International Journal of Auditing最新文献

This paper examines how auditor extra-billing and the quality of the auditor–board member relationship affect client-initiated auditor changes. Extra-billing is an auditor billing practice where the auditor invoices a higher amount than originally negotiated with the client. Although extra-billing is common in audit practice, it has not yet received much attention in audit research. Understanding audit as a professional service, we conceptualize extra-billing as a factor that is instrumental in creating or preventing bonding, which influences the repeat purchasing behaviour of a client, such as retaining an incumbent auditor. Seventy-eight board members responsible for audit matters completed a case that varied auditor extra-billing (no extra-billing or extra-billing) and the quality of the auditor–board member relationship (good or bad relationship). The results show that both an extra-billing and a bad auditor–board member relationship increase the likelihood of a client-initiated auditor change. These results have important implications for auditors, auditees and audit regulators.

Despite an emphasis on the value of communication from the auditor to the audit committee in auditing standards and by regulators, it is unclear if it is effective at revealing bad news to the audit committee. Using the unique Korean setting, where communication must be disclosed, we examine if it is associated with future firm-specific stock price crash risk. We find that greater communication is significantly negatively associated with stock price crash risk and that the results are driven by written communication and communication on key audit matters or internal controls. Furthermore, the value of communication is stronger coming from Big 4 auditors and when the audit committee is independent.

There is an increasing pressure on companies to provide nonfinancial information. An important element of related nonfinancial reports is information on combating bribery and corruption. This study examines the impact of voluntary assurance on such reports on financial analyst perceptions and decisions. Moreover, it investigates whether the type of assurance provider (financial statement auditor vs. another audit firm) and the assurance level (limited vs. reasonable assurance) exert an influence. For this purpose, we conducted an experiment with a 2 × 2 + 1 between-subject design and financial analysts from Turkey as participants. The extent of financial analyst reliance on the combating bribery and corruption report of a fictitious company, their likelihood to recommend the purchase of shares of the fictitious company, their related credit risk assessment and the likelihood that they purchase shares in the fictitious company served as dependent variables. The analyses are based on 116 responses after the elimination of manipulation check failures. Our findings indicate that assurance on combating bribery and corruption reports results in perceptions and decisions which are more favourable to the fictitious company. Moreover, they do not indicate a significant impact of the type of assurance provider. However, our participants' perceptions are more positive in the case of reasonable assurance.

The increasing number of ESG-linked financial instruments demonstrates the need for reliable information on companies' ESG performance, which is a challenge for users. Debates surround the effects of reliability-enhancing instruments like corporate social responsibility (CSR) report assurance and environmental, social, and governance (ESG) rating services on decisions related to ESG-linked financial instruments. Using experimental evidence from 156 bank managers, we show that assurance positively impacts ESG-linked credit lending decisions, with an additional positive impact when a neutral ESG rating is present in conjunction. When ESG performance and ESG rating improve, reasonable assurance can further amplify this positive effect. Additionally, our research indicates that the implementation of a positive ESG rating positively influences ESG-linked credit lending decisions, irrespective of any assurance factors. These findings have various implications, as they draw attention to the decision-making relevance of CSR report assurance and ESG ratings, as well as the understanding of assurance levels.

This exploratory study investigates the implementation of key audit matters (KAM) in audit reports under ISA701 to better understand how KAM disclosures may help narrow the audit expectations gap. The study draws on findings from semi-structured interviews with 28 professional stakeholders from the Kingdom of Saudi Arabia (KSA). The study's aim was to explore the relationship between KAM disclosures and the audit expectations gap considering audit quality concerns. Our findings reveal that (i) financial statement users report that they better understand what the auditor does, which enhanced their confidence in the audit process; and (ii) at least some financial statement users report that KAM disclosures provide new information about companies' risks that management was not already providing. We further report that many interviewees (particularly Big Four external auditors) indicated that the KAM reforms did not enhance audit quality in KSA. Interestingly, a small number of non-Big Four auditors believed that KAM disclosures have enhanced audit quality. The key message is that the KAM reforms did not necessarily improve audit quality but that they are perceived to have played a role in further narrowing the audit expectations gap and reducing the need for communication, thus creating market efficiencies.