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External Auditors (external + auditor)
Selected AbstractsFrom Member of the Company to Registered Auditor: The Role of the External Auditor in Corporate GovernanceAUSTRALIAN ACCOUNTING REVIEW, Issue 1 2009C. Richard Baker Corporate governance has often been defined in a narrow way as comprising ,the range of control mechanisms that protect and enhance the interests of shareholders of business enterprises' (Fama and Jensen 1983). In the corporate governance literature there has also been a general focus on the structure and functioning of boards of directors and the responsibilities of audit committees in relation to external auditing (Rosenstein and Wyatt 1990;Shleifer and Vishny 1997). This article looks at the evolution of the role of external auditing in corporate governance. The role of the external auditor has changed through time, and consequently it should not be assumed that the role of external auditing is fixed or that it cannot be changed to meet societal needs and expectations. This observation leads to the primary argument of our article, which is that the role of the external auditor in corporate governance ought to be expanded in order to enhance the effectiveness of corporate governance for the benefit of a wider spectrum of stakeholders and society generally. [source] Do External Auditors Perform a Corporate Governance Role in Emerging Markets?JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2005Evidence from East Asia ABSTRACT In emerging markets, the agency conflicts between controlling owners and the minority shareholders are difficult to mitigate through conventional corporate control mechanisms such as boards of directors and takeovers. We examine whether external independent auditors are employed as monitors or as bonding mechanisms, or both, to alleviate the agency problems. Using a broad sample from eight East Asian economies, we document that firms with agency problems embedded in the ownership structures are more likely to employ Big 5 auditors. This relation is evident among firms that raise equity capital frequently. Consistently, firms hiring Big 5 auditors receive smaller share price discounts associated with the agency conflicts. Also, we find that Big 5 auditors take into consideration their clients' agency problems when making audit fee and audit report decisions. Taken together, these results suggest that Big 5 auditors do have a corporate governance role in emerging markets. [source] External auditors' reliance on internal audit: the impact of sourcing arrangements and consulting activitiesACCOUNTING & FINANCE, Issue 2 2010Lois Munro M42 Abstract This study examines the impact of internal audit outsourcing and involvement in consulting on external auditors' reliance on the work of internal audit. We test whether these factors influence reliance on internal audit work already undertaken and the use of internal auditors as assistants, distinguishing between control evaluation and substantive testing. Involvement in consulting impacts reliance on work undertaken and the use of internal auditors as assistants for control evaluation. External auditors make greater use of internal auditors as assistants for substantive testing when internal audit is provided in-house. Overall, external auditors use internal audit more for control evaluation tasks. [source] The Influence of Nonaudit Service Revenues and Client Pressure on External Auditors' Decisions to Rely on Internal Audit,CONTEMPORARY ACCOUNTING RESEARCH, Issue 1 2005WILLIAM L. FELIX Jr. Abstract This paper investigates how external auditor provision of significant nonaudit services and client pressure to use the work of internal audit influence external auditors' use of internal auditors' work. More specifically, we study how external audit evidence gathering choices are influenced by nonaudit fees and client pressure. Our research is motivated by an observation that the magnitude of nonaudit services provided to audit clients introduces the risk that client management may leverage its position with the external auditor and potentially affect the audit process. We address this issue by extending prior research and focusing on the importance of various explanatory variables, including nonaudit service revenues, client pressure, internal audit quality, and coordination, to the external auditor's decision to rely on the work of internal audit. We use data primarily obtained through surveys completed by internal and external auditors. The survey responses represent 74 separate audit engagements. Our findings reveal that when significant nonaudit services are not provided to a client, internal audit quality and the level of internal-external auditor coordination positively affect auditors' internal audit reliance decisions. However, when the auditor provides significant nonaudit services to the client, internal audit quality and the extent of internal - external auditor coordination do not significantly affect auditors' reliance decisions. Furthermore, when significant nonaudit services are provided, client pressure significantly increases the extent of internal audit reliance. Thus, external auditors appear to be more affected by client pressure and less concerned about internal audit quality and coordination when making internal audit reliance decisions at clients for whom significant nonaudit services are also provided. [source] Sarbanes Oxley Section 404 Costs of Compliance: a case studyCORPORATE GOVERNANCE, Issue 2 2007Lineke Sneller In 2002 US Congress approved the Sarbanes Oxley Act (SOX). Section 404 requires companies to assess their internal controls and acquire an attestation of this assessment from their external auditor. In this paper, we investigate the costs of compliance of this assessment and attestation. The European division of a US listed company is used as a case study. The divisional project approach is described, and costs of compliance for this division are presented in two categories: assessment costs, mainly hours spent by internal staff; and attestation costs, mainly audit fees. The case study shows that the internal hours spent on assessment are approximately 12 times higher than the initial estimate made by the SEC in 2002, and that the realised other expenses are approximately 1.4 times higher than this estimate. Furthermore, a year on year increase of 50 per cent of the company's audit fee in the first year of Section 404 compliance is found. Companies can reduce the costs of compliance by implementing programmed controls, using auditors from countries with lower rates, remediating material weaknesses only, focusing on the internal control system rather than on individual controls, and by encouraging the auditor to rely on the company's assessment. [source] Internal audit outsourcing in AustraliaACCOUNTING & FINANCE, Issue 1 2006Peter Carey M42 Abstract The present study investigates the determinants of internal audit outsourcing using survey data on 99 companies listed on the Australian Stock Exchange, where 54.5 per cent fully rely on in-house facilities and 45.5 per cent outsource some or all of their internal audit function. Results from logistic regression analyses suggest that internal audit outsourcing is associated with perceived cost savings and the technical competence of the external provider. For a subsample of firms that have previously undertaken internal audit activities before outsourcing, contrary to expectations, the larger the organization the greater the propensity to outsource. In addition, smaller firms are found to be adopting internal audit for the first time, through outsourcing. These results suggest that internal audit outsourcing is an expanding business opportunity for professional accountants; but with 75 per cent of firms outsourcing to their external auditor, there are implications for external auditor independence. [source] Auditor Independence: A Comparative Descriptive Study of the UK, France and ItalyINTERNATIONAL JOURNAL OF AUDITING, Issue 2 2002Joanna E. Stevenson The independence of the external auditor has long been a subject of great debate, particularly by UK and US interested parties. With the growth and globalisation of the large multi-disciplinary firms, it has again been pushed to the fore: new ethical guidance issued by international bodies such as La Fédération des Experts- Comptables Européens (FEE) and The International Federation of Accountants (IFAC) and the activities of the Securities and Exchange Commission (SEC) and Independence Standards Board in the US have encouraged a wider consideration of the issue. In Europe, the European Commission has issued a Consultative Paper containing fundamental principles for adoption into Member States' own regulation on statutory auditor independence. Increasing pressure for the removal of obstacles to a single European audit market have resulted in safeguards of auditor independence in some countries being described as undesirable barriers. This paper considers the issue of statutory auditor independence across three EU Member States: the UK, France and Italy, by comparing the ethical guides and the legal and professional regulations in place, highlighting and discussing areas of divergence, and contrasting them with the EC's Consultative Paper. It takes into account factors such as culture and the historical development of auditing in order to explore the differences found. The paper demonstrates that positions taken in France and Italy on the issue of auditor independence differ markedly from that taken by the UK profession. Of the three countries reviewed, the UK viewpoint has most obviously influenced the drafting of the EC Paper. The implications of these variances for EU harmonisation are discussed, and the paper concludes that there is a clear need for empirical study of this important issue in Europe to better understand the reasons for differing perceptions and attitudes, and the repercussions of these differences on the process of European audit harmonisation. [source] From Member of the Company to Registered Auditor: The Role of the External Auditor in Corporate GovernanceAUSTRALIAN ACCOUNTING REVIEW, Issue 1 2009C. Richard Baker Corporate governance has often been defined in a narrow way as comprising ,the range of control mechanisms that protect and enhance the interests of shareholders of business enterprises' (Fama and Jensen 1983). In the corporate governance literature there has also been a general focus on the structure and functioning of boards of directors and the responsibilities of audit committees in relation to external auditing (Rosenstein and Wyatt 1990;Shleifer and Vishny 1997). This article looks at the evolution of the role of external auditing in corporate governance. The role of the external auditor has changed through time, and consequently it should not be assumed that the role of external auditing is fixed or that it cannot be changed to meet societal needs and expectations. This observation leads to the primary argument of our article, which is that the role of the external auditor in corporate governance ought to be expanded in order to enhance the effectiveness of corporate governance for the benefit of a wider spectrum of stakeholders and society generally. [source] The Influence of Nonaudit Service Revenues and Client Pressure on External Auditors' Decisions to Rely on Internal Audit,CONTEMPORARY ACCOUNTING RESEARCH, Issue 1 2005WILLIAM L. FELIX Jr. Abstract This paper investigates how external auditor provision of significant nonaudit services and client pressure to use the work of internal audit influence external auditors' use of internal auditors' work. More specifically, we study how external audit evidence gathering choices are influenced by nonaudit fees and client pressure. Our research is motivated by an observation that the magnitude of nonaudit services provided to audit clients introduces the risk that client management may leverage its position with the external auditor and potentially affect the audit process. We address this issue by extending prior research and focusing on the importance of various explanatory variables, including nonaudit service revenues, client pressure, internal audit quality, and coordination, to the external auditor's decision to rely on the work of internal audit. We use data primarily obtained through surveys completed by internal and external auditors. The survey responses represent 74 separate audit engagements. Our findings reveal that when significant nonaudit services are not provided to a client, internal audit quality and the level of internal-external auditor coordination positively affect auditors' internal audit reliance decisions. However, when the auditor provides significant nonaudit services to the client, internal audit quality and the extent of internal - external auditor coordination do not significantly affect auditors' reliance decisions. Furthermore, when significant nonaudit services are provided, client pressure significantly increases the extent of internal audit reliance. Thus, external auditors appear to be more affected by client pressure and less concerned about internal audit quality and coordination when making internal audit reliance decisions at clients for whom significant nonaudit services are also provided. [source] The Impact of Internal Auditor Compensation and Role on External Auditors' Planning Judgments and Decisions,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2001F. Todd Dezoort Abstract This paper reports the results of an experiment that investigates how external audit planning is affected when internal auditors have incentives and the opportunity to bias their evaluations. Specifically, we draw on attribution theory to examine how internal auditor eligibility for incentive compensation and participation in consulting (i.e., two factors that provide incentives to bias audit evaluations) affect external audit planning. In addition, we examine the effects of incentive compensation and a consulting role across two routine internal audit tasks , an objective tests of controls task and a subjective inventory valuation task , to evaluate whether their effects are contingent upon task subjectivity (i.e., opportunity to bias audit evaluations). Seventy-six external auditors from four Big 5 public accounting firms participated in an experiment that manipulated internal auditor compensation (fixed salary versus incentive compensation), the type of work that the internal auditors routinely perform (primarily auditing versus primarily consulting), and audit task subjectivity (objective tests of controls versus subjective inventory valuation). Our results suggest that the nature of internal auditors' compensation and work affect audit planning recommendations differently. The opportunity to receive incentive compensation results in less reliance on internal auditors' work and greater budgeted audit hours, but only for the subjective task. Although a consulting role decreases perceived internal auditor objectivity, it has a limited effect on planning recommendations. Specifically, consulting has no effect on reliance, and leads to greater budgeted audit hours only when incentive compensation is available. We discuss potential explanations for the results as well as implications for audit research, practice, and regulation. [source] The Audit Commission review of diabetes services in England and Wales, 1998,2001DIABETIC MEDICINE, Issue 2002B. Fitzsimons Abstract Aims of the Audit Commission The Audit Commission has a statutory duty to promote the best use of public money. It does this through value for money studies, such as that reported in Testing Times[1]. This work has been followed with a review of innovative practice in commissioning. These initiatives aim to support the implementation of the diabetes national service framework. The Audit Commission also appoints external auditors to NHS organizations who assess probity and value for money in the NHS; the latter by applying national studies locally and by carrying out local studies. Methods Research for Testing Times consisted of structured visits to nine acute trusts, a telephone survey of 26 health authorities and a postal survey of 1400 people with diabetes and 250 general practitioners. Local audits used a subset of the original research tools. Case studies were identified through a cascade approach to contacts established during Testing Times and through self-nomination. Results Rising numbers of people with diabetes are placing increasing pressure on hospital services. Some health authorities and primary care organizations have reviewed patterns of service provision in the light of the increasing demands. These reviews show wide variations in patterns of routine care. In addition, there is a widespread lack of data on the delivery of structured care to people with diabetes. People with diabetes report delays in gaining access to services, and insufficient time with staff. There are insufficient arrangements in place for providing information and learning opportunities to support self-management. Conclusion As the number of people with diabetes continues to rise, the potential for providing more care in a primary care setting needs to be explored. This will enable specialist services to focus more effectively on those with the most complex needs. [source] External auditors' reliance on internal audit: the impact of sourcing arrangements and consulting activitiesACCOUNTING & FINANCE, Issue 2 2010Lois Munro M42 Abstract This study examines the impact of internal audit outsourcing and involvement in consulting on external auditors' reliance on the work of internal audit. We test whether these factors influence reliance on internal audit work already undertaken and the use of internal auditors as assistants, distinguishing between control evaluation and substantive testing. Involvement in consulting impacts reliance on work undertaken and the use of internal auditors as assistants for control evaluation. External auditors make greater use of internal auditors as assistants for substantive testing when internal audit is provided in-house. Overall, external auditors use internal audit more for control evaluation tasks. [source] Efficient contracting and accountingACCOUNTING & FINANCE, Issue 2 2003David Emanuel This paper examines the role of accounting in an efficient contracting perspective of the firm. The firm is an alternative to the market when the costs of using the market become excessive. When a firm replaces the market, authority substitutes for the price mechanism in determining how decisions are made. This paper examines accounting's role in controlling the firm to ensure resources are put to their highest-value use. Accounting, together with employment contracts, compensation arrangements, debt contracts, internal and external auditors, and the board of directors including its audit and compensation committees comprise a package of mechanisms that have evolved to govern the firm. These institutional devices become the firm's efficient contracting technology. As accounting is part of that contracting technology, the accounting controls and systems that evolve and get implemented are efficient and the accounting methods that are used in calculating the numbers that form part of the firm's contractual arrangements are, likewise, efficient. [source] Internal Reporting of Derivatives: Some Australian EvidenceAUSTRALIAN ACCOUNTING REVIEW, Issue 23 2001Zoltan P. Matolcsy This paper provides evidence on the internal reporting of derivatives by Australian non-banking companies. The key findings, based on a survey of the top 100 Australian companies, are: (i) most companies have well established policies and procedures to deal with derivatives; (ii) for most companies the board of directors and the external auditors receive only monthly reports on derivatives, limiting their ability to monitor continuously the firms' exposure to derivatives; and (iii) none of the companies continuously revalues its derivatives and assesses the risks associated with its exposure, with more than half of the companies evaluating their exposures less frequently than weekly. [source] The Influence of Nonaudit Service Revenues and Client Pressure on External Auditors' Decisions to Rely on Internal Audit,CONTEMPORARY ACCOUNTING RESEARCH, Issue 1 2005WILLIAM L. FELIX Jr. Abstract This paper investigates how external auditor provision of significant nonaudit services and client pressure to use the work of internal audit influence external auditors' use of internal auditors' work. More specifically, we study how external audit evidence gathering choices are influenced by nonaudit fees and client pressure. Our research is motivated by an observation that the magnitude of nonaudit services provided to audit clients introduces the risk that client management may leverage its position with the external auditor and potentially affect the audit process. We address this issue by extending prior research and focusing on the importance of various explanatory variables, including nonaudit service revenues, client pressure, internal audit quality, and coordination, to the external auditor's decision to rely on the work of internal audit. We use data primarily obtained through surveys completed by internal and external auditors. The survey responses represent 74 separate audit engagements. Our findings reveal that when significant nonaudit services are not provided to a client, internal audit quality and the level of internal-external auditor coordination positively affect auditors' internal audit reliance decisions. However, when the auditor provides significant nonaudit services to the client, internal audit quality and the extent of internal - external auditor coordination do not significantly affect auditors' reliance decisions. Furthermore, when significant nonaudit services are provided, client pressure significantly increases the extent of internal audit reliance. Thus, external auditors appear to be more affected by client pressure and less concerned about internal audit quality and coordination when making internal audit reliance decisions at clients for whom significant nonaudit services are also provided. [source] | ||||||||||||||||||||||