International Journal of Auditing

vLex
Publisher:
Wiley
Publication date:
2021-02-01
ISBN:
1090-6738

Issue Number

Latest documents

  • Corruption and audit fees: New evidence from EU27 countries

    This study examines the relationship between country‐level corruption and audit pricing decisions across EU27 countries. Using a sample of 29,607 firm‐year observations for the period 2011–2021, I find that firms headquartered in more corrupt countries pay higher audit fees and have longer reporting lags. I also show that this relationship is stronger after the EU audit reform came into force in 2016. The results suggest that auditors respond to corruption risk stemming from the broader macroeconomic environment by increasing audit fees and audit effort. In additional analyses, I show how the association between audit fees and corruption varies across firm industries, and I document that female engagement partners tend to be more sensitive to corruption risk than their male counterparts. Ultimately, I find unexpected evidence indicating that financial reporting quality, proxied by discretionary accruals, is not adversely affected by corruption. This study addresses prior calls for a more granular understanding of external factors in audit research and provides the first European evidence of the association between corruption and auditor responses. The implications of this study should be particularly relevant for researchers, market participants and regulators.

  • Setting auditing standards: Analysis of a writing process

    This study investigates the work of actually writing auditing standards in France, a country that has not adopted the International Standards on Auditing (ISAs). Based on interviews, participant observation, and documentary study, I highlight the adaptation work carried out to develop French standards, with a transposition mechanism that goes far beyond simply translating ISAs. I emphasise the significant impact of legalism and the principle of hierarchy of norms. I also illustrate the writing conventions used to set standards that are clear and understandable for a wide range of stakeholders. My results show that every word counts in standard‐setting work, which makes it an iterative process involving experts in standard‐setting technique. This study opens the black box of standard‐setters' work and offers a new perspective for analysis of standard setting by considering it as a writing process.

  • Factors affecting team performance of external auditors in Iran: A Delphi–interpretive structural modelling approach

    This study employs the Delphi–interpretive structural modelling (ISM) approach to uncover and model factors influencing team performance in external audit. In Delphi interviews, 73 factors were identified, and a subsequent survey revealed 13 crucial factors. Among these, supervisor competence, team members' knowledge, and managers/supervisors' supportive attitudes were emphasized as top priorities among the essential 13 factors. These factors serve as guiding principles for interactions, shaping behaviour and attitudes. Notably, this study goes beyond previous research, which typically focussed on a limited number of factors, by identifying 73 factors influencing audit team performance and then determining and modelling the most critical factors based on expert insights. It also sheds light on the underappreciated role of supervisors, often overshadowed by audit managers or partners. Moreover, the study links these factors with transformational, servant, and ethical leadership theories, fostering a more balanced approach to future research in the auditing profession.

  • Audit simulation and learning styles: Enhancing students' experiential learning and performance at a MENA university

    Drawing on experiential learning theory (ELT), this study (1) explores students' perceived benefits of experiencing different learning styles through an audit simulation (AS) assignment and (2) analyses its role in enhancing students' performance at a Middle East and North Africa (MENA) university. The study compares students' performance across two different periods, 2019 and 2022, with 46 and 48 participants, respectively, independently completing a questionnaire of six open‐ended questions paired with follow‐up feedback, the instructor's observations and the analyses of students' grades. Our study findings indicate that the AS assignment enabled students to effectively experience different learning styles at different times during the AS learning process. They visualised an authentic AS experience by critically analysing and practically evaluating AS documents while showing strong preferences for initiating new experiences. It also reveals an improvement in students' grades after the AS implementation. Our study has theoretical implications relating to cognitive and constructivist learning, learning transfer and ethics awareness, as well as practical implications in audit education, skill development, teamwork, professional development, auditors' evaluation and curriculum assessment in other disciplines than auditing.

  • Issue Information

    No abstract is available for this article.

  • Internal auditing's role in preventing and detecting fraud: An empirical analysis

    Internal auditing plays a pivotal role in preventing and detecting fraudulent activities. However, the orientation and role of internal auditing in dealing with fraud risk can vary significantly across different companies. This study examines the relationship between the internal audit function (IAF) and fraud, providing new insights into the current practices of internal auditing. Using a survey dataset comprising responses from 275 Chief Audit Executives across Germany, Switzerland and Austria, we investigate factors that correlate with an increased propensity for IAFs to engage in fraud prevention and detection. Our findings suggest that a robust corporate governance environment significantly influences the extent to which the IAF is involved in preventing and detecting fraud. Shedding light on the positioning of internal auditing between management and the audit committee with respect to fraud, our results show that increased IAF involvement with management positively affects the level of activities to prevent and detect fraud, while increased IAF involvement with the audit committee has the opposite effect. Furthermore, we find that the propensity of IAFs to engage in fraud prevention and detection increases when the IAF applies technology‐based auditing techniques for risk identification. Our results have implications for building appropriate protection against the steadily increasing risk of fraud within organizations, while holistically addressing the ambiguity regarding the responsibility for preventing and detecting fraud.

  • Assessing audit effort in response to exogenous shocks: Evidence from Korea on the impact of enhanced audit standards and COVID‐19

    This study examines the effects of COVID‐19 and the enhanced internal control requirements (Korea Sarbanes‐Oxley or K‐SOX) on audit effort in Korea. The results show that both COVID‐19 and K‐SOX led to increases in audit effort. Regarding the comparative magnitude of these two shocks, COVID‐19 is associated with greater total audit effort, whereas K‐SOX is linked to greater IT audit effort. This study also finds that Big 4 firms negatively moderate the increase in total audit effort and IT audit effort caused by COVID‐19. Additionally, Big 4 firms moderate the effect of K‐SOX on mid‐sized clients. Specifically, Big 4 firms positively moderate the increase in total audit effort, whereas they negatively moderate the increase in IT audit effort caused by K‐SOX. This study also investigates the effects of COVID‐19 and K‐SOX on various ranks of auditors and the effects of these exogenous events observed across different industry sectors. Our findings provide insights into the impact of an unpredicted global health crisis and predicted stringent regulations on audit effort when they occur simultaneously, an area that has never been addressed due to its unprecedented nature.

  • Audit team diversity, work quality and affective state outcomes

    This paper investigates the audit team outcomes of team diversity. Diversity theory suggests that diversity can benefit a team's work quality if the variety of team characteristics improves decision‐making and performance. However, team diversity can have harmful affective outcomes if team members separate into different categories, and thus they feel stressed, intend to leave the profession or experience conflict between team members. We investigated this paradox in team diversity in an audit context at a Big 4 audit firm in Sweden, which provided proprietary team data. In addition, 335 individuals from 185 different audit teams responded to a questionnaire. Each participant responded to a survey about their experience with one specific engagement. Results indicated that team diversity benefits the audit team's affective outcomes of role stress, satisfaction and turnover intentions. However, diverse teams also reduce some audit teams' work quality outcomes, such as dysfunctional behaviour, performance, effort and perceptions of audit quality.

  • Audit outcomes of non‐financial misconduct

    We examine how non‐financial misconduct by corporations impacts audit outcomes. We use a novel database of penalties received by firms from federal, state and local agencies for legal violations not directly related to their financial reports and find that auditors raise fees following these violations. The magnitudes are economically significant: violating firms pay about $162,000 or 6% more in audit fees than comparable firms without violations. Additionally, auditors charge more when the penalty amounts are higher and infractions are more egregious. Companies fined for non‐financial misconduct are also more likely to receive going concern opinions. Our results are robust to propensity score matching, falsification tests and firm‐fixed effects and are not attributable to lax firm culture or “tone at the top”. These results highlight that firms' unethical conduct, even those that do not directly lead to financial reporting infractions, has consequences beyond just the penalties imposed by enforcement agencies.

  • External auditing arrangements of smaller authorities in England

    Less complex entities (LCEs) make a critical contribution to the public, private and voluntary sectors in England and internationally and account for the great majority of all local public audits. Recently, the role and objectives of financial reporting and external auditing in England have been subject to unprecedented criticism through a number of independent national reports. This paper discusses the auditing arrangements for LCEs in the public sector in England by examining the evidence generated by the local public audit review by Sir Tony Redmond. It discusses implications for the local public audit regime and considers whether the existing and proposed accountability and transparency arrangements are compatible with the new International Standard on Auditing (ISA) for LCEs. It contributes to the limited research on the new ISA for LCEs by investigating the differences and similarities between the new ISA for LCEs and the emerging auditing standards for English LCEs.

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