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  • Book Review of Disruption in the Audit Market: The Future of the Big Four, Financial Failures & Scandals: From Enron to Carillion, and The Future of Auditing

    This article provides a concise review of the three books, Disruption in the Audit Market: The Future of the Big Four (ISBN: 978–0367–220‐66‐2), Financial Failures & Scandals: From Enron to Carillion (ISBN 978–036‐7,220‐73‐0), by Prof. Krish Bhaskar and Prof. John Flower, together with Mr. Rod Sellers, and The Future of Auditing (ISBN: 978–0367–220‐66‐2) by Prof. David Hay.

  • Issue Information

    No abstract is available for this article.

  • Exploring the antecedents of internal auditors' voice in environmental issues: Implications from China

    The purpose of this article is to explore the antecedents of internal auditors' voice in environmental‐related issues. Using 226 responses from internal auditors and their immediate supervisors from China, we found that internal auditors' perceived organizational environmental orientation and their individual environmental orientation were significantly related to both their promotive and prohibitive voice in environmental issues. Internal auditors' perceived supervisory support for the environment was significantly related to their promotive voice, whereas internal auditors' environmental commitment was significantly related to their prohibitive voice. Moreover, internal auditors' environmental commitment mediated the relationships between the other three antecedents and their prohibitive voice in environmental issues. Our findings provide insights for researchers, practitioners, and regulators.

  • Corporate reputation and the timeliness of external audit and earnings announcement

    We examine the association between corporate reputation and the timeliness of external audit and earnings announcement. Changes in financial reporting regulation have resulted in longer audit delay, leading to an increase in the number of firms that announce earnings prior to audit completion, both of which have implications for the quality and usefulness of financial information. We find that corporate reputation is negatively associated with audit report lag, earnings announcement lag, and the likelihood of firms announcing earnings after audit completion. Our results are robust to a variety of sensitivity tests. We document important benefits in the form of timelier audits and earnings announcements derived from developing and maintaining a good corporate reputation. Our findings have implications for client firms and auditors, particularly given the challenges faced by auditors in terms of more onerous audit requirements and shorter filing deadlines, as well as demands for timelier information faced by firms.

  • Are the Big 4 audit firms homogeneous? Further evidence from audit pricing

    We provide new evidence on audit pricing differences within the Big 4 audit firms in the U.S. market. Industry expertise research argues that an audit firm with greater competencies can differentiate itself from competitors in terms of within‐industry market share and charge an audit fee premium for its services. We show that while KPMG's average fee premium is smaller than those of other Big 4 audit firms, PricewaterhouseCoopers consistently earns an above‐average fee premium and has remained the market share leader across most U.S. industries. More importantly, the supposed effects of industry specialization on audit fees become statistically insignificant after controlling for individual pricing differences within the Big 4. Overall, we conclude that the Big 4 firms are not homogeneous in audit pricing, and that the literature has apparently confounded an individual audit firm reputational effect (as first observed by Simunic, 1980) with an industry specialist fee premium in the U.S. audit market.

  • Organization capital and audit fees around the world

    We examine whether auditors consider organization capital in audit pricing decisions. Utilizing an international sample from 40 countries spanning the period 2001–2017, we find that firms with high levels of organization capital pay high audit fees: a finding that is consistent with both the risk‐ and the agency‐based arguments for audit pricing. Additionally, our results indicate that the positive relationship between organization capital and audit fees is reinforced in firms with pronounced business risks and agency problems, whereas it is relatively weak in countries with protective employment legislation. Our study contributes to the voluminous literature on the determinants of audit fees by showing that auditors price the risks related to clients' intangible assets, especially those embodied in a firm's key talents. Our study also contributes to the scarce literature on the effects of organization capital in international markets.

  • Investigating recent audit reform in the Australian context: An analysis of the KAM disclosures in audit reports 2017–2018

    The aim of this study is to explore the new Australian auditing regulations around Key Audit Matters (KAMs), fully adopted since 2017, by reporting on matters published in over 3,000 Australian statutory audit reports from 2017 to and including 2018 reports. The study provides the first evidence on whether auditors used the same or different disclosures related to audit procedures when reporting on the same KAM in the second year in Australia. The findings suggest the most common KAM disclosures are related to “impairments of goodwill and intangible assets,” “revenue recognition,” “asset valuation,” “acquisitions,” and “exploration and evaluation.” Around 70% of Australian auditees had the same KAMs disclosed in both years 2017 and 2018. The study found differences between large and small audit practitioners related to the average number of KAMs disclosed and the average number of audit procedures undertaken per KAM. There were also differences found between industries and auditee size.

  • Editorial by Dr Ilias Basioudis: Letter to the UK parliament on the future of audit
  • Group audits and earnings informativeness

    The Public Company Accounting Oversight Board (PCAOB) has cited investors as the main stakeholder group requesting greater disclosure about the involvement of auditors other than the group auditor. This study investigates the following: 1) whether (any) differences in investor perceived earnings quality of group audits are associated with the component auditor belonging to the same network as the group auditor and; 2) whether this association is affected by the location of the client. We find that earnings informativeness is lower for group audits conducted by audit firms related by a global network. However, this finding is pertinent only to non‐US‐domiciled companies. We also find that since the escalation of PCAOB scrutiny, the earnings informativeness of non‐U.S. companies has increased.

  • Applying a new audit regulation: Reporting Key Audit Matters in Jordan

    This study aims to explore the application of a new audit regulation, International Standard on Auditing no. 701 (ISA 701) on Key Audit Matters (KAMs), in the developing country context of Jordan. To do so, the researchers analyzed the content of audit reports issued in Jordan in 2017 and 2018, and conducted interviews with 18 Jordanian audit partners and directors involved in KAM reporting. Findings of this study show that the number of KAMs reported in Jordan is relatively small, and that they emphasize items such as accounts receivable, inventory, investment property, and revenue. They also show that audit firms generally disagree on the nature and content of KAMs, overwhelmingly tend to report industry‐specific KAMs rather than entity‐specific KAMs, and avoid reporting KAMs related to governance or internal controls. Justifications by interviewees include ambiguity of ISA 701 and discretion in its application, fear of displeasing closely held clients who do not demand high‐quality audits, and limited interest by regulatory authorities in the detailed content of KAMs.

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