Where, AQ – auditquality, ERR – help of audit planning in preventing errors in auditing, help of audit planning in preventing fraud in auditing, help of audit planning in mitigating high risk. Then we specified an econometric model in OLS method for assessing the impact of audit planning in qualityaudit check-up as follows:
This study examined the impact auditquality on earnings management of listed conglomerate companies in Nigeria for a period of 12 years (2005-2016). There are 6 listed conglomerate companies on the Nigerian Stock Exchange as obtained from the Nigerian Stock Exchange (NSE) as at 31 st December, 2016 (Appendix B). Out of the 6 companies, four companies are studied. The selected companies are those that their annual reports and accounts were obtained for complete 12 years period. The companies include; AG Leventis PLC, Chellarams PLC, John Holt PLC and UAC of Nigeria PLC (Appendix C). This study utilized documentary firm – level data collected from the annual reports and accounts of the sampled firms. Panel data methodology using Pooled OLS, and random effect regression methods were used in analyzing the data using STATA 14.0. This is because the panel data methodology helps in exploring both time series data and cross-sectional data simultaneously (Muhammad, 2011).
statement (Deis and Giroux, 1992). Study done by Ghosh and Moon (2003) resulted a finding that auditquality is increasing along with longer audit tenure. Meanwhile, studi of Mai et al. (2008) found that the longer audit tenure, the lower its auditquality. Other factor that is also important in affecting auditor independency is fee audit. Fee audit is scale received by the auditor in conducting his/her duty. This besaran fee sometimes make an auditor in dilemmatic position, on one side auditor must be independent in giving opinion on financial report equity relating to the interest of many parties, however, on the other side, auditor also has to fulfill the requirement wanted by by a client paying fee for his/her service, in order to satisfy the client with his/her work and to keep using the service in the future (Ng dan Tan 2003). Competition among PAFs enables them to offer lower price. With this lower fee, PAF has tendency to cutdown several job vacancies, for example by not conducting certain auditing procedure. Empirically fee audit has proven that that variable very affects auditquality. Several study results found the existence of relationship between auditquality and audit service fee, for example a study conducted by Abdul et al. (2006) and Dhaliwal et al. (2008) that found a proof that fee audit significantly affects auditquality. Problems of auditquality become global issues, for instance International Forum of Independent Audit Regulators (IFIAR). IFIAR is an international organization from regulators of Public Accountant and Public Accountant Firm assistance and supervisor that are independent towards profession. Regulators attending are led by executive chairmen from institutions that have the authority in assisting and supervising
In recent decades, there has been a noticeable increase in the practice of earnings management (EM) as a proxy for financial reporting, especially real activities, with effect on the quality of financial statements. The role of the audit committee in mitigating EM remains ambiguous because of inconclusive findings. Therefore, this study examines the moderating effect of auditquality and audit committee on financial reporting quality, also known as real earnings management in Malaysian companies. The results show that corporate governance mechanism such as financial accounting expert, meeting and indicate significant results with real EM while, audit committee independence and size, shows an insignificant result on real EM. In addition, the results show that auditquality of the audit committee leads to less aggressive EM practice in real activities. The findings also show that auditquality and audit committee has a significant role in restricting the real EM. Auditquality is found to significantly moderate the relationship between audit committee with financial reporting quality proxy. Overall, this study provides a reference point for the relevant parties such as regulatory bodies, policymakers and standard setters towards improving the quality of earnings and corporate governance practices in ensuring credible accounting information.
factors that influence the quality of an audit is also ongoing. Among them is a study conducted by DeAngelo (1981) which examined the impact of the size of KAP on auditquality. Hoitash et al (2007) conducted a study by assessing how the influence of unusual audit fees on auditquality. In addition to these studies, Chang et al (2017) also attempted to analyze the effect of auditor workload on auditquality. In addition to the commercial sector, research on auditquality is also carried out in the public sector including research conducted by Deis Jr. and Giroux (2004) that measures audit tenor, number of clients, size of KAP and client financial conditions, and supervision from other parties on the quality of institutional audits school. As an association of Public Accountants in Indonesia, IAPI also conducts studies related to auditquality. On September 10, 2018, IAPI issued a Decree of the IAPI Management Board which regulates auditquality indicators for KAP in Indonesia. In the IAPI Board's Decision, IAPI believes that auditquality is influenced by audit competence, ethics and independence of auditors, time allocation by key engagement personnel, quality control system, results of supervision or inspection, range of control arrangements, organization and management of KAP and fee policy. Based on this, IAPI believes that by increasing these components, the auditquality in Indonesia can also be improved. With this in mind, this paper intends to examine three components which, according to IAPI, will affect auditquality, namely auditor competence, auditor independence and auditor workload. This research is expected to provide empirical evidence whether these three components identified by IAPI really affect auditquality in Indonesia.
Auditquality is considered as an essential factor affecting the reliability of financial information. The aim of this study is to assess the effects of audit firm characteristics, including audit reputation, audit fees and audit firm size, on auditquality. A sample of 192 companies listed on Hanoi and Ho Chi Minh Stock Exchange for the period of 2006-2014 was selected. Multiple regression was used to analyze the data. The findings show that Big 4 auditors in Vietnam provide high auditquality than non-Big 4 auditors. Interestingly, in Vietnam context, except for the audit firms in the Big 4 group, the findings suggest that smaller audit firms provide better auditquality. Additionally, the results reveal that the more audit fees the auditors receive, the lower auditquality they provide. The critical role of auditquality has attracted significantly scholarly attention, however, prior studies have mainly focused on firms in developed countries. Little is known about auditquality in an emerging economy context such as Vietnam. This study adds to the limited number of studies on auditquality of listed companies in emerging economies.
Our study has provided an overview of the impact of the corporate governance quality on auditquality in Malaysia during the period from 2003 to 2012 (i.e., pre-and post-2007 Code period), using the effectiveness of the board and AC to proxy for corporate governance quality and audit fees to proxy for auditquality. The timeframe is interesting and appropriate as the Code was revised in 2007 and the 2007 Code was aimed at strengthening the roles and responsibilities of the board and AC. The sample has focused on 457 non- financial companies that had listed and traded their shares on the main board of Bursa Malaysia from 2003 to 2012. There is no evidence to show that the effectiveness of AC has a significant influence on audit fee in the pre- and post-2007 Code period. The results also show that the effectiveness of the board does not has a significant influence on audit fees in the pre-2007 Code period but it has significant influenced on the audit fees in the post-2007 Code period. This suggests that the existing corporate governance framework particularly on the board has an influence on the quality of audit process, but the corporate governance framework in relation to audit committee has limitation in its governance role on audit process. Our results partially support the regulatory initiatives intention at enhancing role and responsibilities of the board and AC in order to improve the audit process.
Regarding the quality attributes the International Auditing and Assurance Standards Board (IAASB, 2014) states that auditquality encompasses inputs, processes, outputs, interactions and contextual factors. The most important input factor is the auditor and his or her values, ethics, attitudes, knowledge, skills, and experience. Concerning the process, quality audits are said to be performed in a rigorous manner, in accordance with laws, regulations and standards. The primary output is considered to be a useful and timely audit report containing the auditor’s opinion. Moreover, quality audits require proper interaction between auditors and other stakeholders. Lastly, the context of the processes and interactions has an influence on the auditquality. Context factors include, but are not limited to, corporate governance, audit regulation, cultural aspects and information systems.
Financial Reporting Council (2006b) considers five factors that influence auditquality to includes: audit firm culture, skills and personal qualities of audit partners and staff, the effectiveness of the audit process, and the reliability and usefulness of audit reporting, amongst factor that are exogenous to the auditors. Earlier studies used observable outcomes as proxies for auditquality this includes; audit opinions, auditors’ selection and change, decisions, financial statements outcomes and analysts forecast. Francis (2004) reviewed 25 years of empirical researches and found that difference exists in the auditquality which can be concluded by examining different auditors. Moizer (1998) examines the issue of auditquality from a behavourial perspective, typically identifying attributes that are perceived by financial statement preparers, auditors and users that are related to auditquality. He found out that the big audit firms provide quality service.
183 Thus, irrespective of arguments regarding the ‘optimal’ level of competition within the audit market, the present argument focuses on how it was through the interrelations (linkages and linking work) of contemporaneous discourses and priorities of financial stability, the free market, the EU’s single market ambitions and competition which served to harden the connections between auditquality, independence and competition. These relations served as the lens through which the quality discourse would come to be articulated, showing acutely one means by which quality is constitutive of these wider discourses and priorities, or if you rather, the social. However, the argument currently being made is not merely an analysis of the latest struggles to regulate quality, conditioned by the rise in this period of neoliberalist tendencies and policies. More importantly, and evaluated as a longitudinal study, the central argument of this thesis rests on what this analysis in turn reveals about quality itself. The pre-conditions which gave rise to the advent of mandatory rotation suggest that the quality discourse, at any given time, is located within a wider network comprised of an intersecting social, political and economic field and not necessarily, or at least entirely, rooted within any underlying ‘reality’. World events periodically punctuate that field which leads to attendant changes in practice, regulation and academia. It is, however, at the interrelations of these discourses which gives not only the contemporary meaning of quality but also endows quality with the means by which its nature is exceedingly malleable and its reach is spread. This malleable nature gives quality the means by which multiple actors from different domains to act together, and separately through the development of arena specific proxies, all in the name of quality. In this sense, we can conceive of quality as a boundary object (Starr and Griesemer, 1989). Through these actions, which are dependent on the linkages to bring together ideas, those arenas of activity become re-configured in part leading to new conceptualisations of the problem and in this way, a changing discourse and meaning of auditquality.
This study is conducted to investigate the impact levels of determinants influencing auditquality of ODA projects with the case of State Audit of Vietnam. By interviewing state auditors, observing audit activities in the audit process of ODA projects and sending questionnaires to auditors, primary data were used for running the regression model of auditquality. The results show that two groups of external factors of legal framework and auditee have positive relationships with auditquality, but auditee has a stronger impact. For internal determinants, the impact levels to auditquality reduce from expertise to duration, knowledge, profession with a significant level of 1%. Compliance variable has the lowest level of influence with 10% of a significant level. Working conditions and control are not statistically significant and no impact on the auditquality of ODA project. Based the findings, some recommendations are given for State Audit of Vietnam to improve auditquality of ODA projects.
The main factor that is generally and empirically proven by previous research is the time budget pressure that encourages reduced auditquality behavior. Willett and Page  found that the biggest cause of auditquality decline and auditor performance was influenced by time budget pressure factors. Improper audit time allocation can lead to the emergence of behavior that threatens auditquality. Determination of the audit time budget which is too short or too long will have an impact on the effectiveness of the audit. The results of the McNamara and Liyanarachchi  study also found that the reduced time budget led to significantly reduced auditquality behavior. However, different results were found in Sukmanto's  study which stated that time budget pressure factors did not significantly influence reduced auditquality behavior.
Therefore the company’s revenue can be divided into two cash and accrual elements. In comparison to the cash element, the accrual element has less objectivity and consequently it is less reliable. This problem, on the one hand, derives from the accrual items involving measuring future benefits or commitments that exist currently. With regard to the mentioned points, the main question of this research is that whether the auditquality and the cost of equity can be effective on the sustainable profits? In other words, can some features including the audit tenure and the audit office be influential on the company’s sustainable profits?
Over the past years, many studies have investigated the factors influencing auditquality and fee. Few studies have examined the effect of ownership concentration, especially family ownership and control on audit fee and quality. Studies show that there are two views about the effect of family control and ownership on audit fee and quality. The agency theory states that family firms may decrease or increase agency problems (Khan and Subramaniam, 2012). According to this theory, however, there are motives for family firms to maximize personal interests and to influence the process of financial reporting which result in increased agency costs. As a result, increased agency costs require risk evaluation and high audit efforts and therefore a higher audit fee. On the other hand, family ownership can also be considered for the improvement of internal monitoring and reduction of conflicts of interests between manager and owner, therefore resulting in decreased audit risk evaluation and audit fees (Khan and Subramaniam, 2012).
The results of this study indicate that ABFE have a negative effect on auditquality. Therefore, researchers advise governments and associations to periodically review the quality of KAP in relation to documentation related to the audit engagement, so it can produce a good qualityaudit. In addition, the auditor should be able to be professional in accordance with applicable standards in order not to be given written sanctions related to significant auditquality degradation because the fee received is too high or too low (IAPI, Peraturan Pengurus Nomor 2 Tahun, 2016). This study shows that the length of audit engagement provides high auditquality. This indicates that regulator should evaluate the rules regarding the duration of the engagement. Regulators should not only look at their independence, but also the time it takes the auditor to understand the client’s business in order to create the proper audit procedures.
Over the years, there has been much debate regarding auditquality. The industry has struggled with how to define auditquality, as well as, how to identify the proper framework and indicators for assessing auditquality. Auditquality gained even more attention after corporate scandals, such as Enron (2001), WorldCom (2002), Tyco (2002), HealthSouth (2003), American Insurance Group (2005), Bernie Madoff (2008) and Lehman Brothers (2011). These scandals shattered the publics’ opinion of the accounting and auditing profession and caused investors to question the quality of the audits performed. To date, there is still “little agreement on how to define auditquality, let alone how to measure it” (Dickins et al. 2014, 1). This paper reviews the most recent academic articles published in the top journal during 1981 through 2017.
According to Geiger and Rama , any effort to ensure that public interest is protected while the needs of users of audit works are truly met, must be founded on authentically functioning auditquality mechanisms. It is all a matter of res- ponding to healthy standards of accountability required of state or parastatal bodies. When audit reports or findings are free from misrepresentations, distor- tions, or bias, it is more than likely that thoroughly-documented audit analyses will ensure stakeholders’ or public adhesion or approval, leading in turn to en- hanced levels of trust, confidence and assurance . These writers claimed that, in the process, auditquality is sure to demonstrate that principles of good go- vernance are truly functioning in the best interest of a country and its people.
Audit delay is another characteristic that can be considered to enhance the quality of auditing. Auditing brings about the transparency as well as the accuracy of published financial statements and the need to address the cause of auditing delay cannot be overemphasized. Audit around the world has been used in various ways to identify the time past between the close of the fiscal year as well as the field work of audit. Latter part of it is usually the date that the applicable tests of audit work are found to have been completed and the auditor leaves the place where the clients reside. Audit delay according to Zohreh and Azadeh (2011) is the number of days between the fiscal year-end of a company and the date of the audit report. It is defined as “the number of days between the date of the financial statements and the date of the auditor’s report” (Sagin & Nikhil, 2019, P. 38). Audit delay is a challenge that is predominantly pernicious in most of the countries that are still developing where regulatory standards for auditing timeliness are found not to be properly enforced as well as where the entire culture of the business is not in agreement to detecting punctuality and matters efficiency such as financial reporting. Audit delay as it relates to the quality of audit can be seen in different perspective. H0 4 : audit delay does not have any significant effect with auditquality of quoted firms in
The review of the different perspectives related to auditquality increases our understanding concerning the various concepts and factors affecting auditquality in practice. The analysis reveals that the majority of academic research applies the notions of the competence and independence of the auditors as the key concepts to measure auditquality. Despite the significant contribution of academic research on auditquality, this concept of auditquality is said to be narrow in focus, and the proxies that are used to measure it are still inconclusive (Duff, 2004). In addition, the majority of the research utilizes quantitative approaches, such as archival, surveys and experiments that fail to address or understand auditquality in its actual audit setting. It is important to note that the proxies of auditquality cannot be defined in strictly quantitative terms (Knechel et al., 2013). According to Humphrey (2008), even if the researcher introduces more variables or complexity into surveys or experiments or archival data, it is still debatable whether a researcher can capture or understand the pressure and influence of the audit environment on the quality of audit performance. As a result, these studies are unlikely to capture the actual audit practices, which are important to further understand auditquality.
Therefore, the effectiveness of MAFR depends on which of the two forces (i.e., enhanced auditor independence versus lack of understanding of a client’s business and industry) dominates. First, with regard to the impact of MAFR on auditor reporting decisions for financially distressed firms, if the force of enhanced auditor independence outweighs the lack of understanding of a client’s business and industry, newly rotated auditors under MAFR are expected to issue more appropriate audit opinions to financially distressed firms (e.g., GCOs) compared with newly switched auditors under VAFC. Specifically, newly rotated auditors are expected to be more likely to issue a FGCO to financially distressed firms in their initial audits. In addition, considering that the newly rotated auditors with enhanced independence under MAFR are expected to more conservatively conduct their initial audit of new clients (FGCO firms), we predict that (FGCO) firms audited by these auditors are more likely to have high- quality financial reporting such as lower signed discretionary accruals and higher accruals quality. Second, if a lack of understanding of a client’s business and industry outweighs the force of enhanced auditor independence, our predictions discussed above will be reversed. Lastly, if the force of enhanced independence is not significantly different from the lack of understanding of a client’s business and industry, we do not expect a significant difference in auditor reporting decisions for financially distressed firms during initial financial statement audits or in financial reporting quality between initial audits of (FGCO) firms under MAFR and VAFC. Further, as discussed previously, prior literature also provides mixed results on the impact of MAFR on auditquality and/or financial reporting quality.