Download or read book The Effect of Mandatory Audit Firm Rotation on Audit Quality Audit Fees and Audit Market Concentration written by R. Narayanaswamy and published by . This book was released on 2019 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: In India, the government introduced mandatory audit firm rotation following calls to improve audit quality and auditor independence in the wake of the Satyam accounting scandal. The absence of strong institutional mechanisms to prevent and detect audit failure in a timely manner has led the government to require periodical audit firm rotation. Evidence from firms for the years 2014 to 2017 suggests that mandatory audit firm rotation does not appear to have improved audit quality, reduced audit costs and increased audit market competition.
Download or read book The Effect of Mandatory Audit Firm Rotation on Audit Quality and Audit Fees written by Soo Young Kwon and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a unique setting in which mandatory audit firm rotation was required from 2006-2010, and in which both audit fees and audit hours were disclosed (South Korea), this study provides empirical evidence of the economic impact of this policy initiative on audit quality, and the associated implications for audit fees. This study compares both pre- and post-policy implementation and, after the implementation of the policy, mandatory long-tenure versus voluntary short-tenure rotation situations. Where audit firms were mandatorily rotated post-policy, we observe that audit quality (measured as abnormal discretionary accruals) did not significantly change compared with pre-2006 long-tenure audit situations and voluntary post-rotation situations. Audit fees in the post-regulation period for mandatorily rotated engagements are significantly larger than in the pre-regulation period, but are discounted compared to audit fees for post-regulation continuing engagements. We also find that the observed increase in audit fees and audit hours in the post-regulation period extends beyond situations where the audit firm was mandatorily rotated, suggesting that the introduction of mandatory audit firm rotation had a much broader impact than the specific instances of mandatory rotation.
Download or read book Public accounting firms required study on the potential effects of mandatory audit firm rotation written by and published by DIANE Publishing. This book was released on with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effects of Mandatory Audit Firm Rotation on Client Importance and Audit Industry Concentration written by Christopher Bleibtreu and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Recently, a system of audit firm rotation has been implemented for the audits of listed companies conducted in the EU. In the US, in contrast, the regulator decided against such rotation. Whereas proponents argue that rotation would strengthen independence and decrease audit market concentration, opponents stress the importance of auditors' learning effects, which would be eliminated by a change in auditors. In extending the market matching model of Salop (1979), we provide an analysis that integrates these contradictory views. We assume that both auditors' industry expertise and their experience in auditing a client decrease audit costs. We investigate the bidding strategies applied to re-acquire clients that were lost due to rotation, auditors' profit contributions, the equilibrium number of auditors (i.e., audit market concentration), and the economic importance of specific clients.Our findings indicate that the regulators' goals of simultaneously decreasing client importance and audit market concentration are in direct conflict, and therefore the rotation system might have unintended consequences. Our model thus suggests how different institutional parameters give rise to economic forces that can support diverging decisions regarding the implementation of MAR.
Download or read book Audit Regulations Audit Market Structure and Financial Reporting Quality written by Christopher Bleibtreu and published by . This book was released on 2021-11-24 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audit Regulations, Audit Market Structure, and Financial Reporting Quality provides a structured overview of the empirical and analytical literature on the effects of audit market regulations. After a short introduction, the monograph is organized as follows. Chapter II addresses the structure of the audit markets of industrialized countries. First presenting an overview of the concentration metrics used to describe the structure of an audit market or a market segment, then providing the empirical findings on audit market concentration at the national level and presenting an overview of the main reasons that led to the currently high degree of concentration. Chapter III summarizes the reasons why regulators worldwide consider a high degree of concentration to be a concern. In particular, it reviews the regulator's assumption that a high degree of concentration inevitably leads to a low degree of competition and to the corresponding effects of low audit quality and high audit fees. It also provides an overview of the empirical findings on the association between concentration and audit quality and fees, respectively. Chapter IV introduces the mandatory audit firm rotation, the prohibition on the joint supply of audit and non-audit services, and joint audits as examples for regulations that are likely to have both incentive and market structure effects. Chapter V summarizes the empirical findings on the effects of these regulations on audit quality and market structure. Chapter VI summarizes models that regard the market structure as given. The results from these models show that the effects of regulations are not straightforward, but depend on various factors related to the auditor, the client, and the legal environment. Chapter VII gives an overview of analytical research that simultaneously considers incentive effects and market structure effects. It also provides a brief overview of industrial organization models that seem suitable to expand the models applied to investigate the effects of audit regulations. Chapter VIII concludes and highlights avenues for future research.
Download or read book Mandatory Audit Firm Rotation Study written by United States. General Accounting Office and published by . This book was released on 2004 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mandatory audit firm rotation study study questionaires responses and summary of respondents comments written by United States. General Accounting Office and published by DIANE Publishing. This book was released on 2004 with total page 167 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Differential Effects of Market Concentration on Oligopolistic and Atomistic Segments written by Hongkang Xu and published by . This book was released on 2016 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first essay, I divide the local audit market into the oligopolistic segment and atomistic segment and examine whether the differential effect of audit market concentration on audit fees, audit quality, and auditor switch in these two segments. I find that the market concentration raises the audit fees, but lowers the audit quality in the oligopolistic segment. In contrast, the market concentration lowers audit fees, but raises the audit quality in the atomistic segment. Moreover, I find that market concentration reduces the probability of auditor switch in both oligopolistic and atomistic segments. My findings reveal that audit market concentration only reduces the competition among oligopolistic segment. In contrast, the atomistic segment becomes more compressed and more competitive in a highly concentrated market. I also examine the nonlinear association between the auditor's market share and audit quality. I find that the relation between the market share and audit quality is an inverted U-curve. The second essay examines (1) the effect of real activities manipulation (RAM) on the audit report lags, (2) the impact of RAM on the audit fee and audit quality of industry experts, and (3) the linkages between accrual-based earnings management (AM), RAM, and audit fees. I find that RAM is associated with longer audit report lags. I also find that industry specialist auditor charge higher audit fees and make a more constraining influence on AM when their clients engage in aggressive RAM. However, I do not find that RAM affects the association between AM and audit fees.
Download or read book The Impact of Mandatory Audit Firm Rotation on Audit Fees written by Masoud Azizkhani and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A mandatory audit firm's rotation policy has been adopted in many counties, including Iran, as a mechanism to improve auditor independence and in turn, audit quality. Proponents of this policy claim that its results are increased clients' audit costs. Using data from firms listed in Tehran Stock Exchange where the mandatory audit firm rotation was required from 2007, this study provides empirical evidence of the economic impact of this policy initiative on audit fees. We examine the impact of both voluntary and mandatory audit firm switch on audit fees for a sample of firms listed on TSE that covers 2006 to 2013. We find no relation between mandatory audit firm rotation and audit fee. Our results suggest that the mandatory audit firm rotation does no impact on audit costs. Other results also show that there is a positive association between voluntary audit firm rotation and audit fees.
Download or read book Competition in the Audit Market written by Joseph Gerakos and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The audit market's unique combination of features - its role in capital market transparency, mandated demand, and concentrated supply - means it receives considerable attention from policymakers. We explore the effects of two market scenarios that have been the focus of policy discussions: mandatory audit firm rotation and further supply concentration due to the exit of a "Big 4" audit firm. To do so, we first estimate publicly traded firms' demand for auditing services, allowing the services provided by each of the Big 4 to be differentiated products. We then use those estimates to calculate how each scenario would affect client firms consumer surplus. We estimate that, conservatively, mandatory audit firm rotation would induce consumer surplus losses of approximately $2.7 billion if rotation were required after ten years and $4.7-5.0 billion if after only four years. We find similarly that exit by one of the Big 4 would reduce client firms' surplus by $1.4-1.8 billion. These estimates reflect only the value of firms' lost options to hire the exiting audit firm; they do not include likely fee increases resulting from less competition among audit firms. The latter could result in audit fee increases between $0.75-1.3 billion per year for mandatory rotation and $0.47-0.58 billion per year for the disappearance of a Big 4 audit firm. Such losses are substantial; by comparison, total audit fees for public firms were $11 billion in 2010.
Download or read book Essays on the Quality of Audited Financial Statements written by Ulf Mohrmann and published by Logos Verlag Berlin GmbH. This book was released on 2016-02-15 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dissertation consists of four essays on the quality of audited financial statements. The first analysis investigates the association between several regulations of the audit market and earnings characteristics. The second essay differentiates between different drivers of audit quality after an auditor change by comparing the effects of voluntary and mandatory auditor changes. The third study analyses the different strategies of Big4 and non-Big4 auditors in dealing with Level 3 fair values. The fourth part examines banks' valuation behavior concerning Level 3 fair values.
Download or read book The Effect of Mandatory Audit Firm Rotation on Audit Quality with Evidence from China written by Chenyang Dai and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using discretionary accruals as a proxy for audit quality, this paper examines the association between mandatory audit firm rotation and audit quality. The study contributes to the debate on the effect of the mandatory audit firm rotation policy by bringing evidence directly from a setting where such an audit policy is in place. The results of multivariate regressions find no evidence that the adoption of such a policy improves average audit quality in the period thereafter. Other tests focus on the period where the mandatory rotation policy is already in place and examine the potential fluctuation of audit quality in the antecedent and decedent years of a mandatory rotation. The results find no significant difference of the audit quality in the last engagement year of a preceding auditor or in the first engagement year of an incoming auditor. Together with empirical findings in a few other markets where similar audit policies is or was in place, the results of the study argues against the necessity of introducing a mandatory audit firm rotation policy, The study provide implications of relevance for regulators who are considering taking similar measures to improve audit quality.
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 The Joint Impact of Structural Market Characteristics on Audit Quality and Audit Pricing written by Othar Kordsachia and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the association between audit market concentration, audit quality, and audit fees in US audit markets. It contributes to the extant literature by modelling the interactive effects of the structural characteristics of audit markets on audit quality and pricing. Based on a large sample of audit clients from 138 metropolitan statistical areas (MSAs) from 2004 to 2016, this study provides instance for an overall positive (negative) association between audit concentration and audit quality (audit pricing). However, improvements in audit quality are less significant in large markets, where auditors have a greater number of clients, even when concentration is low. Concerning the pricing of audit services, greater concentration leads to competitive cost efficiencies (lower audit fees) because of improved economies of scale; however, this is only when audit markets are small. When markets are large and concentrated, greater audit market concentration is associated with higher (monopolistic) audit fees. This is indicative of a trade-off between economies of scale and market domination.
Download or read book Differential Effects of Market Concentration on Oligopolistic and Atomistic Segments written by Hongkang Xu and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study divides the audit market into the oligopolistic and atomistic segments at MSA level and examine whether the effect of audit market concentration on audit fees and audit quality is the same in these two segments. I find that the market concentration raises the audit fees in the oligopolistic segment. In contrast, the market concentration lowers audit fees, but raises the audit quality in the atomistic segment. My findings reveal that audit market concentration only reduces the competition among oligopolistic segment. In contrast, the atomistic segment becomes more compressed and more competitive in a highly concentrated market.
Download or read book The Effect of Audit Market Concentration on Audit Pricing and Audit Quality written by John Daniel Eshleman and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book An Investigation of the Relationship Between Audit Fees and Auditor Reputation written by Timothy A. Pearson and published by . This book was released on 1990 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt:
