According to Anderson et al. (1998), independent auditors are charged primarily with the responsibility of reporting on the financial statements of organizations. They are to state categorically whether or not in their opinion, the statements show a true and fair view of the profit or loss and the financial position of the company. In statutory audit, the auditor who must be a professional, can neither vary nor limit his reports as it must be in compliance with the status (Uzuh, 2006). The auditor also renders other services in which reports are generated for the clients. Such other reports are expected both to be in line with the terms of reference and have a good measure of quality. The audit clients should have value for his money and be satisfied at the end of the assignment (Eduardo et al., 2002). Whether the assignment is statutory or non statutory, the auditor should take necessary steps to improve the methodologies used, tools applied, work flow and the quality of his outputs (DeFond et al., 2002). Okpala (2012) stated that initially, the idea of quality management upon which Stamatisgenericmodel is based is a platform for reducing defects and errors in products through the use of measurements, well defined methodology and steps.
According to O'Sullivan and Diacon (2002) more audit hours and more specialized audit personnel are needed for a more thorough investigation leading to higher audit fees. Hence, it is expected that higher audit fees indicate a higher qualityaudit, as more audit exercise is required to ensure that the financial reports are free from material misstatement. Hoitash, Markelevich, and Barragato (2007) investigated the link between audit fees and auditquality. Their findings show that fees paid to auditor can impact in a way; large fees paid to auditor increases quality of audit, which indicates a significant positive relationship between audit fees and auditquality. Bell, Doogar, and Solomon (2008) maintained that the risk- based approach of audit planning and subsequent pricing means that clients perceived by the auditor as risky are typically assigned more efforts, which in turn results in higher audit fees. Yuniarti (2011) examined strength of metrics that affect auditquality of 24 Bandung firms at 2009. He proffers that higher audit fees increase and improve auditquality due to auditors’ effort, and accounting firm should enhance amount of audit fees that lead to higher auditquality. However, the study found that audit fees significantly and positively affect auditquality. Yassin and Nelson (2012) employed audit fee as indicator for auditquality. They proffered that, a higher audit fees means that auditors provide sufficient audit services to the companies compared to lower audit fees. Moutinho, Cerqueira, and Brandao (2012) examined the relation between audit fees and firm performance. The result shows that there is a negative relation between fees pay to auditors and firm performance. Accordingly, Nam (2011) in Farouk and Hassan (2014) investigated the relation between audit fees as an indicator for auditor independence and auditquality of firms. Using multiple regression models, the study found that abnormal audit fee change rate is negatively related with auditquality. In Nigeria, Semiu and Kehinde (2011) examined the perception of auditor independence in Nigeria; their results indicate that the size of audit fee is the most influencing factor capable of deterring auditor independence in Nigeria. Similarly, Semiu and Johnson (2012) found that audit and /or non-audit fees threaten auditors’ independence in Nigeria when they investigated the effects of joint provision of audit and non-audit services on auditor independence, and find that
Audit fee is also regarded as one of the proxies that is adopted for the quality of audit to be measured. The amount that the auditor charged for the performance of audit process and for the accounts of a firm is what is regarded as audit fees (Walid, 2012). Audit fees that are high are reflected in higher costs which result from greater quality of audit (Okolie, 2014). According to Moizer (1997), audit fees are related with higher quality of audit resulting in higher reputation of auditors. A lot of studies have been done to look at the association which exists between fees of audit as well as the quality of audit. Audit fees and auditquality in Nigeria was examined by Onaolapo, Ajulo and Onifade (2017) and sample of cement corporations that are listed on the floor of Nigerian Stock Exchange was used. The result reveals that client size, audit fee, leverage ratio and audit tenure reveal a joint significant association with the quality of audit. Also, indicates that audit fee particularly has an impact that is significant and positively associated to the quality of audit. Aliu, Okpanachi & Mohammed (2018) investigates audit fees as well as auditquality of companies listed on the downstream sector of petroleum industry in Nigerian. The finding illustrates that audit fee as has insignificant and negative association with the quality of audit. H0 3 : audit fee does not have any significant relationship with auditquality of quoted
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).
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 auditquality
The financial statement audit is an important tool for reducing information asymmetries and maintaining an efficient market environment. However, if the audit is to improve financial performance, there must be credibility and reliability as regards audited financial information. This research work was designed to examine the impact of auditquality on financial performance of quoted firms in Nigeria. The study is descriptive in nature and the correlational and ex-post facto designs were adopted in carrying out this research. Data were obtained basically from the published annual reports and accounts, and notes to the financial statements of the four firms that represent the sample of the study. The data collected were quantified and presented in tables. Multiple regression analysis using the SPSS Version 15.0 was employed in analyzing the data and testing the stated hypotheses. The results of the findings shows that auditor size and auditor independence have significant impacts on the financial performance of quoted cement firms in Nigeria. However, auditor independence has more influence than auditor size on financial performance. The study recommends that the management of quoted cement firms in Nigeria increase the remuneration of auditors in order to improve their financial performance. The study further recommends that management should employ the services of audit firms whose character and integrity is beyond question.
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 auditquality, 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.
Soo and Trompeter, (2003) and Carcello and Nagy (2004). Audit firm size was also found to be negative though statistically insignificant. This means a large audit firm is more likely to produce lesser qualityaudit. This is liken to produce lesser qualityaudit. This is likened to the ‘too big to fail” syndrome of Nigeria banks which saw the demise of large banks such as Intercontinental, Oceanic, to mention a few. The case of Arthur Anderson is still fresh in our memory; therefore, the negative relationship between the size of the audit firm and auditquality is not unexpected. This finding disagreed with the findings of previous studies (e.g. Teoh & Wong, 1993, Francis & Krishman, 1999, Reynolds & Francis, 2000). The variable of audit independence was positive but not statistically significant. This means the independence of the auditor is likely to increase auditquality. This position is consistent with Alim, Trisni and Lilik (2007), Windson, Warring and Rasmussen (2009).
There have been a lot of corporate scandals in the academic literature and across accounting profession on audit tenure, independence and financial reporting quality. The debate center whether the auditor’s independence in the auditor client relationship should be allowed to build a short or long term relationship with the client. The corporate scandals in many countries have raised question about the effectiveness and efficiency of auditor independence in financial reporting but the regulatory and professional bodies tried in enforcement and compliance to enhance the auditquality and restoring the investor’s confidence (Holma & Zamanb, 2011) Lennox(2014) opined that the main objective of audit have been shifted from presenting the financial statement in true and fair view and emphasis was not on the arithmetical accuracy but on a fair presentation of financial reporting. Accounting and auditing play a significant role in principal – agent relationship (i.e. agency relationship). The agency relationship between owners and managers in a firm creates a natural conflict of interest because of the information asymmetry that exists between manager and shareholders.
Furthermore, Mihret and Yisman (2009) carried out a study entitled 'Internal Audit Effectiveness: An Ethiopian Public Sector case study with structured questionnaire, interview and observation as instruments of data collection. They found that certain factors such as internal auditquality, support from management among others, strongly affect effectiveness of internal audit whereas organizational structure and internal auditor's attributes have less impact on the same variable. In another study done by Enofe, Mgbame, Osa-Erhabor and Ehiorobo (2013) on 'The Role of Internal Audit in Effective Management in Public Sector' in Edo State with the use of Z- test,the researchers found that internal audit effectiveness played a role in ensuring effective management in public sector, among others. Similarly, a study carried out by Onoja, Ajanya and Audu (2013) on 'An Assessment of Internal Control Audit on the Efficiency of Public Sector in Kogi State Nigeria' with the use of questionnaire for data collection and chi-square model for analysis, found that internal audit can effectively check fraud and fraudulent activities in the public sector, among others.
The extent of the audit fee is basically elucidated by client attributes related to audit effort and audit risk (Turpen, 1995). Previous studies document that higher audit fees are related to lesser earnings management and higher financial reporting quality. For instance, Franke, Johnson and Nelson (2002) study the effect of audit fees and earnings management in US. The study reveals that audit fees have a negative significant relationship with earnings management. This is affirmed by Hoitash, Markelevich and Barragato (2007) who apply 13,860 firm-year observations and determine the influence of audit fees and auditquality in US. Their finding reveals a negative significant correlation between audit fees and discretionary accruals. Mitra, Deis and Hossain (2009) examine the relationship between audit fees and FRQ of Big 5 client firms in US. They employ a sample of 6,852 firm- year observations for the period of 2000 to 2005. Their finding reveals that audit fees reduce the likelihood of abnormal accruals and thus increase earnings quality. More so, Carmona, Momparler and Lassala (2015) explore the relationship between audit fees and auditquality of listed firms in Spain. They show that audit fee is negatively and significantly related to discretionary accruals. This indicates that higher audit price is related lower discretionary accruals and higher financial reporting quality.
Results An overall data agreement of 82.3% and overall data completeness of 95.6% were found, reflecting a moderate level of data accuracy and a very high level of data completeness. Half of all data disagreements were caused by information discrepancies, a quarter by missing discrepancies and a quarter by time, date and number discrepancies. Transcription discrepancies only accounted for 1 in every 50 data disagreements. The sources of inaccurate and incomplete data have been identified with the intention of implementing data quality improvement. Conclusions Regular audits of data abstraction are necessary to improve data quality, assure data validity and reliability and guarantee the integrity and credibility of registry outputs. A generic framework and model for data quality audits of clinical quality registries is proposed, consisting of a three-step data abstraction audit, registry coverage audit and four-step data quality improvement process. Factors to consider for data abstraction audits include: central, remote or local implementation; single-stage or multistage random sampling; absolute, proportional, combination or alternative sample size calculation; data quality indicators; regular or ad hoc frequency; and qualitative assessment.
he globalization of economy, technological advancements, and complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever-increasing attention to internal controls and internal auditing (Karagiorgos et al , . 2009 .(This developing role of the internal auditing is also reflected in its current definition, i.e. “internal auditing is an independent, objective assurance and consulting activity designed to add value and improve a company’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes” (Savcuk, 2007).An effective internal audit function will add value and improve an organization’s operations. Oxford Dictionary defines effective as having an effect or able to bring about the result intended. Dittenhofer (2001) and Omar, et al. (2007) defined effectiveness as the achievement of the objectives and goals. Beckmerhagen, et al. (2004) stated that in order to adequately measure audit effectiveness, evaluation must not done only on results of the audit against the planned objectives, but also the audit process (planning, execution to reporting and follow-up) and resources (auditor independence and competence). Omar, et al. (2007) explained that the effectiveness concept in the public sector focuses on the outcome or impact of a program or activity rendered to the public. A program is said to be effective if its outcome met its objective(s). Sterck and Bouckaert (2006) mentioned that the implementation of internal audit function in the public sector is most effective when there is (1) legal requirement for the establishment of internal audit function, (2) strategy for the development of competency of internal audit function staff, (3) support from top management and existence
Moreover nearly (50%) of the sample agrees that these services affect auditors decision about qualifying reports and device acceptable treatments in order to satisfy their clients. This result agrees with Simunic (1984). On the other hand the majority agrees that auditors’ rotation, creation and reporting to audit committees are not affected by the provision of non audit services. This finding agrees with Meuwissen et al ( 2002) who stated that the creation of audit committees neither affected by the provision of non audit services nor reporting to it. The majority of auditors also agree that audit fees are affected by the provision of services. This agrees with Wines (1994) who has found that auditors are less likely to qualify reports when higher level of non audit fees is derived. The majority also agree that auditors are willing to disclose non audit services fees and consider these services having no effect on the second partner review.
Recently, regulators and policy makers who witnessed the global financial crisis during 2007– 2009 began considering a variety of ways to enhance auditor independence and financial reporting quality, ultimately aiming at investor protection. Since the enactment of the Sarbanes– Oxley Act of 2002 (SOX), the Mandatory Audit Firm Rotation (MAFR) requirement has once again received significant attention from regulators and policy makers around the world, including the European Union (EU) and the U.S. Public Companies Accounting Oversight Board (PCAOB). In this paper, we investigate whether MAFR enhances auditquality in Korea. We find that under MAFR, newly rotated auditors are more likely to issue first-time going-concern audit opinions to financially distressed firms during their initial (first-year) financial statement audit compared with under the Voluntary Audit Firm Change (VAFC). Moreover, firms audited by mandatorily rotated new auditors have less discretionary accruals and higher accrual quality than those audited by voluntarily switched new auditors during the initial audit engagement. These results of earnings quality are more pronounced for firms that received a first-time going- concern audit opinion during the initial financial statement audit under MAFR. Taken together, the findings suggest that MAFR produces better auditquality than the VAFC. Further, our study provides implications for regulators and policy makers of countries considering the adoption of MAFR.
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.
In 2004, Kouram et al. analyzed the decline in auditquality (RAQ) by two factors: the time pressure and the risk of false reports. They hypothesized that there was a negative relationship between RAQ and the risk of false reports. The 106 experienced auditors employed in the five largest audit firms in Australia comprised the statistical community of this study. The case filed about a hypothetical manufacturing company with plans for timing and audit tests, and a section for studying two possible RAQ positions were given as follows: 1) Accepting suspicious audit evidence and evidence, and 2) Reducing a sample. selected. The results showed that accepting suspect documents was directly influenced by the time budget pressure variable but did not apply to the risk of false reports. But to minimize the sample, the risk factor has
Modern medical practice is increasingly dependent on reliable clinical laboratory services . Yet in Nigeria, clinical laboratories are grossly inadequate with weak infrastructure  and Quality Management Systems (QMS) are uncommon like in other developing countries  . Many laboratories are faced with numerous challenges including improper record keeping, documentation of procedures and lack of internal auditing. Fam- ily Health International (FHI) 360 with funding from the President’s Emergency Plan for AIDS Relief (PEPFAR) through United State of Agency for International Development (USAID) and Global Fund to fight AIDS and Tuberculosis and Malaria (GFATM) supported the Government of Nigeria to strengthen laboratories in 26 Pub- lic Health facilities in North West region of Nigeria for comprehensive Antiretroviral therapy (ART) services from 2005 to 2012. The key activities and support provided to strengthen the laboratories include, renovation of infrastructure, provision of alternate power sources and running water, procurement and installation of equip- ment, training of human resource, supply of commodities and reinforcement of the supply chain and logistics management systems. Others include establishment of the culture of planned preventive maintenance (PPM), in- troduction of laboratory quality management systems, registration for proficiency testing programs, develop- ment of policies, SOP, job aids, reporting and monitoring tools as well as improvement of information manage- ment, regular on-site technical assistance, monitoring and mentoring.
The Business Dictionary.comdictionary includes the following definition: "Collective plans, practices and supporting infrastructure by which an organizations aims to reduce and, possibly, eliminate lack of conformity with the specifications, standards and expectations of clients in the most effective way, in terms of cost, and as efficiently as possible."( Business Dictionary.com. Quality management system (QMS) definition).
Previous studies did not provide consistent results for how simultaneous provision of audit and non-audit services by an independent auditor to a client company affects auditquality. Researchers have identified endogeneity in the research method as the primary reason. Therefore, this study conducted analysis comprehensively using empirical data and research methods contrasting with existing studies in order to address the controversy related to endogeneity in effects of non-audit service by the same independent auditor with auditquality. This study used audit compensation and abnormal accruals variables simultaneously, and audit time variable using empirical data from Korean clients for comprehensive analysis. In addition, in order to control for endogeneity, the auditquality variable between before and after non-audit service is provided for companies which received non-audit service only. Study results found that the non-audit service meaningfully affects audit service quality before controlling for endogeneity. However, after controlling for endogeneity, the same independent auditor providing non-audit service did not affect the audit service quality. In other words, it was found that the non-audit service did not affect the quality of external audit after endogeneity from self-selection bias is removed and the homogeneity of samples is ensured by comparing the auditquality before and after the non-audit service was provided for companies at least once from the same independent auditor. Furthermore, this result was consistent using all audit compensation variables of auditquality, abnormal accruals and audit time variable.