Top PDF Audit Firm Characteristics and Audit Quality in Nigeria

Audit Firm Characteristics and Audit Quality in Nigeria

Audit Firm Characteristics and Audit Quality in Nigeria

Prior studies have shown that audit tenure has a significant influence on audit quality. This effect was either positive or negative. Watts and Zimmerman (1983) found that the longer the auditor tenure, the more dependence on clients. Auditor’s objectivity and independence will be destroyed and hence, audit quality reduces. Copley and Doucet (1993) opined that the longer the period of engagement, the higher the risk of lower audit quality. This was supported by the findings in: (Arrunada & Paz-Ares, 1998, Dopuch, King &Schwarts 2001, Ebrahim, 2001,). Walker, Lewis and Casterella (2001) also investigated the link between the length of the audit engagement and audit failures and found that auditor rotation may not necessarily improve audit quality. Carcello and Nagy (2004) explored the association of changing the auditor and audit quality from the point of view of fraudulent reporting. They found no significant relationships intended of the long-term tenure of the auditors. They concluded that mandatory changes of auditors might have a negative impact on audit quality.
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Stamatis Generic Model and Audit Quality in Nigeria

Stamatis Generic Model and Audit Quality in Nigeria

Abstract: Due to the frequent business failure coupled with incessant malpractices and increase in fraud techniques, there is a need for auditors to improve audit quality to address these negative occurrences. This study investigated the application of Stamatis generic model as a continuous quality improvement technique to influence audit quality in Nigeria. The population consists of 916 licensed auditing firms in Nigeria and 683 was the sample size upon which questionnaire was administered. 641 copies of questionnaire were returned representing a response rate of 94%. The questionnaire was validated by certified quality management. The reliability and internal consistency of the instrument for data collection was confirmed by the Cronbach’s Alpha reliability coefficients (Rc) of 82% obtained from pilot study. Pearson product moment correlation coefficient was used to confirm the research hypotheses. The result obtained showed positive correlations and statistically significant relationships among the level of Stamatis generic model awareness and degree of implementation (r =.752; p =.000) and the application of Stamatis generic model and audit quality (r =.630; p =.000). Findings show that though the model theoretically predicted audit quality but are yet to be implemented by auditors in Nigeria as a result of ignorance, inexperience and low level of firms’ resources. The study concluded that Stamatis generic model will improve the quality of auditor’s reports if implemented and through multiplier effect, influences the integrity of financial statements and stakeholders’ decision. It was recommended that audit firms should adopt SGM to have quality output and satisfied clients.
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The Nexus Between Audit Quality And Performance Of Listed Oil And Gas Firms In Nigeria

The Nexus Between Audit Quality And Performance Of Listed Oil And Gas Firms In Nigeria

joint provision of non-audit services potentially impairs auditors’ independence. In contrast, Umar (2012) investigates the stakeholders’ perception of non-audit services provision via auditor independence in Nigeria during the period 2005 to 2010; the findings reveal that there are a number of threats to auditor independence and one of which is familiarity, which comes as a results of long-term audit firm-client relationship. Also, Martinez and Moraes (2014) investigated the linkage between fees pay to auditors and firm performance of Brazilian listed companies from 2009 to 2010. Using Tobin’s q as a measure of firm performance, their results showed that there is a positive relationship between audit fees and firm value. In like manner, Farouk and Hassan (2014) examined the effect of audit quality and financial performance of listed cement firms in Nigeria. Using the correlational and ex-post facto designs, they employed multiple regression analysis to analyse the data. The findings show that auditor independence and auditor size have significant effects on the financial performance of the listed cement firms in Nigeria, with auditor independence having more influence than auditor size on financial performance. However, Sayyar, Basiruddin, Abdul Rasid, and Elhabib (2015) further investigated the impact of audit quality on firm performance in Malaysia; using multivariate regression analysis, the study found that there is insignificant link between audit quality variables (audit fees and audit firm rotation) and Return on Asset. Similarly, while audit fee is significantly and positively related to Tobin’s Q; audit firm rotation is insignificantly related to Tobin’s Q.
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BOARD STRUCTURE, CORPORATE CHARACTERISTICS AND AUDIT QUALITY OF NIGERIA BANKS

BOARD STRUCTURE, CORPORATE CHARACTERISTICS AND AUDIT QUALITY OF NIGERIA BANKS

Non-executive directors are associated with the responsibility for monitoring managers and thereby reducing agency costs that arise from the separation of ownership and control in day-to- day company management (Fama, 1980; Fama and Jensen, 1983). The importance of non- executive and independent directors is underscored by CBN code of corporate governance that stipulates that the number of non-executive directors on the board of banks should be more than those of executive directors and that at least two (2) non-executive board members should be independent directors ( who do not represent any particular shareholder interest and hold no special business interest with the bank), (CBN, 2006). Thus, higher proportions of independent and non-executive directors on boards are expected to induce a more effective monitoring function which then leads to more reliable financial statements. This is due to the incentive for non-executive and independent board members to develop reputations as experts in decision making (Fama & Jensen, 1983) and to provide an unbiased assessment of a management‟s actions. Their study explored board independence based on the agency theory. The Study by Adeyemi and Fagbemi (2010) on quoted non-banking Institutions in Nigeria showed that the governance variable of non-executive directors‟ ownership have significant relationship with audit quality
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AUDIT FIRM ATTRIBUTES AND AUDIT QUALITY IN NIGERIA

AUDIT FIRM ATTRIBUTES AND AUDIT QUALITY IN NIGERIA

Independence, according to Sweeney (1994) simply denotes the quality to be free from influence, bias or persuasion, the absence that will impair greatly the audit services value as well as the report of audit. Audit independent is one of the explanatory variables to be examined in audit firm attribute. Audit independence has to do with the absence of interests which leads to the creation of the risk of unacceptability of material bias with due respect to financial statements reliability. It might as well be seen as the auditor’s unbiased intellectual attitude for decisions to be made throughout the process of auditing and reporting. The instantaneous role of audit independence is to ensure the audit is served. It brings about more effectiveness in the audit and make sure that the objectivity of the auditor is properly planned and executed. Dubuisi, Okeke and Chinyere (2017) posit that the independence of audit can be seen as auditor’s unbiased intellectual attitude in decisions making all through the audit as well as the process of financial reporting. Previous studies have revealed that auditor independence have effects on audit quality (Enofe, Mgbame, Efayena & Edegware, 2014). Ndubusi, et al. (2017) examined audit quality determinants: Evidence from quoted health care companies in Nigeria and found a relationship that is positively and statistically significant with that of the independence of audit as well as the quality of audit. Likewise, positive relationship that is significant also existed between the independence of auditor and that of the quality of audit (Alim, Trisni & Lilik, 2007). It therefore follows that as auditor independence rises, the quality of audit rises likewise.
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7. Audit Quality and its Impact on Earnings Management of Quoted Conglomerates in Nigeria

7. Audit Quality and its Impact on Earnings Management of Quoted Conglomerates in Nigeria

This study examined the impact audit quality 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).
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MARKET IMPLICATIONS OF AUDIT QUALITY IN NIGERIA: EFFECTS ON SHAREHOLDERS’ EARNINGS AND STOCK PRICE PREDICTABILITY

MARKET IMPLICATIONS OF AUDIT QUALITY IN NIGERIA: EFFECTS ON SHAREHOLDERS’ EARNINGS AND STOCK PRICE PREDICTABILITY

Panel A results show that both component sof earnings are persistent. However, cash flow is of more quality, and predict future earnings more than the accrual component. It is regarded as having more persistence (0.56, p-0.000) than the accrual component of current earnings (0.145, p-0.000). The differential spersistence is because Cash flow is less subject to distortion than accrual. Again, both components of earnings significantly predict stock performance. The findings conform with (Sloan, 1996; Richardson et al., 2005; Okpa, 2018). Panel B results show that that ADI is a positive predictor of firm EPS. Stated differently, the more independent the auditors, the more reliable the EPS reported in the financial statements of manufacturing firms in Nigeria. The effect is found to be about 13.78, implying that audit independence is regarded as audit quality, which allows for greater confidence of the market in the reported accounting numbers of firms. The t-statistics value of 8.436 and p-value of 0.000 less than the 0.05 alpha level shows that the effect is statistically significant. Also, ADI is found to have a significant positive impact on market prices of stocks, with a coefficient of 14.73 (t-statistic= 4.108; p=0.001). Based on the result, audit firm size has significant effect on EPS and MPS of Manufacturing companies in Nigeria.
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Audit Firm Size, Audit Fee, Audit Reputation and Audit Quality: The Case of Listed Companies in Vietnam

Audit Firm Size, Audit Fee, Audit Reputation and Audit Quality: The Case of Listed Companies in Vietnam

Audit quality 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 audit quality. 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 audit quality 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 audit quality. Additionally, the results reveal that the more audit fees the auditors receive, the lower audit quality they provide. The critical role of audit quality has attracted significantly scholarly attention, however, prior studies have mainly focused on firms in developed countries. Little is known about audit quality in an emerging economy context such as Vietnam. This study adds to the limited number of studies on audit quality of listed companies in emerging economies.
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Audit Quality, Firm Characteristics and Real Earnings Management: The Case of Listed Vietnamese Firms

Audit Quality, Firm Characteristics and Real Earnings Management: The Case of Listed Vietnamese Firms

H 3 : Firm age has a negative effect on real earnings management. 2.3. Firm Leverage and Real Earnings Management Theory and empirical evidence have indicated different results on the relationship between leverage and real earning management. From capital provider’s perspective, financial reporting quality is critical in evaluating investment decisions and monitoring the use of their capital (Anagnostopoulou and Tsekrekos, 2016). Especially, due to diluted power, resulting high control costs and no welfare, individual investors have little motivation in controlling manager’s activities. Meanwhile, private debt-holders have motivation and opportunities to monitor borrower companies through the debt contracts and require of higher information quality (Alzoubi, 2017). This is also coincide with control hypothesis of Jensen and Meckling (1976) which mentioned that the nature of debt covenants can be served in controlling manager’s discretion in free cash flows. There is extensive research showed that companies with high (or increasing) debt level exposure to higher scrutiny and monitoring from creditors and bankers, which diminishes manager’s opportunities to engage in earnings management activities (Ahn and Choi, 2009; Rodríguez-Pérez and van Hemmen, 2010; Zhong et al., 2007).
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AUDIT COMMITTEE CHARACTERISTICS, BOARD CHARACTERISTICS AND FINANCIAL REPORTING QUALITY IN NIGERIA

AUDIT COMMITTEE CHARACTERISTICS, BOARD CHARACTERISTICS AND FINANCIAL REPORTING QUALITY IN NIGERIA

Licensed under Creative Common Page 1295 Carcello & Hermanson, 1999). DeZoort and Salterio (2001) document that audit committee members with accounting know- how are more likely to make better professional judgments than those without. Xie (2003), Abbott (2004) and Bédard (2004) document that audit committee financial expertise reduces financial restatements or constrains the tendencies of manager manipulating financial report. Krishnan (2005) and Zhang, Zhou and Zhou (2007) find that firms are more likely to be identified with deficiencies in internal control over financial reporting if their audit committees have less financial expertise. All, these studies suggest that financially knowledgeable audit committee members are more likely to prevent and detect material misstatements. Cohen et al. (2000) found that experienced external auditors believe that the lack of financial expertise of audit committee members negates the effectiveness of the committee.
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PERCEPTIONS OF ACCOUNTANTS ON FACTORS AFFECTING AUDITOR’S INDEPENDENCE IN NIGERIA

PERCEPTIONS OF ACCOUNTANTS ON FACTORS AFFECTING AUDITOR’S INDEPENDENCE IN NIGERIA

Larger audit firms are often considered to be more able to resist pressures from management (i.e. higher auditor’s independence). This is proven by almost all of the empirical studies that attempted to find the relationship between audit firm size and auditor’s independence, whereby they found that there is a positive relationship between them (Alleyne et al., 2006; Abu-Bakar et al., 2005). In fact, it has been argued that certain characteristics inherent in small audit practices may increase the danger of impairment of independence, for example, the tendency toward a more personalized mode of service and close relationship with the client (Robert & Darryl, 2009)). However, one should not conclude that large firms are immune to pressures from their clients.
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The Relationship between Audit Committee Characteristics, Audit Firm Quality and Companies’ Profitability

The Relationship between Audit Committee Characteristics, Audit Firm Quality and Companies’ Profitability

Watts and Zimmerman (1990) state that an auditor plays a significant role in monitoring managements' behavior, which reduces the agency costs, similarly, Xiao et al. (2004) note that agency theory postulates that audit mitigates the interest conflict between contracted parties. They add that big audit firms are more likely to be hired by managements with greater potential gains from external monitoring. Salehi and Mansoury (2009) assert that because large audit firms have their own resources such as superior technology and talented employees, these enable them to issue reports of higher quality than small audit firms do. Agency theory proposes that because a big audit firm has a reputation that needs to be maintained they will perform better in their job(Naser, 1998).Dietrich, Harries and Muller (2001) indicated that the reliability of fair value estimations is higher when the firm is monitored by external auditors especially the big audit firms. Bauwhede, Willekens, and Gaeremynck (2003) found that hiring one of the Big auditors decreases the earnings management. Geiger and Rama (2006) found that the big audit firms provide a high quality report in terms of producing lower errors compared with the non-big audit firms. Hayyani (2008) argue that big audit firms are better in predicting failure in companies in Jordan. Teitel and Machuga (2010) provided evidence on the relationship between the audit quality and earnings quality. They found companies that hire a high quality auditor show a high earnings quality. Similarly, Bauwhede and Willekens (2003) found a negative relationship between audit firm size and earnings management. In the contrary,Moroney and Dowling (2005) found no relationship between audit firm size and the auditor performance level. Shanikat and Abbadi (2011) indicated that the audit profession in Jordan is dominated by big audit firms and a few smaller national audit firms. Hence, they concluded that, in general, audit firms in Jordan are of low quality.
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Firm characteristics and quality audit of firms listed at the Nairobi securities exchange in Kenya

Firm characteristics and quality audit of firms listed at the Nairobi securities exchange in Kenya

The study recommended that there is need to increase the proportion of independent auditors since an increase in their number reduces the chances of financial misreporting and leads to positive perception by investors. In so doing, there is improved firm performance. Moreover, in order to reduce financial distress in a company there is also need to increase the number of independent directors because they are independent and without influence from the directors. The study also recommends that there should be high level of professionalism by the audit firms. This means that companies that are highly indebted and auditors fail to prove such indebtness should be fined or operating license be withdrawn so as to safeguard the shareholders of the companies. In addition the officials of the company who engage in misstatements of the financial statements should be sacked and charged in the court of law. The study recommends that measures should be put in place by relevant authorities like ICPAK for disclosure of pertinent issues such as audit fees to encourage availability of such data which are important variables in such a study. It was also noted that some listed companies failed to publish their audited accounts as per requirement by the CMA Act making available information limited. Consequently, disciplinary actions should be taken upon such companies for failure to comply with GAAPs and IAASB.
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Audit Committee and Earnings Management: Pre and Post MCCG

Audit Committee and Earnings Management: Pre and Post MCCG

Bédard et al. (2004) find that the audit committee that comprises financial expert member is negatively associated with discretionary accruals. In addition to financial expertise, DeZoort (1998) find that members with experience in auditing made internal control judgement more like auditors than do members without such experience. DeZoort and Salterio (2001) report that audit committee members with greater audit- reporting knowledge will show more support for the auditor in a dispute with client management than will members with less audit-reporting knowledge. In terms of business-specific expertise, Bedard et al. (2004) argue that being independent directors on the company’s board will allow them to develop their monitoring competencies by accumulating the knowledge of the company’s operation and activities. However, they find no significant association between the firm-specific expertises of audit committee members with earnings management. Based on these arguments the following hypotheses are proposed:
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The market for audit services in Kosovo

The market for audit services in Kosovo

Results of this study indicate that the size of auditee is a significant factor in determination of audit fee. It is reasonable because the larger the company size, requires the longer the audit process, and consequently the higher the audit cost. In other word, the number of hours needed to complete the audit work determines the amount of audit fee. Our results are in accordance with prior findings. Simunic (1980), concluded that the large client will have more transactions, therefore, requires the auditor to perform more detailed audit processes and procedures, and thus the auditors have to be more attentive and diligent to audit and review their clients business, which results in higher audit fees.
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Does Non-Audit Service Compromise Audit Quality?

Does Non-Audit Service Compromise Audit Quality?

Methods for controlling endogeneity include the Heckman selection model (2SLS), the propensity score matching technique, the before and after comparison method, and the paired t-test. Lawrence et al. (2011) argued that studies should utilize the propensity score matching technique, which is an advanced version of the paried t-test, since the Heckman selection model cannot control endogeneity effectively. However, since the propensity score matching technique analyze endogeneity by finding similar paired sample, if there is no proper substitution sample, the result may be distorted and it will face variable selection issues. Moreover, although there are many differences in audit compensation and audit time according to industry characteristics, the propensity score matching technique does not match similar samples in the same industry. Therefore, the before and after comparison method is the most reasonable method to analyze the effect of non-audit service. Accordingly, this study compares audit compensation, audit time and audit quality by years for the companies which received non-audit service at least once according to the before and after comparison method.
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Mandatory audit firm rotation and Big4 effect on audit quality: evidence from South Korea

Mandatory audit firm rotation and Big4 effect on audit quality: evidence from South Korea

The explanation for no significant association between ROT and signed abnormal accrual variables may be due to the fact that positive accruals and negative accruals are offset against each other. Myers et al. (2003) argue that regulators are not solely concerned with the dispersion in accruals, but they are also concerned about the distortion in earnings due to inappropriate income-increasing or income- decreasing accruals. Earnings can either be managed upward (income-increasing) or downward (income-decreasing) on terms favorable to management. Myers et al. (2003) and Chi et al. (2009) also separate absolute abnormal accruals into positive and negative accruals. Following these studies, we identify positive and negative abnormal accruals to test whether new auditors restrict extreme income-increasing and/or decreasing activities. Previous studies posit that ordinary least squares (OLS) estimates can be considered biased in a truncated sample; therefore, we estimate a ML (maximum likelihood) truncated regression, consistent with previous studies (Greene, 2000; Myers et al., 2003; Chi et al., 2009). In untabulated results, we find mixed results. Specifically, for income-increasing accruals from DAMJ, the coefficient for ROT is significantly positive (0.006, z = 2.69) for FROT versus PROT comparison, suggesting that the FROT sample do not constrain extremely positive accruals compared to the PROT sample. Second, for income-decreasing accruals from DAMJ, the coefficient for ROT is insignificant (0.001, z = 0.20) for the FROT versus PROT comparison, suggesting that the audit quality of the FROT sample is indistinguishable from that of itself in prior years. All the coefficients for ROT for the FROT versus VROT comparison appear to be insignificant, again suggesting that there is no evidence supporting that the mandatory rotation regime enhances audit quality. The results from the DAKO partitions are consistent with above findings.
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PROVISION OF NON-AUDIT SERVICES AND THEIR EFFECT ON AUDITORS’ INDEPENDENCE AND THE QUALITY OF AUDIT 

PROVISION OF NON-AUDIT SERVICES AND THEIR EFFECT ON AUDITORS’ INDEPENDENCE AND THE QUALITY OF AUDIT 

A survey was made to study the different services provided by auditors in the audit market in Sudan and study their perception the effect of provision of non-audit services on auditors' independence and the quality of audit. A questionnaire was disseminated to thirty audit firms. Analysis showed that only two types of services are provided regularly by auditors. Results have also shown that according to auditors' perceptions independence is not impaired by non- audit services however there are some areas that are controversial and need to be addressed. Equally important, evidence significantly showed that non-audit services do not adversely audit quality. Recommendations were made for policy and practice, of which: Governing bodies have to address the problems underlying auditors' independence and quality of financial reporting. Policy makers must have a rule that govern the provision of no-audit services and must establish a task force that address oversight issues when non-audit services are provides besides audit. In addition to that auditors must identify all threats to independence and must apply the necessary safeguards, and employ practices like peer reviews and mandatory rotations.
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Characteristics of firms that issue concise financial reports in Australia

Characteristics of firms that issue concise financial reports in Australia

choose to issue a summary report (Lee and Morse, 1990; Ward, 1998). The theory underlying the introduction of summarised annual reports is that the information needs of unsophisticated individual investors differ from the needs of other users, such as sophisticated institutional investors (Epstein and Pava, 1994). Furthermore, companies not only have an obligation to communicate useful information to unsophisticated investors as well as the more sophisticated ones, they also have an obligation (in varying degrees of importance) to consider issues of cost, profitability, risk, competitiveness, public relations and industry norms and expectations. Within the business environment, the CFR represents an opportunity for companies faced with the difficulty of accommodating different information needs to communicate with less sophisticated members in an appropriate manner. The extent to which that opportunity is embraced is likely to be affected by particular attributes of the firm.
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Digitization and Audit Profession

Digitization and Audit Profession

The term `Digitization` is believed to be used by Wachal (1971) [2], where he has discussed the implications on the society as a consequence from digitization. Digitization is the usage of technology and digital advances, such as analytics, mobility, social media and smart embedded devices, to radically improve performance. Digitization and sweeping developments in Information Technology (IT) has stimulated the computer program designers to design the soft wares to assist Auditors in examining, testing, gathering evidence, conducting analytical tests, evaluating internal control, sampling data, documenting the audit, scheduling the audit, printing exception reports and preparing audit reports (Crutchley, C.,et al. 2007) [3]. Though this process is a topic within auditing research and theory, the auditors and the clients are exploiting and implementing digital innovations to have business efficiencies, increase customer satisfaction, increase productivity and to develop good business strategies [4]. The machines, methods and products become smarter and smarter with advancement in the technology, like ‘Sensors and Radio-frequency.
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