The Effect of Joint Auditor Pair Composition on Audit Quality

The Effect of Joint Auditor Pair Composition on Audit Quality
Author: Gerald J. Lobo
Publisher:
Total Pages: 53
Release: 2019
Genre:
ISBN:

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Using a sample of firms from France, where the law requires the use of two auditors, we study the effect of auditor pair composition on audit quality by examining a specific account, goodwill impairment. We document that firms audited by a Big 4-non-Big 4 auditor pair (BS) are more likely to book an impairment and book a larger impairment than firms audited by a Big 4-Big 4 auditor pair (BB) when low performance indicators suggest a greater likelihood of impairment. Moreover, firms audited by a BB pair reduce impairment disclosures when they book impairments, while firms audited by a BS pair do not, suggesting lower transparency for firms audited by a BB pair. Our results inform investors and firms in mandatory joint audit regimes, as well as regulators who are considering requiring joint audits.

From Joint to Single Audits - Audit Quality Differences and Auditor Pairings

From Joint to Single Audits - Audit Quality Differences and Auditor Pairings
Author: Claus Holm
Publisher:
Total Pages: 44
Release: 2017
Genre:
ISBN:

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This study analyses audit quality differences between audits by a single big audit firm and joint audits with either one or two big audit firms. We exploit the unique situation in Denmark beginning on 1 January 2005, at which time a long-standing mandatory joint audit system for listed companies was replaced by a voluntary joint audit system. First, we report the results of a survey of Danish CFOs' views on and their experiences with the choice of single or joint audits and their perceptions of audit quality. Second, based on data from the mandatory joint audit abolition year and the following two years, we test the audit quality differences using abnormal accruals. Most CFOs perceive that audit quality by a single big four audit firm is the same as it is in joint audits with either one or two big four audit firms. The results of our empirical analysis are in line with the perceptions. We find no evidence of audit quality differences between audits made by a single big four firm and those conducted by either of the two combinations of joint audits.

Auditors' Joint Engagements and Audit Quality

Auditors' Joint Engagements and Audit Quality
Author: Pietro A. Bianchi
Publisher:
Total Pages: 51
Release: 2019
Genre:
ISBN:

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This study examines the effect of auditors' collaboration in joint audit engagements on knowledge transfer, auditor expertise, and audit outcomes. I employ a unique sample of Italian private companies whose financial statements are jointly audited by three individual auditors and use measures from the network literature to capture the intensity of interactions between these auditors. I find a positive association between several audit quality proxies and auditors' collaboration in multiple joint engagements. My results suggest that auditors develop knowledge and contacts through collaboration which potentially leads to higher audit quality. Overall, my findings suggest that joint engagements facilitate knowledge transfer and increase auditor expertise.

Auditing and Society

Auditing and Society
Author: Wally Smieliauskas
Publisher: Routledge
Total Pages: 269
Release: 2020-07-30
Genre: Business & Economics
ISBN: 0429854129

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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.

Integrated Reporting and Audit Quality

Integrated Reporting and Audit Quality
Author: Chiara Demartini
Publisher: Springer
Total Pages: 136
Release: 2017-04-13
Genre: Business & Economics
ISBN: 3319488260

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This book analyzes the relationship between integrated reporting and audit quality within the European context, presenting empirical evidence and drawing on a broad review of the available literature in order to evaluate the ability of integrated reporting to enhance audit risk assessment. Dedicated sections first elucidate the concepts of integrated reporting and audit quality. The main integrated reporting frameworks are compared, the role of integrated reporting within a firm’s disclosure is examined, and all aspects of audit risk are discussed. The key question of the impacts of integrated reporting on the components of audit risk is then addressed in detail, with reference to empirical findings, their practical implications, and their limitations. The concluding section explores the future of corporate reporting and the development of the next integrated reporting framework and summarizes the insights that the analysis in the book offers into the relationship between integrated reporting and audit quality in the European setting.

Are Joint Audits a Proper Instrument for Increased Audit Quality?

Are Joint Audits a Proper Instrument for Increased Audit Quality?
Author: Jamel Azibi
Publisher:
Total Pages:
Release: 2018
Genre:
ISBN:

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Joint audits are recently controversial discussed to increase audit quality and decrease audit market concentration in Europe, complementing the existing and future rotation rules by the 8th EC directive. First, this article presents a theoretical foundation of joint audits. In this context, the main influences on low balling are presented. The link between joint audits and audit quality is still controversial. Then, the main results of empirical research on joint audit are focused. A clear positive link between joint audits and audit quality cannot be found, but there is strong evidence for higher audit costs which could lead to an increased price competition. Insofar, a lower audit market concentration by joint audits is not generally connected with higher audit quality, because there are many corporate governance interactions. To test this hypothesis, we use a sample of 306 Germany and French companies between 2008 and 2012. Empirical results demonstrate unclear effect of the joint audit on audit quality in these two countries.

The Role of Joint Audit in Audit Quality - Practitioners' Insights

The Role of Joint Audit in Audit Quality - Practitioners' Insights
Author: Oliver Marnet
Publisher:
Total Pages: 0
Release: 2022
Genre:
ISBN:

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Outside those jurisdictions where joint audit is regularly practiced, this audit model tends to be poorly understood and frequently remains subject to often repeated but unsubstantiated misapprehensions. Meanwhile, even reviews which set out to provide an objective and comprehensive overview of this mechanism may base their insights and recommendations on a somewhat selective analysis of prior research, partial citations, omissions, and discriminatory interpretation of research results. Meanwhile, academic research into external audit suffers from a multitude of methodological difficulties, and results in mixed, inconclusive, and contradictory results, where even minor changes to assumptions, environmental settings, modelling, and data selection can lead to widely differing conclusions. This also applies to research into joint audit , and perhaps more so. One outcome of this mixed experience is that calls for more empirical research along tried and tested, but debateable, methodologies into joint audit may offer limited promise for more persuasive insights on audit quality effects from any this model. This is not particularly helpful to the current discussion on audit reform, or on debates whether particular audit models and mechanisms might contribute to audit quality. In a reflection on decades of audit reform, Humphrey et al. (2018) suggest that there is a need to ask different questions in the exploration of ways and means to enhance the quality of audit and to allow audit to re-engage with its social role. These authors note a need for stakeholders to adopt a much greater diversity of inquiry, including an exploration of lessons from success as well as failure, and to reflect more deeply on the realities and experiences of audit practitioners. In a closely related discussion, Biehl et al. (2021), exploring issues underlying contradictory empirical results in the audit literature, encourage a focus on audit quality enhancing factors (Biehl et al, 2021).By presenting insights from practitioners, regulators, and audit committee chairs with first-hand experience of joint audit, together with reflections from stakeholders less familiar with its application, the present investigation seeks to expand and build on recent reports, inquiries, consultations and policy reform discussions on the role, future, and shape of external audit. Aiming to inform the discussion on audit reform, this study aims to de-mystify joint audit, sheds a critical light on this audit model, and hopes to provide stakeholders with a deeper understanding of what joint audit is, how it works in practice, and which key characteristics of this model may allow it to make a positive contribution to the quality of external audit.

Auditing Teams

Auditing Teams
Author: Mara Cameran
Publisher: Taylor & Francis
Total Pages: 133
Release: 2017-03-31
Genre: Business & Economics
ISBN: 1134825536

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The recent audit failures which have rocked financial markets worldwide have accentuated the need for a better understanding of the link between risk, control and audit quality; as well as emphasising the need to open the "black box" of the ways auditing firms actually function. Reflecting these imperatives, Auditing Teams unravels the organizational and management issues in audit firms that are key to achieving effectiveness in service provision. Specifically, this key research reflects upon the relevance and dynamics of auditing teams and their impact on auditing quality, and specifically responding to the recent claim from regulators which highlights auditing team characteristics as the source of wide variations in quality. By leveraging different perspectives – auditing, management accounting, organization and psychology – to investigate auditing teams and basing on evidence collected from the professional world, this book will provide a unique insight into the role of auditing teams on audit quality. It will be of great interest to scholars and advanced students in auditing, as well as to practitioners and regulators in the field.

Multiple Audit Mechanism and Audit Quality

Multiple Audit Mechanism and Audit Quality
Author: Mohamed M. El-Dyasty
Publisher:
Total Pages: 47
Release: 2019
Genre:
ISBN:

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Egypt has a unique and complex audit market in which companies could use multiple audit mechanism through which a company can engage more than one audit firm to verify same financial statements. This mechanism could be conducted through joint audits or dual audits. Joint audits could be performed voluntary. On contrary, dual audits involve a mixture of voluntary and mandatory audits. On one hand, State-owned companies are obligated to appoint accountability state authority as a single auditor to perform audit. On the other hand, some state-owned companies may voluntary hire a private audit firm to avoid consequences of designating accountability state authority. Therefore, this study aims to investigate the association between multiple audit mechanism and audit quality in Egypt. To accomplish this objective, a sample of listed companies' financial statements and accompanied audit reports are used. Abnormal accruals are employed as proxies of audit quality through abnormal working capital accruals and modified-Jones models. Results showed that joint audits are not associated with both proxies of audit quality. In contrast, dual audit is positively associated with abnormal accruals leading to conclude that dual audits are not providing a high level of audit quality. Single audits outperform multiple audit mechanism in companies aiming to manage earnings to reduce income. Results also indicate that selecting two non-big firms to perform audit process is providing a higher level of audit quality. In addition, it is evident that big 4 audit firms in Egypt are not associated with audit quality. Finally, no association is found between accountability state authority and audit quality.