Tier audit firms may not be able to provide high quality audits in their efforts to increase their market share. I further predict that firms that are audited by Second-Tier audit firms are subject to larger financing costs measured by cost of debt and equity. I also expect that Second-Tier audit firms' clients exercise backdating of ESOs more often than Big audit firms' clients. The findings of this dissertation will contribute to our understanding of previous audit and financial accounting research from the perspective of Second-Tier audit firms. The investigation of Second-Tier audit firms and their clients will provide us a better understanding of why some firms are more likely to hire a Big-audit firm versus a Second-Tier audit firm. We will also have a better insight on issues raised by backdating of ESOs, and whether the quality of the audit provided can mitigate such irregular behavior.
Book Synopsis Using Peer Firms to Examine Whether Auditor Industry Specialization Improves Audit Quality and to Enhance Expectation Models for Analytical Audit Procedures by : Miguel Minutti Meza
Download or read book Using Peer Firms to Examine Whether Auditor Industry Specialization Improves Audit Quality and to Enhance Expectation Models for Analytical Audit Procedures written by Miguel Minutti Meza and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Client Influence and Auditor Independence Revisited by : Tom Adams
Download or read book Client Influence and Auditor Independence Revisited written by Tom Adams and published by . This book was released on 2017 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial scandals such as those surrounding the Enron-Andersen debacle provoke concerns that auditors lack independence when faced with influential clients, and are unwilling to respond to client risks by resigning. Unlike previous studies that examine whether client influence affects audit quality on ongoing engagements (and provide mixed results), we investigate whether office-level client influence affects auditor resignations from risky clients for whom the resignation decision is most salient. Using a sample of risky clients, we find that (1) auditors are more likely on average to resign from influential clients, and (2) this positive association holds for non-Big N auditors, auditors in smaller offices, and non-specialist auditors. We speculate that audit firms or audit offices that have inadequate mechanisms to mitigate independence risk use resignation as a tool to counter such risk. This is consistent with the suggestions offered in professional guidance. Also, importantly, the effect of client influence is distinct from that of client size. Influential clients are prevalent across the spectrum of absolute client size, and the positive association between client influence and auditor resignations occurs for both large and small clients.
Book Synopsis Auditor Capacity Stress and Audit Quality by : Stephen C. Hansen
Download or read book Auditor Capacity Stress and Audit Quality written by Stephen C. Hansen and published by . This book was released on 2008 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: The unprecedented migration of Andersen's clients that followed Andersen's indictment in March 2002 potentially placed a large burden on successor auditors' audit resources. We refer to this strain, measured at the local-office level, as auditor capacity stress. We examine the effect of auditor capacity stress on investor assessments of audit quality by examining changes in earnings response coefficients (ERCs) of Big-4 client firms. We observe larger decreases in marginal ERCs in fiscal 2002 relative to a base period of 1999-2001 for clients at successor auditors' offices that experience high capacity stress than for clients of low-capacity-stress offices. That is, capacity stress appears to adversely impact perceived audit quality in the first year with successor auditors. However, we also find that marginal ERCs recover more substantially in fiscal 2003 relative to 2002 for clients of high-capacity-stress audit offices than low-capacity-stress offices. This finding suggests that clients experience relief from capacity stress in 2003, with greater relief for more highly-stressed auditors. The evidence indicates that auditor failures can be quite disruptive to audit markets but a quick recovery is possible.
