Download or read book Audit Quality and the Going Concern Decision Making Process written by Nieves Gómez Aguilar and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we attempt empirically to investigate the relationship between audit quality and the probability that a financially distressed company would receive a going concern opinion. Auditor decision-making in the presence of going concern uncertainties may be characterized as a two-stage process. The first stage is the identification of a potential going concern problem and the second stage is to determine whether the particular company should receive a qualified going concern opinion. A sample of 1,199 non-financial Spanish company-years has been obtained from the database issued by the Stock Exchange National Commission for the fiscal years ending between December 1991 and December 2000. The results indicate that audit quality (measured by the auditor's level of independence and knowledge) affects the probability that a financially distressed company would receive a going concern opinion. This probability is influenced not only by the auditor's ability to detect financial uncertainties, but also by the auditor's decision-making as to what type of opinion should be finally issued.
Download or read book Can Accruals Quality Explain Auditors Decision Making The Impact of Accruals Quality on Audit Fees Going Concern Opinions and Auditor Change written by Partha Sengupta and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we investigate whether auditors' decisions can be explained by accruals quality. Using alternative measures of accruals quality developed by prior researchers, we find that a firm with poorer accruals quality is associated with higher audit fees, a greater likelihood of receiving a going concern audit opinion and a greater likelihood of auditor turnover. Recent studies have used accruals quality to proxy for a firm's information risk. Our study contributes to the literature by showing that information risk can be useful in explaining auditors' decisions. Accruals quality measures have also been suggested as a means of identifying earnings management. Existing studies exploring the effects of earnings management on auditors' decisions primarily use discretionary accruals and provide conflicting results. In contrast we find fairly consistent evidence that the likelihood of earnings management affects auditors' decisions adversely.
Download or read book Auditor Going Concern Reporting written by Marshall A. Geiger and published by Routledge. This book was released on 2021 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Auditor reporting on going-concern-related uncertainties remains one of the most challenging issues faced by external auditors. Business owners, market participants and audit regulators want an early warning of impending business failure. However, companies typically do not welcome audit opinions indicating uncertainty regarding their future viability. Thus, the auditor's decision to issue a "going concern opinion" (GCO) is a complex and multi-layered one, facing a great deal of tension. Given such a rich context, academic researchers have examined many facets related to an auditor's decision to issue a GCO. This monograph reviews and synthesizes 182 recent GCO studies that have appeared since the last significant review published in 2013 through the end of 2019. The authors categorize studies into the three broad areas of GCO 1) determinants, 2) accuracy, and 3) consequences. As an integral part of their synthesis, they summarize the details of each study in several user-friendly tables. After discussing and synthesizing the research, they present a discussion of opportunities for future research, including issues created or exacerbated as a result of the global COVID-19 pandemic. This monograph will be of assistance to researchers interested in exploring this area of auditor responsibility. It will also be of interest to auditing firms and individual practitioners wanting to learn what academic research has examined and found regarding this challenging aspect of audit practice. Auditing standard-setters and regulators will find it of interest as the authors review numerous studies examining issues related to audit policy and regulation, and their effects on GCO decisions. The examination of GCO research is extremely timely given the financial and business disruption caused by the worldwide COVID-19 pandemic. This unprecedented global event has caused companies, auditors and professional bodies to revisit and reassess their approach to going concern, and to think even more deeply about this fundamental business imperative"--
Download or read book The Auditor s Going concern Opinion written by Ann Vanstraelen and published by . This book was released on 2000 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Audit Reporting for Going Concern Uncertainty written by Sandro Brunelli and published by Springer. This book was released on 2018-02-07 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book employs a narrative analytical approach to explore all aspects of the debate surrounding auditor reporting on going concern uncertainty worldwide. In-depth analysis of significant academic studies and of regulatory perspectives is combined with an illuminating empirical study in the Italian context. The book opens by discussing the assessment of going concern for accounting and auditing purposes. It is examined how going concern is considered in the FASB and IASB accounting standards and how auditors in the PCAOB and IAASB environments should verify its presence in financial statements and report on it in the audit report. Accounting and auditing in relation to going concern in other jurisdictions are also addressed. Research into the determinants, accuracy, and consequences of going concern opinions (GCO) is then thoroughly reviewed, with separate examination of studies and trends in the United States, Europe, and the rest of the world. In the third part of the book, interesting evidence from the Italian Stock Market, including investor reactions to GCOs during the period 2008–2014, is presented and evaluated. The book will be of interest to academics, regulators, and practitioners alike.
Download or read book Essays Examining the Association Between Going Concern Audit Opinions Subsequent Earnings Management and Engagement Office Audit and Reporting Quality written by Marcus R. Brooks and published by . This book was released on 2014 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays that examine the association between going concern audit opinions, subsequent earnings management and engagement office audit and reporting quality. Essay I (Chapter 1) examines the earnings management behavior of financially distressed firms following the receipt of a going concern opinion. The results indicate that financially distressed firms, unable to improve their financial condition through the manipulation of accounting accruals, report large magnitudes of negative discretionary and working capital accruals. As a result, these firms turn their attention to the manipulation of real operational activities. By engaging in various forms of real activity manipulation, financially distressed firms are able to reduce reported expenses, conserve cash, and most importantly, avoid bankruptcy and/or the receipt of a subsequent going concern opinion, despite being in financial distress. Essay II (Chapter 2) investigates whether audit quality and reporting accuracy is associated with engagement office propensity to issue going concern opinions. The findings from this study show clients of engagement offices with a high propensity to issue going concern audit opinions are associated with large magnitudes of income decreasing discretionary accruals, suggesting that these engagement offices require their clients to report more conservatively. The findings also show that these engagement offices' financial statement conservatism carries over to their financial reporting decision-making. The conservative reporting posture of these engagement offices leads them to issue going concern audit opinions to subsequently viable clients, leading to higher type I error rates. Overall, this dissertation contributes to the accounting literature addressing going concern audit reporting by creating two new variables that help to explain the association between the receipt of a prior going concern audit opinion and subsequent earnings management, and the association between engagement office propensity to issue going concern audit opinions and audit and reporting quality. The variables created could open a new stream of literature aimed at addressing earnings management behavior and choices following the receipt of a going concern opinion and also demonstrate that more attention should be directed to the characteristics of individual engagement offices because they are the ultimate determining factor of an audit firm's overall audit and reporting quality. Together, the studies show how important it is to analyze the effects of going concern audit reports and how they are associated with seemingly unrelated topics in accounting literature.
Download or read book Improving Healthcare Quality in Europe Characteristics Effectiveness and Implementation of Different Strategies written by OECD and published by OECD Publishing. This book was released on 2019-10-17 with total page 447 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume, developed by the Observatory together with OECD, provides an overall conceptual framework for understanding and applying strategies aimed at improving quality of care. Crucially, it summarizes available evidence on different quality strategies and provides recommendations for their implementation. This book is intended to help policy-makers to understand concepts of quality and to support them to evaluate single strategies and combinations of strategies.
Download or read book Quality Control in Audit Firms written by Jaehan Ahn and published by . This book was released on 2018 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether auditors use their own going-concern opinion (GCO) errors (i.e., endogenous, results-based audit-quality signals) as audit-quality signals, and whether they use those signals to make adjustments in their subsequent office-wide audit quality. We argue (along with the PCAOB) that GCO errors signal potentially undesirable conservatism levels by auditors, and hence undesirable levels of audit quality. Auditors who recognize this should be able use GCO errors for quality-control purposes. We specifically examine whether auditors adjust their office-wide conservatism (i.e., audit quality) in response to changes in the number of Type I or Type II GCO errors observed in their office in a given period. Using several measures of auditor conservatism (signed abnormal accruals, likelihood of GCO, and subsequent GCO errors) we find evidence that auditors systematically decrease (increase) their office-wide conservatism levels subsequent to increases (decreases) in Type I errors. We also find evidence that auditors systematically increase (decrease) their office-wide conservatism levels subsequent to increases (decreases) in Type II errors. These results suggest that auditors use observable audit-quality signals for real-time quality-control purposes.
Download or read book Auditor decision quality written by John Angus Pendley and published by . This book was released on 1996 with total page 153 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Use of Cash Flow Measurements in the Decision making Process of Going Concern Audit Opinions written by Sandra H. Mankins and published by . This book was released on 2017 with total page 330 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite standard requirements, prior research concludes that less than 40% to 50% of companies filing for bankruptcy receive a going concern opinion (GCO) in the 12 months prior to filing bankruptcy, resulting in a type II audit error (e.g., Altman, 1982; Altman & McGough, 1974; Carson et al., 2013; Chen & Church, 1992; Menon & Schwartz, 1987; Ryu, Uliss, & Rob, 2009). Additionally, prior research shows that 80% to 90% of firms receiving a GCO do not fail in the subsequent 12 month period, resulting in a type I audit error (e.g., Carson et al., 2013; Geiger, Raghunandan, & Rama, 1998; Geiger, Raghunanden, & Rama, 2006; Mutchler & Williams, 1990). To address these errors, some call for the use of cash flow measurements when making GCO decisions, suggesting that their use enhances auditors' ability to identify companies having a high probability of failure (Charitou, Neophytou, & Charalambous, 2004; Fawzi, Kamaluddin, & Sanusi, 2015; Mills & Yamamura, 1998). To explore these suggestions, this research analyzes seven cash flow ratios of 3,846 financially distressed firms. Using binary logistic regression, two research questions are addressed: (1) Are cash flow measurements used in making GCO decisions, and (2) Does the use of cash flow measurements decrease the probability of type I and/or type II audit errors/misclassifications? Results are mixed, indicating that the operating cash flow (OCF) ratio appears to be used in making GCO decisions, while the funds flow coverage (FFC), cash interest coverage (CIC), cash-to-net income (CNI), long-term debt coverage (LTDC), earning quality (EQ). and operating cash margin (OCM) ratios do not appear to be used. Additionally, results indicate that the OCF. FFC, and OCM ratios are related to firm failure, suggesting that the use of the OCF ratio and the nonuse of the FFC and OCM ratios impact type I and type II audit errors. Results further indicate that the OC. CNI, LTDC, and EQ ratios are not related to firm failure. suggesting that the nonuse of these ratios does not contribute to the occurrence of type I and type II audit errors. Opportunities for future research are also discussed.
Download or read book Understanding Auditor Decision Behavior in Different Going Concern Task Settings written by Andrew J. Rosman and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The going-concern decision is studied within a framework that varies task settings. Using an interactive computer process-tracing method, experienced auditors from four Big 6 firms examined cases based on real data that differed in financial health (bankrupt and nonbankrupt) and stage of organizational development (start-up and mature). They made judgments about each entity's ability to continue as a going concern and if they had substantial doubt about continued existence, they listed evidence they would seek as mitigating factors. There are six principal findings. First, problem representations and information acquisition were sensitive to differences in task settings. Second, mitigating factors generally remained constant across settings. Third, auditors' behavior reflected configural processing in the presence of audit settings that differed on multiple dimensions. Without the computer process-tracing method used in this study, this configural processing may not have been detected. Fourth, categorizing information into financial and nonfinancial dimensions was critical to understanding how auditors problem representations differed across settings. Fifth, Type I errors (determining that a health company is a going-concern problem) differed from correct judgments in terms of information acquisition, although Type II errors (determining that a problem company is viable) did not. This finding may indicate that Type II errors are primarily due to deficiencies in other stages of processing, such as evaluation. Finally, accurate performance in the going-concern task was found to be related to acquiring fewer information cues, proportionately more liquidity information, and nonfinancial information earlier in the process.
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 Auditing and Society written by Wally Smieliauskas and published by Routledge. This book was released on 2020-07-30 with total page 489 pages. Available in PDF, EPUB and Kindle. Book excerpt: Auditing has become an essential component in market societies and the need for auditing skills has risen in line with globalization. This textbook provides a comprehensive overview of the role of financial statement auditing in contemporary society, including the auditor’s role in evaluating the financial reporting of an auditee—a topic of central concern in the recent comprehensive review of the auditing profession in the Brydon Report (2019). The experienced authors provide insight into auditing research to help readers understand its function, regulation, and role in theory and practice. With focus on private sector financial statement auditing and its regulation, the book includes perspectives on social theory, history, and the importance of professional standards. The thought-provoking final chapter challenges students to consider the effectiveness of auditing in evaluating increasingly risky and complex accounting estimates involving assumptions about future events. A fundamental approach to auditing theory, this textbook will be useful reading for advanced undergraduate and postgraduate students across business and accounting fields.
Download or read book The Going Concern Principle in Non Financial Disclosure written by Rosa Lombardi and published by Springer Nature. This book was released on 2021-08-31 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book investigates the going-concern principle in the non-financial disclosure by companies in the international scenario proposing concepts and challenges to come. Following the main accounting literature, requirements and regulations, this book proposes the current state of the art in the non-financial disclosure, collecting main mandatory and voluntary frameworks and standards (e.g. European Directive 2014/95/UE on non-financial information, Global Reporting Initiative, International Integrated Reporting Council, Sustainability Accounting Standards Board, Climate Disclosure Standard Board, Carbon Disclosure Project, AA1000). This is a useful proposition for the investigation of the presence versus absence of the going concern in the sustainability and non-financial reports and disclosure by companies. Through a qualitative methodology, this book is intended to show the incidence of the going-concern in the non-financial disclosure and to what content and meaning it is refereed. Several issues and characteristics of information provided to stakeholders are drafted.
Download or read book Opening the Black Box of Audit Quality written by Derrald Stice and published by . This book was released on 2017 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effect of individual auditor quality (below the partner level) on overall audit quality. We aggregate audit employee-level performance evaluations to create a measure of auditor quality at the office level. We find that high quality audit offices are associated with a lower likelihood of client restatement, fewer client abnormal accruals, and a higher likelihood of a client receiving a going concern opinion. We partition employees into low, medium, and high level, based on job title, in order to investigate which employee levels drive these results. We find that the restatement results are driven by high quality high-level employees (Senior Managers/Directors), while the going concern results are driven by high quality low-level employees (Seniors). Furthermore, we find evidence that high quality audit teams are associated with all aspects of audit quality and the magnitude of these team effects are much larger than those of the effects for any individual employee type. These findings are consistent with higher-level auditors preventing the most serious financial statement deficiencies, low-level employees contributing to audit firm independence, and overall team quality creating synergy which has the strongest effect on all aspects of audit quality. Overall, our empirical results suggest that individual auditor quality is associated with higher quality audits, and that employees at all levels affect audit outcomes.
Download or read book Does Auditor Gender Affect Issuing a Going Concern Opinion written by Sarowar Hossain and published by . This book was released on 2015 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior experimental research has documented a potential impact of auditor gender on audit judgement, auditor behavior and decision making. Using a unique data set of 10 286 firm-year observations of auditor gender, this study examines whether a particular characteristic of the auditor- the auditor's gender - affects audit quality. Audit quality is measured by the propensity to issue modified opinions, first-time going-concern opinions, and going-concern opinions for financially distressed companies. The results show that the female auditors are less likely to issue modified opinions, first-time going - concern opinions, and going-concern opinions for financially distressed companies. Consistent wit prior literature, this study also confirms that modified opinions, first-time going-concern opinions, and going-concern opinions for financially distressed companies are consistently negatively associated with the size of the client firm, and positively associated with the prior year audit opinion and whether the company reported a loss. The findings provide evidence of differential audit outcomes when auditor is a female. The finding of this study has potential practical implications for accounting firms and professions in terms of assignment of personnel to audit engagements, training, decision aids, and the audit review process. The results are robust in various sensitivity analyses.
Download or read book Auditing written by Karla M. Johnstone-Zehms and published by . This book was released on 2023-02-10 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prepare for success in today's rapidly changing audit environment as you develop professional and ethical decision-making skills with Zehms/Gramling/Rittenberg's AUDITING: A RISK BASED-APPROACH, 12E. This edition integrates the latest in standards, including new guidance on audit reports, fraud risks and audit evidence. Unique conceptual frameworks help you strengthen ethical decision-making skills and professional skepticism. A new framework also guides you through using data analytics in auditing with simulation cases that use real-life data sets. Revised, reader-friendly content offers interesting learning features that highlight key points and provide hands-on opportunities to refine critical-thinking skills. New and revised end-of-chapter cases and problems further strengthen your writing skills for the CPA exam. In addition, MindTap digital resources are available with an interactive ebook and engaging cases to reinforce your data-driven decision-making skills.
