Pub Date : 2023-02-14DOI: 10.1108/maj-08-2021-3282
Sheng Yao, Siyu Wei, Lining Chen
Purpose Existing studies have shown that all kinds of audit risks greatly affect audit pricing for accounting firms. However, it is still unclear whether environmental risks caused by environmental violations lead to a high audit fee. This study aims to investigate whether accounting firms raise audit fees after client firms have violated environmental regulations or have been punished for such violations. Design/methodology/approach This study selects listed firms with environmental violations between 1994 and 2018 as the treatment sample and match the treatment group with a control group of firms from the same industry, of similar asset size and with no environmental violations for the same time period. Then, this study constructs a difference-in-difference (DID) model to explore the impact of firm environmental violations (or punishment for environmental violations) on the audit pricing. Findings This study finds that accounting firms tend to raise audit fees after client firms have violated environmental regulations or have been punished for such violations, and this increasing effect is different due to environmental regulation intensity, regional span and internal control defects. Further evidences show that environmental violations influence audit fees through financial restatement, whereas environmental punishments impact audit fees through earnings management and risk-taking. Originality/value This study enriches the literature on determining factors of audit fees and economic consequences of environmental violations and provides empirical supports to understand the pricing behavior of accounting firms.
{"title":"Do clients’ environmental risks affect audit pricing? Evidence from environmental violations in China","authors":"Sheng Yao, Siyu Wei, Lining Chen","doi":"10.1108/maj-08-2021-3282","DOIUrl":"https://doi.org/10.1108/maj-08-2021-3282","url":null,"abstract":"\u0000Purpose\u0000Existing studies have shown that all kinds of audit risks greatly affect audit pricing for accounting firms. However, it is still unclear whether environmental risks caused by environmental violations lead to a high audit fee. This study aims to investigate whether accounting firms raise audit fees after client firms have violated environmental regulations or have been punished for such violations.\u0000\u0000\u0000Design/methodology/approach\u0000This study selects listed firms with environmental violations between 1994 and 2018 as the treatment sample and match the treatment group with a control group of firms from the same industry, of similar asset size and with no environmental violations for the same time period. Then, this study constructs a difference-in-difference (DID) model to explore the impact of firm environmental violations (or punishment for environmental violations) on the audit pricing.\u0000\u0000\u0000Findings\u0000This study finds that accounting firms tend to raise audit fees after client firms have violated environmental regulations or have been punished for such violations, and this increasing effect is different due to environmental regulation intensity, regional span and internal control defects. Further evidences show that environmental violations influence audit fees through financial restatement, whereas environmental punishments impact audit fees through earnings management and risk-taking.\u0000\u0000\u0000Originality/value\u0000This study enriches the literature on determining factors of audit fees and economic consequences of environmental violations and provides empirical supports to understand the pricing behavior of accounting firms.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2023-02-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46270358","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-13DOI: 10.1108/maj-03-2022-3487
M. Harjoto, I. Laksmana
Purpose This study aims to examine the impact of COVID-19 public health restrictions on audit fees and audit delay at the auditor local office level. Design/methodology/approach The authors take advantage of the availability of the state-by-state lockdown data to measure the degree of public health restrictions in auditor office locations. Using multivariate regression analysis, this study empirically investigates the impact of the length of lockdown in auditors’ office locations on audit fees and audit delay. The authors also examine whether office-level characteristics (i.e. office size and office-level client importance) moderate the association between the length of statewide lockdown and both audit fees and audit delay. Findings The authors find that a longer lockdown in auditors’ office locations is associated with higher audit fees and longer audit delay. The increase in audit fees and audit delay due to lockdown is higher for clients of larger local offices than those of smaller offices. In contrast, the positive impact of lockdown on audit fees and audit delay is less for more economically significant clients of an auditor office than that for less significant clients. Smaller clients are more likely to bear the higher cost of audits and experience longer audit delay during the pandemic. Originality/value The results suggest that COVID-19 restrictions have forced auditors to change the nature, scope and timing of their tests, resulting in higher audit fees and longer delays in completing audit engagements. Beyond the main effect of lockdowns on audit fees and audit delay, the study finds evidence of the moderating effect of auditor office size and office-level client importance, providing some insights on how auditor local offices cope with COVID-19 restrictions.
{"title":"The impact of COVID-19 restrictions on audit fees and audit delay: evidence from auditor local offices","authors":"M. Harjoto, I. Laksmana","doi":"10.1108/maj-03-2022-3487","DOIUrl":"https://doi.org/10.1108/maj-03-2022-3487","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the impact of COVID-19 public health restrictions on audit fees and audit delay at the auditor local office level.\u0000\u0000\u0000Design/methodology/approach\u0000The authors take advantage of the availability of the state-by-state lockdown data to measure the degree of public health restrictions in auditor office locations. Using multivariate regression analysis, this study empirically investigates the impact of the length of lockdown in auditors’ office locations on audit fees and audit delay. The authors also examine whether office-level characteristics (i.e. office size and office-level client importance) moderate the association between the length of statewide lockdown and both audit fees and audit delay.\u0000\u0000\u0000Findings\u0000The authors find that a longer lockdown in auditors’ office locations is associated with higher audit fees and longer audit delay. The increase in audit fees and audit delay due to lockdown is higher for clients of larger local offices than those of smaller offices. In contrast, the positive impact of lockdown on audit fees and audit delay is less for more economically significant clients of an auditor office than that for less significant clients. Smaller clients are more likely to bear the higher cost of audits and experience longer audit delay during the pandemic.\u0000\u0000\u0000Originality/value\u0000The results suggest that COVID-19 restrictions have forced auditors to change the nature, scope and timing of their tests, resulting in higher audit fees and longer delays in completing audit engagements. Beyond the main effect of lockdowns on audit fees and audit delay, the study finds evidence of the moderating effect of auditor office size and office-level client importance, providing some insights on how auditor local offices cope with COVID-19 restrictions.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2023-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44216554","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-08DOI: 10.1108/maj-02-2022-3457
K. Lai, Patrick P. Leung
Purpose This paper aims to first investigate auditor change following mismatch by focusing on the number of times mismatch occurred prior to auditor change and on clients mismatched continuously with auditors for two or more years. Subsequently, it studies the relation of mismatch in the current year with auditor change for clients mismatched in the past year. These issues are important because of the call for regulatory intervention in auditor selection. If market forces achieve improvement in matching, then those forces should be relied upon in auditor selection. Design/methodology/approach This paper adapts the literature to estimate mismatch and uses logistic regressions on an auditor change model to study the timing of auditor change by mismatched clients and on a mismatch model to examine improvement in matching following auditor change. Findings This paper finds that the more frequent mismatches occurred in the past four years, the higher the likelihood of switching in the current year. Clients mismatched continuously for two or more years are more likely to change auditors. This paper also reports that mismatched clients who switch auditors are less likely to be mismatched again after the switch. Research limitations/implications Because market forces reduce mismatch through auditor change, free choice by clients and auditors should be allowed, and regulatory intervention should be introduced cautiously. As investors and other users of financial statements have an interest in seeing that clients get the appropriate auditors for the audit, they will be assured that market forces could achieve the purpose. Thus, the results of this paper address public concern in the regulatory regime and support current audit market practices. Originality/value Prior studies assume a one-year time frame for auditor change to follow mismatch. This paper relaxes this assumption, to better reflect audit market practices, by showing that clients who are more often mismatched with auditors or those mismatched continuously for two or more years could also change auditors. Furthermore, prior studies find that mismatching motivates auditor change, but they do not show that matching improves after the change. This paper extends the literature by shedding new light to show that auditor change improves auditor–client matching.
{"title":"Auditor – client match: timing of auditor change following mismatch and improvement through the change","authors":"K. Lai, Patrick P. Leung","doi":"10.1108/maj-02-2022-3457","DOIUrl":"https://doi.org/10.1108/maj-02-2022-3457","url":null,"abstract":"\u0000Purpose\u0000This paper aims to first investigate auditor change following mismatch by focusing on the number of times mismatch occurred prior to auditor change and on clients mismatched continuously with auditors for two or more years. Subsequently, it studies the relation of mismatch in the current year with auditor change for clients mismatched in the past year. These issues are important because of the call for regulatory intervention in auditor selection. If market forces achieve improvement in matching, then those forces should be relied upon in auditor selection.\u0000\u0000\u0000Design/methodology/approach\u0000This paper adapts the literature to estimate mismatch and uses logistic regressions on an auditor change model to study the timing of auditor change by mismatched clients and on a mismatch model to examine improvement in matching following auditor change.\u0000\u0000\u0000Findings\u0000This paper finds that the more frequent mismatches occurred in the past four years, the higher the likelihood of switching in the current year. Clients mismatched continuously for two or more years are more likely to change auditors. This paper also reports that mismatched clients who switch auditors are less likely to be mismatched again after the switch.\u0000\u0000\u0000Research limitations/implications\u0000Because market forces reduce mismatch through auditor change, free choice by clients and auditors should be allowed, and regulatory intervention should be introduced cautiously. As investors and other users of financial statements have an interest in seeing that clients get the appropriate auditors for the audit, they will be assured that market forces could achieve the purpose. Thus, the results of this paper address public concern in the regulatory regime and support current audit market practices.\u0000\u0000\u0000Originality/value\u0000Prior studies assume a one-year time frame for auditor change to follow mismatch. This paper relaxes this assumption, to better reflect audit market practices, by showing that clients who are more often mismatched with auditors or those mismatched continuously for two or more years could also change auditors. Furthermore, prior studies find that mismatching motivates auditor change, but they do not show that matching improves after the change. This paper extends the literature by shedding new light to show that auditor change improves auditor–client matching.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2023-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45729987","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-01DOI: 10.1108/maj-03-2021-3052
Xiaoqing Feng, W. Wen, Yun Ke, Ying He
Purpose This study aims to examine whether a firm's demand for high-quality auditors is influenced by multiple large shareholders (MLS). As one type of ownership structure, MLS have gained popularity in China recently and have different types of large shareholders, including large institutional shareholder, large foreign shareholder and large state shareholder. The authors also examine whether different types of MLS have heterogeneous impacts on appointing high-quality auditors. Design/methodology/approach With a sample of 27,131 firm-year observations from Chinese public companies from 2003 to 2018, the authors use multivariate regressions to examine the effect of MLS on auditor choice. Heckman two-stage analysis, a firm fixed effects model, propensity score matching and difference-in-differences test are used as robustness checks. Findings This paper finds that the presence and power of MLS increase the likelihood of appointing high-quality auditors. With regard to the types of MLS, large institutional shareholders and foreign shareholders have significant positive effects on appointing high-quality auditors, while the presence of state-owned large shareholders has no effect on auditor choice. Further analyses reveal that the positive effect of MLS on high-quality auditor choice is more pronounced in firms with severe agency problems and information asymmetry. Taken together, these results suggest that MLS play a monitoring role by demanding high-quality auditors. Originality/value This paper contributes to the literature on the determinants of auditor choice. While prior studies primarily focus on the impact of concentrated ownership structure, corporate governance and the pressure from stakeholders on auditor choice, this paper complements the literature by providing evidence from the heterogeneous effects of different types MLS. This paper also extends the literature on the consequences of MLS from the perspective of auditor choice.
{"title":"Multiple large shareholders and auditor choice: evidence from China","authors":"Xiaoqing Feng, W. Wen, Yun Ke, Ying He","doi":"10.1108/maj-03-2021-3052","DOIUrl":"https://doi.org/10.1108/maj-03-2021-3052","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine whether a firm's demand for high-quality auditors is influenced by multiple large shareholders (MLS). As one type of ownership structure, MLS have gained popularity in China recently and have different types of large shareholders, including large institutional shareholder, large foreign shareholder and large state shareholder. The authors also examine whether different types of MLS have heterogeneous impacts on appointing high-quality auditors.\u0000\u0000\u0000Design/methodology/approach\u0000With a sample of 27,131 firm-year observations from Chinese public companies from 2003 to 2018, the authors use multivariate regressions to examine the effect of MLS on auditor choice. Heckman two-stage analysis, a firm fixed effects model, propensity score matching and difference-in-differences test are used as robustness checks.\u0000\u0000\u0000Findings\u0000This paper finds that the presence and power of MLS increase the likelihood of appointing high-quality auditors. With regard to the types of MLS, large institutional shareholders and foreign shareholders have significant positive effects on appointing high-quality auditors, while the presence of state-owned large shareholders has no effect on auditor choice. Further analyses reveal that the positive effect of MLS on high-quality auditor choice is more pronounced in firms with severe agency problems and information asymmetry. Taken together, these results suggest that MLS play a monitoring role by demanding high-quality auditors.\u0000\u0000\u0000Originality/value\u0000This paper contributes to the literature on the determinants of auditor choice. While prior studies primarily focus on the impact of concentrated ownership structure, corporate governance and the pressure from stakeholders on auditor choice, this paper complements the literature by providing evidence from the heterogeneous effects of different types MLS. This paper also extends the literature on the consequences of MLS from the perspective of auditor choice.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46194423","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-01-27DOI: 10.1108/maj-04-2022-3533
Jin Jiang, Xiangyun Lu, Yihan Wu, Hua Zhang
Purpose The purpose of this study is to investigate the effects of capital market liberalization on audit reporting and pricing. The authors use the announcement of the Shanghai-Hong Kong Stock Connect program in China as a shock to capital market liberalization. Design/methodology/approach The authors use the difference-in-differences method to study the difference in changes in the frequency of modified audit opinions and audit fees between the treatment group and the control group. Findings This study finds that capital market liberalization increases reputational and litigation risks for auditors and leads to more conservative audit reports. In addition, capital market liberalization stimulates the management of eligible firms to improve the information environment, helps to reduce information asymmetry and decreases audit fees. Specifically, the authors identify the channels of active foreign institutional investors as a new governance mechanism through which capital market liberalization impacts eligible firm and auditor decisions. Research limitations/implications This study complements the literature by showing that capital market liberalization may bring a new and strong governance mechanism for eligible firms and auditors. Practical implications This study may provide new references for active foreign institutional shareholders as a new and strong governance mechanism in weak institutional regimes such as China, auditors’ optimization decisions when litigation risks increase and management’s improvements in the information environment under the monitoring of foreign institutional shareholders. Originality/value Overall, this study contributes to the literature by showing that capital market liberalization can bring a new governance mechanism for the management of eligible firms and auditors in a weak institutional environment. Foreign institutional shareholders may be superior to the domestic market forces and other corporate governance in the role of monitoring the management of eligible firms and auditors.
{"title":"The impact of capital-market liberalization on audit reporting and pricing: evidence from a quasi-experiment","authors":"Jin Jiang, Xiangyun Lu, Yihan Wu, Hua Zhang","doi":"10.1108/maj-04-2022-3533","DOIUrl":"https://doi.org/10.1108/maj-04-2022-3533","url":null,"abstract":"\u0000Purpose\u0000The purpose of this study is to investigate the effects of capital market liberalization on audit reporting and pricing. The authors use the announcement of the Shanghai-Hong Kong Stock Connect program in China as a shock to capital market liberalization.\u0000\u0000\u0000Design/methodology/approach\u0000The authors use the difference-in-differences method to study the difference in changes in the frequency of modified audit opinions and audit fees between the treatment group and the control group.\u0000\u0000\u0000Findings\u0000This study finds that capital market liberalization increases reputational and litigation risks for auditors and leads to more conservative audit reports. In addition, capital market liberalization stimulates the management of eligible firms to improve the information environment, helps to reduce information asymmetry and decreases audit fees. Specifically, the authors identify the channels of active foreign institutional investors as a new governance mechanism through which capital market liberalization impacts eligible firm and auditor decisions.\u0000\u0000\u0000Research limitations/implications\u0000This study complements the literature by showing that capital market liberalization may bring a new and strong governance mechanism for eligible firms and auditors.\u0000\u0000\u0000Practical implications\u0000This study may provide new references for active foreign institutional shareholders as a new and strong governance mechanism in weak institutional regimes such as China, auditors’ optimization decisions when litigation risks increase and management’s improvements in the information environment under the monitoring of foreign institutional shareholders.\u0000\u0000\u0000Originality/value\u0000Overall, this study contributes to the literature by showing that capital market liberalization can bring a new governance mechanism for the management of eligible firms and auditors in a weak institutional environment. Foreign institutional shareholders may be superior to the domestic market forces and other corporate governance in the role of monitoring the management of eligible firms and auditors.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2023-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43442250","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-01-20DOI: 10.1108/maj-11-2021-3381
He Xiao, Jianqun Xi, Hanjie Meng
Purpose This study aims to investigate the impact of mandatory audit partner rotation (MAPR) on Chinese listed firms’ insider trading, as well as the moderating effects of firm characteristics on this impact. The economic mechanism behind this impact is also explored. Design/methodology/approach This study conducts a regression analysis on firms associated with mandatory and voluntary audit partner rotation based on 2009–2019 firm data and examines whether corporate insiders of these two types of firms increase their share sales within 12 months before their financial statements are submitted to a new rotated auditor. Findings Client firms’ corporate insiders increase their share sales within 12 months before their financial statements are submitted to a new mandatory rotated auditor. In addition, such an association is less pronounced for client firms that changed from Big 4 auditors to those with higher financial constraints. This is more pronounced for client firms with higher information asymmetry. The economic mechanism of the finding is that is the MAPR implementation reduces earnings management activities from client firms. Moreover, client firms’ buy-and-hold stock returns decline in the first year after MAPR. Research limitations/implications This study should assist investors, corporate shareholders and Chinese policymakers. Investors can be well protected through the adoption of MAPR because upcoming auditors enhance the audit quality of clients by restraining managers’ manipulation of reported earnings and declining firms’ insider trading afterwards. Investors, Chinese policymakers and corporate shareholders should pay more attention to firms’ financial report quality, auditor selection, financial situation, corporate governance and the information environment. Explicitly, firms with less transparent financial report quality, non-big 4 auditors and fewer financial constraints are more likely to be involved in insider trading. Originality/value To the best of the authors’ knowledge, none of the extant studies have examined the impact of MAPR on insider sales. This study extends the research on the effect of the audit process on firm market performance by investigating the impact of audit partner rotation policy on insider trading behaviors.
{"title":"Does mandatory audit rotation affect insider trading? Evidence from China","authors":"He Xiao, Jianqun Xi, Hanjie Meng","doi":"10.1108/maj-11-2021-3381","DOIUrl":"https://doi.org/10.1108/maj-11-2021-3381","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the impact of mandatory audit partner rotation (MAPR) on Chinese listed firms’ insider trading, as well as the moderating effects of firm characteristics on this impact. The economic mechanism behind this impact is also explored.\u0000\u0000\u0000Design/methodology/approach\u0000This study conducts a regression analysis on firms associated with mandatory and voluntary audit partner rotation based on 2009–2019 firm data and examines whether corporate insiders of these two types of firms increase their share sales within 12 months before their financial statements are submitted to a new rotated auditor.\u0000\u0000\u0000Findings\u0000Client firms’ corporate insiders increase their share sales within 12 months before their financial statements are submitted to a new mandatory rotated auditor. In addition, such an association is less pronounced for client firms that changed from Big 4 auditors to those with higher financial constraints. This is more pronounced for client firms with higher information asymmetry. The economic mechanism of the finding is that is the MAPR implementation reduces earnings management activities from client firms. Moreover, client firms’ buy-and-hold stock returns decline in the first year after MAPR.\u0000\u0000\u0000Research limitations/implications\u0000This study should assist investors, corporate shareholders and Chinese policymakers. Investors can be well protected through the adoption of MAPR because upcoming auditors enhance the audit quality of clients by restraining managers’ manipulation of reported earnings and declining firms’ insider trading afterwards. Investors, Chinese policymakers and corporate shareholders should pay more attention to firms’ financial report quality, auditor selection, financial situation, corporate governance and the information environment. Explicitly, firms with less transparent financial report quality, non-big 4 auditors and fewer financial constraints are more likely to be involved in insider trading.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, none of the extant studies have examined the impact of MAPR on insider sales. This study extends the research on the effect of the audit process on firm market performance by investigating the impact of audit partner rotation policy on insider trading behaviors.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2023-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44081937","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-01-10DOI: 10.1108/maj-04-2022-3521
R. P. Sihombing, Dian Agustia, N. Soewarno
Purpose Data analytics can change the working of advisory services (AS) that internal auditors routinely carry out. Not getting psychological support from employers and co-workers can cause internal auditors to be reluctant to use data analytics. Based on trait activation theory, this study aims to examine the mediating effect of data analytics on the relationship between organizational psychological safety (OPS) and AS. Design/methodology/approach The authors surveyed inspectorate auditors in government ministries and institutions who are internal government auditors in Indonesia. This study applied the partial least square structural equation modeling method to test the hypothesis. The total respondents involved in this study were 103 auditors. Findings There are two main findings in this study. First, OPS has a direct effect on AS. Second, data analytics mediates the relationship between OPS and AS. Practical implications This study’s finding has implications for leaders in ministries and government agencies to provide psychological support so that inspectorate auditors increasingly take advantage of data analytics in the process of AS that are always carried out. Originality/value To the best of the authors’ knowledge, this is the first study to examine the mediating effect of data analytics on the relationship between OPS and AS.
{"title":"The mediating effect of data analytics on the relationship between organizational psychological safety and advisory services","authors":"R. P. Sihombing, Dian Agustia, N. Soewarno","doi":"10.1108/maj-04-2022-3521","DOIUrl":"https://doi.org/10.1108/maj-04-2022-3521","url":null,"abstract":"\u0000Purpose\u0000Data analytics can change the working of advisory services (AS) that internal auditors routinely carry out. Not getting psychological support from employers and co-workers can cause internal auditors to be reluctant to use data analytics. Based on trait activation theory, this study aims to examine the mediating effect of data analytics on the relationship between organizational psychological safety (OPS) and AS.\u0000\u0000\u0000Design/methodology/approach\u0000The authors surveyed inspectorate auditors in government ministries and institutions who are internal government auditors in Indonesia. This study applied the partial least square structural equation modeling method to test the hypothesis. The total respondents involved in this study were 103 auditors.\u0000\u0000\u0000Findings\u0000There are two main findings in this study. First, OPS has a direct effect on AS. Second, data analytics mediates the relationship between OPS and AS.\u0000\u0000\u0000Practical implications\u0000This study’s finding has implications for leaders in ministries and government agencies to provide psychological support so that inspectorate auditors increasingly take advantage of data analytics in the process of AS that are always carried out.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is the first study to examine the mediating effect of data analytics on the relationship between OPS and AS.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2023-01-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48784222","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-21DOI: 10.1108/maj-09-2021-3325
C. Cai, Stephen J. Ciccone, Huimin Li, L. Xu
Purpose This study aims to explore the relation among US audit partners’ characteristics, their career advancement and audit quality. Design/methodology/approach This study uses data from Public Company Accounting Oversight Board Form AP, Auditor Reporting of Certain Audit Participants, and publicly available online data sources. The hand-collected data on audit partners’ personal characteristics include gender, work experience and educational background. The measures for audit quality include restatements and audit fees. Findings The authors find that audit partner characteristics matter for the time it takes an individual to reach partnership after completing a bachelor’s degree. There are significant differences in work experience and educational background between partners in the largest (Big N) audit firms and smaller (non-Big N) audit firms. Audit partner traits are related to audit quality, and the effects differ between Big N and non-Big N partners. Originality/value The literature has examined audit partners’ career paths using international data. However, little empirical academic research has examined the career advancement of US audit partners. This study provides initial insights on the career advancement of US partners on a large scale and complements the recent research that examines audit partner characteristics and audit quality in the US market.
{"title":"Audit partner characteristics, career advancement and audit quality in the USA","authors":"C. Cai, Stephen J. Ciccone, Huimin Li, L. Xu","doi":"10.1108/maj-09-2021-3325","DOIUrl":"https://doi.org/10.1108/maj-09-2021-3325","url":null,"abstract":"\u0000Purpose\u0000This study aims to explore the relation among US audit partners’ characteristics, their career advancement and audit quality.\u0000\u0000\u0000Design/methodology/approach\u0000This study uses data from Public Company Accounting Oversight Board Form AP, Auditor Reporting of Certain Audit Participants, and publicly available online data sources. The hand-collected data on audit partners’ personal characteristics include gender, work experience and educational background. The measures for audit quality include restatements and audit fees.\u0000\u0000\u0000Findings\u0000The authors find that audit partner characteristics matter for the time it takes an individual to reach partnership after completing a bachelor’s degree. There are significant differences in work experience and educational background between partners in the largest (Big N) audit firms and smaller (non-Big N) audit firms. Audit partner traits are related to audit quality, and the effects differ between Big N and non-Big N partners.\u0000\u0000\u0000Originality/value\u0000The literature has examined audit partners’ career paths using international data. However, little empirical academic research has examined the career advancement of US audit partners. This study provides initial insights on the career advancement of US partners on a large scale and complements the recent research that examines audit partner characteristics and audit quality in the US market.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2022-12-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43641373","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-13DOI: 10.1108/maj-01-2022-3429
Imen Khelil
Purpose This paper aims to examine the impact of two psychological drivers, namely, psychological capital (PsyCap) and moral courage on internal audit effectiveness (IAE) and whether there is a substitution effect or complementary role of these psychological factors on IAE in the Tunisian setting. Design/methodology/approach IAE is measured using managers’ perceptions of the internal audit function based on 157 responses received from managers, while the remaining variables (including PsyCap and moral courage) are based on 157 internal auditors’ responses. Findings Findings suggest that PsyCap has a positive and significant impact on IAE, while moral courage has an insignificant impact on the same variable. Accordingly, PsyCap and moral courage are not playing a complementary role in improving IAE, and PsyCap substitutes for moral courage in increasing IAE. A battery of checks using interaction terms between moral courage and PsyCap corroborate these findings. Originality/value To the best of the author’s knowledge, this study fills one of the major research gaps in the auditing literature by emphasizing the role played by PsyCap in improving IAE. The findings may have policy implications for top firm management, especially when recruiting internal auditors who should enjoy efficacy, hope, resilience and optimism to help the organization achieve its strategic objectives and increase its performance.
{"title":"Psychological capital, moral courage and internal audit effectiveness (IAE): a complementary or substitution effect","authors":"Imen Khelil","doi":"10.1108/maj-01-2022-3429","DOIUrl":"https://doi.org/10.1108/maj-01-2022-3429","url":null,"abstract":"\u0000Purpose\u0000This paper aims to examine the impact of two psychological drivers, namely, psychological capital (PsyCap) and moral courage on internal audit effectiveness (IAE) and whether there is a substitution effect or complementary role of these psychological factors on IAE in the Tunisian setting.\u0000\u0000\u0000Design/methodology/approach\u0000IAE is measured using managers’ perceptions of the internal audit function based on 157 responses received from managers, while the remaining variables (including PsyCap and moral courage) are based on 157 internal auditors’ responses.\u0000\u0000\u0000Findings\u0000Findings suggest that PsyCap has a positive and significant impact on IAE, while moral courage has an insignificant impact on the same variable. Accordingly, PsyCap and moral courage are not playing a complementary role in improving IAE, and PsyCap substitutes for moral courage in increasing IAE. A battery of checks using interaction terms between moral courage and PsyCap corroborate these findings.\u0000\u0000\u0000Originality/value\u0000To the best of the author’s knowledge, this study fills one of the major research gaps in the auditing literature by emphasizing the role played by PsyCap in improving IAE. The findings may have policy implications for top firm management, especially when recruiting internal auditors who should enjoy efficacy, hope, resilience and optimism to help the organization achieve its strategic objectives and increase its performance.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2022-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42905624","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-09DOI: 10.1108/maj-02-2022-3463
Qianqun Ma, Jianan Zhou, Qi Wang
Purpose Using China’s key audit matters (KAMs) data, this study aims to examine whether negative press coverage alleviates boilerplate KAMs. Design/methodology/approach This study uses Levenshtein edit distance (LVD) to calculate the horizontal boilerplate of KAMs and investigates how boilerplate changes under different levels of the perceived legal risk. Findings The findings indicate that auditors of firms exposed to substantial negative press coverage will reduce the boilerplate of KAMs. This association is more significant for auditing firms with lower market share and client firms with higher financial distress. Additionally, the authors find that negative press coverage is more likely to alleviate the boilerplate disclosure of KAMs related to managers’ subjective estimation and material transactions and events. Furthermore, the association between negative press coverage and boilerplate KAMs varies with the source of negative news. Originality/value The findings suggest that upon exposure to negative press coverage, reducing the boilerplate of KAMs has a disclaimer effect for auditors.
{"title":"Disclaimer effect of key audit matters in China: negative press coverage and boilerplate","authors":"Qianqun Ma, Jianan Zhou, Qi Wang","doi":"10.1108/maj-02-2022-3463","DOIUrl":"https://doi.org/10.1108/maj-02-2022-3463","url":null,"abstract":"\u0000Purpose\u0000Using China’s key audit matters (KAMs) data, this study aims to examine whether negative press coverage alleviates boilerplate KAMs.\u0000\u0000\u0000Design/methodology/approach\u0000This study uses Levenshtein edit distance (LVD) to calculate the horizontal boilerplate of KAMs and investigates how boilerplate changes under different levels of the perceived legal risk.\u0000\u0000\u0000Findings\u0000The findings indicate that auditors of firms exposed to substantial negative press coverage will reduce the boilerplate of KAMs. This association is more significant for auditing firms with lower market share and client firms with higher financial distress. Additionally, the authors find that negative press coverage is more likely to alleviate the boilerplate disclosure of KAMs related to managers’ subjective estimation and material transactions and events. Furthermore, the association between negative press coverage and boilerplate KAMs varies with the source of negative news.\u0000\u0000\u0000Originality/value\u0000The findings suggest that upon exposure to negative press coverage, reducing the boilerplate of KAMs has a disclaimer effect for auditors.\u0000","PeriodicalId":47823,"journal":{"name":"Managerial Auditing Journal","volume":" ","pages":""},"PeriodicalIF":2.9,"publicationDate":"2022-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44436130","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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