International Journal of Auditing最新文献

Topics concerning government contracts have recently attracted much attention from researchers and the public because of the US government's significant spending on goods and services. In this study, we investigate whether audit fees are associated with audit clients' government contracts. We find that firms with a higher proportion of government sales to total sales pay higher audit fees than other firms. Our further analysis shows the audit premium is driven mainly by the federal government and local government contracts. We also show that local government contracts have a larger effect than federal government contracts on the determination of audit fees. Taken together, our findings enhance our understanding of a potential determinant of audit fees and imply that auditors may view firms with and without government contracts differently.

This study investigates the role of audit styles at different levels on financial statement comparability in South Africa, a setting where firms report under International Financial Reporting Standards (IFRS), the institutional environment is strong and the audit environment is dominated by the Big 4 audit firms. An output-based comparability measure is used to consider the association between audit styles at a firm level, audit office level and individual auditor level and financial statement comparability. Evidence of audit style effects on financial statement comparability is found at the three different levels—the audit firm, the audit office and the individual auditor. The study further finds some evidence that audit office style dominates audit firm style and individual auditor style dominates audit office style. This finding suggests that even in countries where internal (within the audit firm) and external (country regulations) control mechanisms are strong, the audit style of the individual auditor is present and associated with increased financial statement comparability. Using a setting where firms report under IFRS further suggests that in a principles-based environment, despite strong internal controls and in-house working rules by audit firms, individual auditors continue to have some level of autonomy in the interpretation and application of the accounting principles and in-house working rules.

We examine how investors perceive audit quality when regulators adopt different enforcement styles to communicate audit inspection findings, and when the audit firm responds to the inspection findings. We employed a 2 × 3 between-subjects experimental design, with regulatory enforcement style (critical or supportive) and audit firm response (defensive actions or remedial actions or control) as the independent variables. We find that investors perceive a relatively high level of audit quality when the audit firm chooses to take remedial actions, regardless of regulators' enforcement styles. In contrast, investors perceive a relatively low level of audit quality when the audit firm chooses to take defensive actions in response to regulators that impose a critical enforcement style. Additional analyses show that investors' perception of audit quality mediates the joint effects of regulatory enforcement styles and audit firm response on willingness to invest. Our findings suggest implications for the ways that regulators adopt different enforcement styles, which should be of interest to audit practitioners and regulators, as the findings show the potential consequences of different firm response strategies to inspection findings.

We examine whether firm-level political risk influences auditor behaviour. Using a text-based political risk measure, we find that firms subject to higher levels of political risk face longer audit report lags, are more likely to have going-concern opinions issued by their auditors and pay higher audit fees. However, the effect of political risk on audit outcomes becomes moderated in the presence of higher lobbying efforts. Our findings suggest that political risk and lobbying efforts to mitigate such risk both influence auditors' judgments in planning audit services. Our original findings survive in a battery of robustness checks, and the primary results do not change when we use an exogenous political shock as an alternative proxy for firm-level political risk.

This study examines the effect of client human resource investment in internal controls (ICs) and information technology (IT) on audit efficiency. Accordingly, we propose a novel approach to modify the measurement of audit efficiency by directly measuring the length of time from the fiscal year end to the last day of fieldwork of an audit firm—fieldwork lags (FWLs)—rather than audit report lags (ARLs). We investigate the relationship between FWLs and the number of IC personnel and their average work experience at the department level: accounting and finance, IT and others. We find that FWLs are negatively related to the number of IC personnel in the accounting and finance departments and other related areas. Furthermore, FWLs decrease when IC personnel in the IT department have more average work experience. This finding indicates that experienced IC personnel in the IT department are critical to reducing the fieldwork time taken by auditors. Overall results suggest that a client's investment in IC personnel in accounting/finance and IT departments enhances audit efficiency.

This study investigates the association between auditor workload compression and tax avoidance. Heavy auditor workloads can limit the extent to which auditors are able to examine the determination of the income tax provision, creating opportunities for companies to maintain their tax avoidance strategies unimpeded. We find evidence indicating that audits performed by auditors with greater levels of workload compression are associated with greater levels of tax avoidance, as proxied by the cash effective tax rate, the Generally Accepted Accounting Principles (GAAP) effective tax rate and book-tax differences. We also investigate the role of auditor-provided tax services (APTS) on the said associations and find evidence generally consistent with knowledge spillover; however, we do not find evidence of a moderating effect from APTS on the association between auditor workload compression and tax avoidance. This study contributes to the auditing and tax literatures by being among the first to investigate whether audit-related constraints due to workload compression affect the outcomes of management's determination of the tax provision.

Several calls from practitioners and the relevant literature suggest that audit committee directors with industry expertise complement the knowledge of financial experts. Thus, this study examines market reactions to the voluntary appointment of new audit committee directors with financial and industry expertise in Germany. Using hand-collected German data on newly appointed audit committee director announcements, we find a significantly positive market reaction around the appointment of financial experts with industry expertise but no reaction around the appointment of financial experts without industry expertise. Consistent with the expectation that some industries demand a higher need for specialised directors, we find a positive market reaction to the appointment of financial experts with industry expertise depending on whether the appointing firm is relatively more challenging for non-industry experts to monitor and advise. Overall, our findings suggest that market participants demand a combination of financial and industry expertise.

This study uses a large sample of firms from 35 countries to examine how media coverage of corporate social irresponsibility (CSI) affects audit fees. We document a positive and significant relationship between media coverage of CSI and audit fees. Further evidence indicates that this positive relationship is less pronounced for firms with a higher level of commitment to corporate social responsibility (CSR) performance but is more pronounced for firms domiciled in countries with stronger investor protections, higher regulatory quality and higher CSR disclosure requirements. Taken together, these findings support the conjecture that CSI media coverage increases auditors' risk and thereby increases audit fees. Moreover, our findings suggest that the effect of media coverage of CSI on audit fees varies with country-level institutional characteristics and the degree of firms' substantive commitment to CSR performance.

Voluntary disclosure in the audit committee report is expected to provide additional information about the activities undertaken to protect investors. The Securities and Exchange Commission's (SEC) ultimate aim in initially promulgating audit committee disclosure requirements was to reduce firms' cost of equity. However, prior research finds that voluntary disclosure in the audit committee report is akin to impression management. In 2015, the SEC issued a concept release encouraging audit committees to provide additional voluntary disclosures in their reports beyond mandatory requirements. In that context, this paper analyses the effect of the audit committee voluntary disclosure on the cost of equity, with financial analysts playing a mediating role. The sample comprises the top US bank holding companies from 2006 to 2015. We manually code the voluntary disclosure in audit committee reports using a scoring grid. Results show that audit committee voluntary disclosure increases the cost of equity. In addition, the association between voluntary disclosure and the cost of equity is mediated by financial analysts. Hence, we infer that the impression management undertone of voluntary disclosures affects financial analysts' coverage and forecasting properties, which in turn lead to an increase in the cost of equity. The paper's empirical evidence highlights the effects of impression management disclosure by analysing corporate governance voluntary disclosures, cost of equity and financial analysts and brings the issue to the attention of banking regulators, SEC and investors.

This paper examines whether auditors plan engagements to be the same-as-last-year (SALY) and if they respond to changes in risk both before and during audit engagements by varying engagements from planned. These are important questions considering audit standards require the assessment of risk and general concerns about audit quality and fee pressure. We provide new insights using a proprietary database containing both quoted and reported audit hours and fees. We find that the basis quoted audit hours and billing rates (i.e., audit plans) are prepared on is not SALY. However, as there is little difference for audit hours, we conclude that they are based-on-last-year (BOLY). Changes in audit characteristics are associated with the variance between quoted and reported audit hours and billing rates. In addition, auditors with higher reputational risk quote more audit hours and have a higher quoted average billing rate and further increase them from quoted.