Download or read book The Economic Consequences of Audit Firms Quality Control System Deficiencies written by Daniel Aobdia and published by . This book was released on 2019 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study seeks to determine the role of audit firms' quality control (QC) system deficiencies, as measured by the Public Company Accounting Oversight Board (PCAOB) inspection program, on audit quality and profitability. Using a unique dataset of firm-wide QC deficiencies identified by the PCAOB during its inspections of audit firms, I find a negative association between QC deficiencies, mainly performance-related, and audit quality. Furthermore, audits conducted by larger audit firms with more organization-level deficiencies appear less profitable, evidenced by more hours worked on the engagements, leading to lower fees per hour. These results appear to be partly explained by deficiencies in the tone at the top (a proxy for culture) and the audit methodology. Further evidence suggests that lack of remediation of QC system deficiencies has a negative influence on audit quality.

Download or read book The Economics of Audit Quality written by Benito Arrunada and published by Springer Science & Business Media. This book was released on 2013-11-11 with total page 203 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on market mechanisms which protect quality in the provision of audit services. The role of public regulation is thus situated in the context defmed by the presence of these safeguard mechanisms. The book aims to contribute to a better understanding of these market mechanisms, which helps in defining the con tent of rules and the function of regulatory bodies in facilitating and strengthening the protective operation of the market. An analysis at a more general level is provided in the three chapters making up Part 1. In the four chapters of Part 2, on the other hand, this analysis is applied to a particular problem to determine how those non-audit services often provided by auditors to their audit clients should be regulated. Finally, Chapter 8 contains a summary of the analysis and conclusions of the work. The conclusion with regard to non-audit services is that their provision generates beneficial effects in terms of costs, technical competence, professional judgment and competition and, moreover, need not prejudice auditor independence or the quality of these services. This as sessment leads, in the normative sphere, to recommending a legislative policy aimed at facilitating the development and use of safeguards provided by the free action of market forces. Regulation should thus aim to enable the parties-audit firms, self-regulatory bodies and audit clients-to discover through competitive market interaction both the most efficient mix of services and the corresponding quality safeguards, adjusting for the costs and benefits of each possibility.

Download or read book The Routledge Companion to Auditing written by David Hay and published by Routledge. This book was released on 2014-09-15 with total page 387 pages. Available in PDF, EPUB and Kindle. Book excerpt: Auditing has been a subject of some controversy, and there have been repeated attempts at reforming its practice globally. This comprehensive companion surveys the state of the discipline, including emerging and cutting-edge trends. It covers the most important and controversial issues, including auditing ethics, auditor independence, social and environmental accounting as well as the future of the field. This handbook is vital reading for legislators, regulators, professionals, commentators, students and researchers involved with auditing and accounting. The collection will also prove an ideal starting place for researchers from other fields looking to break into this vital subject.

Download or read book Audit Quality written by Jonas Tritschler and published by Springer Science & Business Media. This book was released on 2013-10-31 with total page 251 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arising from the author’s experience as a practicing CPA, this book is quite different from other research in this field, as it confronts the subject of audit quality from a pragmatic perspective. The first goal of Jonas Tritschler is to develop an audit quality metric on national audit firm level. Financial reporting errors, as detected by the German enforcement institutions during examinations, which subsequently are published in the German Federal Gazette by the involved companies, are the data basis for this measurement. Using the developed audit quality metric, the second goal of this study is to analyze audit quality differences of selected audit firms by comparing their deployed audit input factors such as employee’s competence (ratio of certified professionals to total audit staff), experience of employees (average tenure of employees in years) and client-specific experience (client fluctuation rate). Results indicate a correlation between audit quality according to the developed metric and the operationalized audit input factors mentioned above.

Download or read book At the Forefront Looking Ahead written by Amir Sasson and published by . This book was released on 2018 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Consequences of Low Quality Audits for Engagement Partners written by Daniel Aobdia and published by . This book was released on 2019 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the consequences of low-quality audits for engagement partners in the US and the role audit firm quality control systems play in this process. We employ a sample period during which the identity of the engagement partner on specific audits is not publicly known to isolate the effect of quality control systems on partner management. We find that restatements result in partner changes for both restating and non-restating clients. Because the identity of the partner on an audit is not publicly known, non-restating clients may not be fully aware of the restatements associated with their engagement partners. We find that audit firms with ineffective partner quality control systems take advantage of this opaque information environment and do not replace low quality partners, especially if the partners can bring in large audit fees. Even if these audit firms replace the partner, they do not supply a new partner with higher quality. Our results highlight the importance of an effective quality control system in disciplining partners. When audit firm quality control systems fail, enhanced transparency through disclosing the identity of the engagement partner may be necessary in disciplining the auditing labor market.

Download or read book Financial Gatekeepers written by Yasuyuki Fuchita and published by Brookings Institution Press. This book was released on 2007-02-01 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Brookings Institution Press and Nomura Institute of Capital Markets Research publication Developed country capital markets have devised a set of institutions and actors to help provide investors with timely and accurate information they need to make informed investment decisions. These actors have become known as "financial gatekeepers" and include auditors, financial analysts, and credit rating agencies. Corporate financial reporting scandals in the United States and elsewhere in recent years, however, have called into question the sufficiency of the legal framework governing these gatekeepers. Policymakers have since responded by imposing a series of new obligations, restrictions, and punishments—all with the purpose of strengthening investor confidence in these important actors. Financial Gatekeepers provides an in-depth look at these new frameworks, especially in the United States and Japan. How have they worked? Are further refinements appropriate? These are among the questions addressed in this timely and important volume. Contributors include Leslie Boni (University of New Mexico), Barry Bosworth (Brookings Institution), Tomoo Inoue (Seikei University), Zoe-Vonna Palmrose (University of Southern California), Frank Partnoy (University of San Diego School of Law), George Perry (Brookings Institution), Justin Pettit (UBS), Paul Stevens (Investment Company Institute), Peter Wallison (American Enterprise Institute).

Download or read book Government Auditing Standards 2018 Revision written by United States Government Accountability Office and published by Lulu.com. This book was released on 2019-03-24 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process. This revision contains major changes from, and supersedes, the 2011 revision.

Download or read book Unraveling the Role of Psychological Capital on Innovation from the Knowledge Management Perspective written by Yunlong Duan and published by Frontiers Media SA. This book was released on 2023-12-20 with total page 221 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effect of Disclosing Audit Quality Control Deficiencies on Non Audit Tax Services written by Jaehan Ahn and published by . This book was released on 2020 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether public disclosure of Deloitte 2007 PCAOB Part II report, which identifies quality control deficiencies related to audits of income tax accounts, affects Deloitte's auditor-provided tax services (APTS). Using a difference-in-differences model, we document a 17 percent lower likelihood of Deloitte's audit clients employing APTS relative to clients of other annually inspected firms when the report is made public. We also find that the dampening effect of publicly disclosing the Part II report on Deloitte's APTS is more evident among audit clients paying higher non-audit fees to auditors and those with more complex tax planning. These results suggest that revealing income tax-specific quality control deficiencies prompts audit clients to revise upward (downward) their expected costs (benefits) of perceived auditor independence impairment (knowledge spillover) stemming from APTS. Overall, our study suggests that public disclosure of audit firm-wide quality control deficiencies pertaining to audits of income tax accounts imposes a collateral damage to the inspected firm's non-audit tax services, thereby providing a more complete understanding of the consequences of the PCAOB's communications about quality control deficiencies in Part II reports.

Download or read book Corporate Scandal and Impact on the Audit Profession written by Carol Nganga and published by GRIN Verlag. This book was released on 2014-09-10 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2012 in the subject Business economics - Economic Policy, grade: A, The University of Liverpool, language: English, abstract: The economic crisis in Europe and earlier credit crisis during 2008 have opened up the debate on the role of auditors and the corporate houses are carrying out their activities. The 2008 mortgage crisis resulted in many financial companies going bankrupt while some closing down permanently. The effect of crisis was felt world-over and one Indian company, Satyam Computers went bankrupt and this is a particular case where the role of auditors from PriceWaterCoopers House, India was questioned (The Indian Express, 2012). Larsson (2005) stated that major corporate frauds and scandals are regularly followed by the debate concerning the aim and scope of auditing. While there were such scandals earlier, this paper analyses one such corporate scandal and how it has affected and changed the profession of auditors in coming years.

Download or read book Audit Committee Formation in the Aftermath of 2007 2009 Global Financial Crisis Volume II written by Zabihollah Rezaee and published by Business Expert Press. This book was released on 2016-07-08 with total page 190 pages. Available in PDF, EPUB and Kindle. Book excerpt: The audit committee has gained considerable attention in the aftermath of 2007-2009 global financial crisis. The audit committee’s role has evolved from a voluntary liaison between management and external auditors to the standing committee of the board of directors in overseeing all aspects of corporate governance, financial reporting, internal controls, risk assessment, and audit activities. This book addresses the determinants of audit committee oversight effectiveness, including their composition, independence, authority, resources, diligence, and activities. The book is organized into three separate volumes and each volume can be utilized separately or in an integrated form. The first volume consists of five chapters, which examine the relevance and fundamentals of the audit committees as well as the determinants of audit committee effectiveness. The second volume consists of nine chapters on financial, auditing, internal control, risk management, ethics and compliance, antifraud, and other oversight functions of the audit committee. The third volume consists of five chapters on the emerging issues of audit committees pertaining to evaluation, education, reporting, and accountability as well as audit committees of private companies, governmental entities and not-for-profit organizations.

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.

Download or read book Effects of Audit Quality on Earnings Management and Cost of Equity Capital written by Hanwen Chen and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effects of audit quality on earnings management and cost of equity capital for two groups of Chinese firms: state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs). The differences in the nature of the ownership, agency relations and bankruptcy risks lead SOEs to have weaker incentives than NSOEs to engage in earnings management. As a result, the effect of audit quality in reducing earnings management will be greater for NSOEs than for SOEs. In addition, investors' pricing of information risk as reflected in the cost of equity capital will be more pronounced for NSOEs than for SOEs with high and low audit quality. We find empirical evidence consistent with these hypotheses. Our findings indicate that (1) while high-quality auditors play a governance role in China, that role is limited to a subset of firms, and (2) even under the same legal jurisdiction, the effects of audit quality (in the form of lower earnings management and cost of equity capital) vary across firms with different ownership structures. Our study extends prior research by focusing on the economic consequences of SOEs' and NSOEs' auditor choices and underscores the importance of controlling for ownership type when conducting audit research.

Download or read book The European Public Audit Oversight Reform Which Effect Does it Have on Audit Quality written by Matthias Linke and published by GRIN Verlag. This book was released on 2019-08-08 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2015 in the subject Economics - Other, grade: 8,0, Maastricht University (School of Business and Economics), language: English, abstract: This paper examines the effect of the European public audit oversight reform on audit quality. Accounting scandals at the beginning of the 21th century called the audit profession into question and raised serious concerns on the oversight system in place. In an attempt to regain investors’ confidence, the European Commission (hereafter referred to as EC) followed the American example and passed Directive 2006/43/EC, which requires the Member States of the European Union (hereafter referred to as EU) to set up public oversight systems for statutory auditors and audit firms. The paper provides empirical evidence that managers are less likely to commit earnings management in the years following the regulatory reform compared to the years preceding the reform, indicating higher audit quality in the post-reform period. Member States of the EU can choose between two options for national public oversight of auditors; the full-time inspection model and the model which consists of peer reviews with an independent commission monitoring this process. I run several analyses with different models and test whether firms in jurisdictions that implemented the full-time inspection model exhibit lower discretionary accruals compared to firms in jurisdictions that implemented the modified peer review model. The results are contradicting and do not support a conclusion.

Download or read book Corporate Governance in the Aftermath of the Global Financial Crisis Volume IV written by Zabihollah Rezaee and published by Business Expert Press. This book was released on 2018-04-04 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate governance has evolved as a central issue for public companies in the aftermath of the 2007–2009 global financial crisis. Corporate governance is a process (journey) of managing corporate affairs to create shareholder value and protect interests of other stakeholders. This book presents a road map for various functions and measures of corporate governance. The participants in the corporate governance process are the board of directors, executives, stakeholders, internal and external auditors, financial analysts, legal counsel, and regulators. This book is organized into four separate volumes; each volume can be utilized separately or in an integrated form. The first volume consists of five chapters that address the relevance and importance of corporate governance as well as the framework and structure of corporate governance. The second volume consists of four chapters that present the three prevailing corporate governance functions of oversight, management, and monitoring. The third volume consists of four chapters that address corporate governance functions performed by corporate gatekeepers, including policy makers, regulators, standard-setters, internal auditors, external auditors, legal counsel, and financial advisors. The fourth volume consists of five chapters that address the emerging issues in corporate governance, including governance for private companies and nonprofit organizations and convergence in global corporate governance.

Download or read book Under researched Areas of Audit Quality written by Jared Eutsler and published by . This book was released on 2016 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: Alternatively, altering the frame of the public interest responsibilities to protecting individuals (such as more familiar individual investors) increases humanization and increases professional skepticism. The second study examines how firms affect audit quality. Audit regulators view audit firm staffing as key input affecting audit quality and have suggested that it has value as a potential indicator of audit quality. Further, regulators (such as the IAASB) have called for audit firms to avoid cutting staff (including in periods of economic contraction), as reductions in staff could have a negative impact on audit quality. However, little empirical evidence exists to support how firm-level staffing maps into engagement-level audit quality. This study evaluates the extent to which firm-level staffing affects audit quality. Audit firm employment is obtained from the 1991-2014 rankings of the top 100 U.S. public accounting firms and analyzed across multiple measures of audit quality. In multivariate tests, firm staffing (such as number of partners) and firm leverage (as measured by total partners divided by total professional staff) are associated with audit quality. This analysis provides support for claims made by regulators, about the value of potential labor related audit quality indicators proposed by the PCAOB. Further, decreases in partners or staff (from year to year) are negatively associated with audit quality supporting regulatory claims that audit firm staff cuts have a detrimental impact on audit quality.