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Auditing Firms (auditing + firm)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

The Relationship between Categories of Non-Audit Services and Audit Fees: Evidence from UK Companies

INTERNATIONAL JOURNAL OF AUDITING, Issue 1 2002
M. Ezzamel
Using survey data we examine the relationship between various categories of non-audit services and audit fees. Compared to previous research, we use a more refined classification of non-audit services both for incumbent and non-incumbent auditors, and control for the existence of an internal audit function and basis of disclosure. Our results suggest that the relationship between levels of audit fees and non-audit services varies by category of non-audit service. These results support explanations of the positive association between fees paid for non-audit services and audit fees in terms either of client specific differences, e.g. organisational complexity, or of events giving rise to the purchase of more audit and non-audit services rather than in terms of direct economic linkages between the cost functions for audit and non-audit services. We speculate that the presence of another auditing firm at the client in a consulting capacity may exert competitive pressure on the fee for external audit. [source]

Audit Programs and Audit Risk: A Study of Japanese Practice

INTERNATIONAL JOURNAL OF AUDITING, Issue 1 2006
Hironori Fukukawa
The current paradigm in audit practice for evidential planning is the Audit Risk Model. However, the notion of relevant risks has broadened with the adoption in recent years of holistic audit approaches encompassing business and process risks and an increased focus on fraud risks. This study examines whether audit planning is ,risk adjusted' using archival data from 235 clients from a well-established audit firm in Japan. We address all four aspects of audit planning (nature, extent, timing and staffing) and examine a wider variety of client risks than prior archival studies in order to reflect the current holistic audit approaches of global auditing firms. The main results indicate that although audit planning is based on the level of and change in assessments of many audit risk variables, the associations between client risks and audit plans are rather modest. In this respect, our findings are consistent with those from prior research. We also find that client risks that comprise business risk and fraud risk affect audit planning to some extent. Finally, we report exploratory results suggesting a substitution effect between audit planning judgments in response to higher client risks such as increasing the extent of validity tests while decreasing the extent of confirmations. [source]

Auditing struggles with crisis of confidence

JOURNAL OF CORPORATE ACCOUNTING & FINANCE, Issue 4 2003
Thomas R. Weirich
How is the auditing profession handling this crisis of confidence? The authors warn that new requirements will affect not just auditing firms, but also the way audits are done. Will this be a new era for auditors and their clients? © 2003 Wiley Periodicals, Inc. [source]

Market Implications of the Audit Quality and Auditor Switches: Evidence from China

JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2009
Z. Jun Lin
Independent audits enhance the credibility of corporate financial reports and assist investors to make rational decisions in the capital market. Nonetheless, the utility of the auditing function depends upon the quality of audits, which is determined by the independence and expertise of auditors. Hence, auditor choice and switch will not only affect an audit's quality, but will also influence decisions made by investors and other market participants. The purpose of this paper is to investigate how investors respond to the quality of audits and auditor switches in the Chinese context. Empirical results show that the quality of an audit and switching to a larger auditor have a positive (negative) impact on earnings response coefficients (ERCs) for firms with positive (negative) abnormal earnings. In contrast, switching to a smaller auditor has a negative (positive) impact on ERCs for firms with positive (negative) abnormal earnings. These results suggest that large auditing firms (Top 10) in China are perceived as more effective for curbing income-increased earnings management, which leads to higher (lower) ERCs for clients with positive (negative) abnormal earnings. Firms' switching to a larger auditor may signal high-quality earnings. Therefore, investors more often increase stock prices when firms have positive abnormal earnings and less often depreciate prices for negative abnormal earnings. Similarly, switching to a smaller auditor may signal lower earning quality, resulting in opposite market responses. In general, the empirical evidence suggests that audit information is valued by the capital market in China. Large auditing firms have been able to product-differentiate themselves within the Chinese stock market. [source]

Compliance with the Disclosure Requirements of Germany's New Market: IAS Versus US GAAP

JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2003
Martin Glaum
This research examines compliance with both International Accounting Standards (IAS) and United States Generally Accepted Accounting Principles (US GAAP) for companies listed on Germany's New Market. Based on a sample of 100 firms that apply IAS and 100 that apply US GAAP, we investigate the extent to which companies comply with IAS and US GAAP disclosure requirements in their year,2000 financial statements. Compliance levels range from 100% to 41.6%, with an average of 83.7%. The average compliance level is significantly lower for companies that apply IAS as compared to companies applying US GAAP. This study provides the first systematic evidence regarding the enforcement of US GAAP outside the US, and accordingly not subject to Securities Exchange Commission (SEC) review. The results unveil a considerable extent of non,compliance. The overall level of compliance with IAS and US GAAP disclosures is positively related to firms being audited by Big 5 auditing firms and to cross,listings on US exchanges. Compliance is also associated with references to the use of International Standards of Auditing (ISA) or US GAAS in the audit opinion. The findings add to the growing concerns regarding the lack of effective supervision in the German capital market. [source]