International Journal of Auditing最新文献

Although auditing standards instruct auditors to avoid issuing standardised key audit matters (KAMs), standard setters warn and financial statement users worry about expanded auditor's reports becoming sticky, generic and boilerplate over time. Based on textual analysis of expanded auditor's reports from the UK, I provide longitudinal evidence of an increase in various textual similarity measures including year-over-year similarity (stickiness), within-peer group similarity (generality) and boilerplate language over time. Next, I identify a number of crucial drivers of convergence and find that disclosure similarity diminishes the positive capital market effect of precise KAM reporting documented in prior studies. Together, these findings suggest that audit firms have successively developed standard text modules for KAM reporting that undermine the aim of expanded auditor's reports to provide informative value. This paper extends the literature on the relationship between institutional environments and unintended effects of auditor disclosure regulation.

This study examines the tests auditors design to assess a client's ‘tone at the top’. By exploiting conceptual differences in the constructs of ethicality and competence, the study investigates auditor knowledge structures by disentangling auditor hypothesis testing strategies. The results of an experiment document that auditors design tests to yield evidence of unethical and competent, rather than ethical and incompetent, client management behaviour. This overall pattern of results, and in particular auditors' focus on seeking evidence of client management competence, is consistent with a diagnostic hypothesis testing strategy and is not consistent with a conservative testing strategy. Collectively, these results provide insights into how auditors' ‘tone at the top’ knowledge is organized and used.

This study investigates the determinants and dynamics of the linguistic features of key audit matters (KAMs) in European countries. Using natural language processing algorithms, including FINBERT, I quantify stylistic and content-based text characteristics at the KAM level and find that KAM length, readability, sentiment, quantitative density, specificity, the degree of forward-looking statements, and the extent of boilerplate language are associated with the type of KAM topics, client attributes, and audit firm characteristics. In additional analyses, I also find early empirical evidence of a time trend in these linguistic features. Since their introduction in 2016, KAMs are becoming longer, more quantitative, more specific, but also include more boilerplate phrases. Collectively, the results of the study contribute to a more nuanced understanding of the determinants and dynamics of KAM disclosures.

We conducted 31 interviews with audit committee (AC) members, chief executive officers (CEOs), and chief audit executives (CAEs) to investigate the role of the internal audit function (IAF) in environmental, social, and governance (ESG) processes and related risks. We find that multiple possible combinations of the maturity of companies' ESG practices and CAE's perception of the IAF stakeholders' salience drive the type of IAF's involvement in ESG. In ESG-mature companies with more salient ACs, the IAF provides assurance over ESG practices, ESG reporting, and reputation risks related to ESG, and it focuses on the governance dimension of ESG. When the CEO is perceived as more salient, the type of IAF's involvement includes both assurance over ESG controls in the supply chain and consulting on ESG activities. In contrast, in low ESG maturity companies with more salient AC, the IAF's role is limited to providing assurance over internal controls established to comply with environmental, health, and safety legal requirements, and prevent managers' unethical behavior. Finally, we discuss the implications for the IAF's ability to add value to the organization. We contribute to the underexplored research area of IAF's involvement in ESG practices and related risk.

This study investigates the association between audit engagement partners' narcissism (measured by the size of their signature) and audit reporting decisions and audit pricing in a private market setting. We analysed 133,267 (78,994) firm-year observations from (financially distressed) Belgian firms audited by 795 individual engagement partners from 2008 to 2017. Our results suggest that narcissism is positively associated with the likelihood that audit partners issue going-concern opinions to their financially distressed clients and with audit fees. An array of robustness checks corroborates these results. Additional results show that audit partner narcissism is positively associated with reporting conservatism. Interestingly, additional analyses also show that narcissism reverses the effect of gender on audit reporting decisions and audit pricing. Collectively, the evidence from this study suggests that partner narcissism is positively associated with conservative audit reporting decisions and audit pricing in a private market setting.

This paper sheds light on the factors driving the maturity levels of integrated governance by analysing survey responses from 148 companies that reported on their efforts to coordinate and align their separated assurance functions. When an organization's assurance functions lack coordination, it can lead to challenges like isolated risk functions, incomplete risk coverage and redundant controls. Integrated governance aims to incorporate and optimize on organization's assurance functions to support an effective risk control environment and the integrity of information used by management and the governing bodies. Despite this goal, research indicates that no organization has achieved a mature level of integrated governance yet. To address this research gap, we identify key drivers for integrated governance maturity such as the awareness of integrated governance within the organization, the implementation of the Three Lines (of Defense) Model and the maturity levels of subsystems, that is, the risk management function and the internal control system.

This paper summarises survey study results identifying knowledge, skills, and attitudes (competencies) for entry-level internal audit professionals that could be used to develop a curriculum for chartered professional accountant (CPA)-bound students to pursue fulfilling careers in internal audit and related management positions under changing competency requirements. We built a survey based on the Institute of Internal Auditor's (IIA's) current Competency Framework, modified by insights from internal audit experts, including a suggestion to include a new information technology category. We then summarise responses from 641 internal audit professionals into a two-dimensional visualisation highlighting the changes from currently identified competencies to expected changes in skill importance one decade in the future. The results highlight that future internal auditors will need to have a broader set of competencies than simply accounting and finance knowledge. Our future focus provides foundational insights related to the necessary and emerging competencies for academic programme planning, future research and practitioners' training and hiring strategies.

Regulation requires US public companies to disclose the pre-approval status of their year-end auditors in their annual proxy statements. Although auditor–client relationships remain at will, the disclosure mandate requires companies to publicly announce their intentions to retain their current auditors. In this paper, we provide initial evidence of the potential implications that these disclosures may have on financial reporting quality. We find that when the disclosures occur later relative to the release of interim reports, interim filings exhibit lower reporting quality. After performing robustness tests, we explore two possible mechanisms that could explain our findings. First, we consider the possibility that audit committee members compromise their independence. Second, we investigate whether auditors delay the performance of certain interim procedures while the disclosures are pending. With the use of audit committee equity compensation to measure audit committee independence impairment and audit fees to measure auditor effort, we find evidence consistent with both explanations.

In this study, we discuss how small audit firms (i.e. non-Big 4 audit firms) address the staffing crunch during the busy season. Using monthly certified public accountant (CPA) employment data from Korea, we find that the number of CPAs in non-Big 4 audit firms peaks before the busy season but drops afterward, suggesting the prevalence of part-time or short-term employment (i.e. flexible staffing). Flexible CPA staffing is more prevalent in audit firms with lower sales, higher sales growth and lower profitability. We further document that the standard deviation of the changes in monthly CPA numbers within a year is negatively associated with audit fees, implying that flexible staffing enables small audit firms to charge lower fees to clients. Additionally, we find no evidence that flexible staffing significantly impairs audit quality. We also report evidence that non-Big 4 audit firms attract more clients when they are more flexibly staffed than otherwise. Collectively, non-Big 4 firms reduce operating leverage via flexible staffing arrangements and share the benefits with clients without compromising audit service quality.

We examine whether corporate political donations (CPDs) are associated with audit fees in the Australian setting. Our baseline results based on observations of Australian top 500 non-financial companies show that, on average, firms with CPDs are associated with about 9% lower audit fees than firms without CPDs consistent with the strategic investment or resource dependency view. Using path analysis, we next show that high earnings quality resulting from strategic benefits of CPDs explains the association. Overall, these results confirm that firms use CPDs as strategic investments that are associated with lower earnings management, which leads to lower audit risk and hence reduced audit fees.