ABSTRACT As critical information intermediaries in capital markets, auditors play a pivotal role in facilitating enterprises’ ‘going global’ strategies. This study investigates how enterprise internationalization drives audit demand and shapes auditor selection, using a sample of A-share listed firms from the Shanghai and Shenzhen Stock Exchanges over the period 2008–2022. We find that higher levels of internationalization significantly increase a firm’s likelihood of engaging a Big Four auditor or of switching to one. Moreover, executives’ overseas experience strengthens this positive association, consistent with the notion that international imprinting heightens their sensitivity to the liability of foreignness (LOF). Three extension analyses yield additional insights: motivation tests lend supportive evidence for the reputation-based rationale underlying auditor choice; the baseline effect is significantly stronger among non-state-owned enterprises; and internationally active firms display differentiated preferences among the four Big Four firms, exhibiting firm-specific selection patterns. These findings offer implications for multinational enterprises, audit firms, regulators, and foreign investors confronting the institutional and informational challenges inherent in cross-border economic integration.

Purpose Based on the assertion that audit hours/effort enhances audit quality, we posit that as Environmental, Social and Governance (ESG) ratings increase, shareholders have an incentive to secure increasing levels of audit hours as an ESG rating assurance strategy (audit demand theory). Design/methodology/approach Using a sample of South Korean listed client-firms over the 2011–2019 period, the study captures the association between ESG, (1) audit hours, (2) audit fees and (3) fees per hour. Findings Empirical results show that clients with higher ESG ratings secure increasing levels of audit effort/hours. Moreover, based on ESG status, no fee premium is imparted by audit firms. Results are robust to various forms of additional analysis, including Big4/NonBig4 division, endogeneity tests, amongst others. Originality/value The study contributes to policymaking by reporting that in a rare instance of audit hour information availability on annual reports, a basis exists for clients to secure increasing levels of audit hours, as an ESG rating assurance strategy. The study therefore extends the ESG assurance and audit literatures.

This study takes a close look at the new opportunities emerging in non-financial ESG auditing, while also highlighting the hands-on challenges that traditional audit firms face as they move into this area. Using a quantitative, survey-driven approach, data was collected from 18 business clients and 10 chartered accountant firms in the Hubballi-Dharwad region. The goal? To assess both the local demand for non-financial audits and how prepared audit firms actually are to deliver these services. Findings point to significant potential in ESG assurance. Awareness among business clients was universal—every single participant knew about ESG—and a strong majority (83.3%) indicated a willingness to seek out non-financial audit services from CA firms. Still, several hurdles are hard to ignore. Notably, 90% of the audit firms admitted they hadn’t received formal ESG training. Plus, the current regulatory landscape for non-financial audit standards remains murky at best. The research also identifies 20 different service areas within ESG, signaling a broad field of opportunity. Yet, it’s clear that bigger, systemic issues—such as the lack of professional development and ambiguous guidelines—need to be tackled collectively if this sector’s potential is to be fully realized. unclear regulations—must be addressed collaboratively to fully realize the sector’s potential.

Agency theory is a widely recognized framework used to explain the relationship between principals (capital owners or shareholders) and agents (capital users or managers) in modern corporate entities. This study reviews the past and present perspectives of agency theory in auditing and examines how the theory explains the demand for independent and statutory auditing as a monitoring mechanism in corporate entities. The separation of ownership and control in modern companies often creates conflicts of interest because capital users may pursue personal goals that differ from those of capital users. These conflicts are commonly associated with information asymmetry, incomplete contracts, and differing risk preferences between principals and agents. As a result, auditing has emerged as a fundamental governance mechanism designed to enhance accountability, transparency, and reliability in financial reporting. The study adopts a conceptual research design based on an extensive review of secondary sources, including academic journals, professional publications, and relevant literature on agency theory and auditing. The literature review highlights the evolution of agency theory from its early foundations to its modern applications in auditing and corporate governance. Historically, auditing was influenced by the police theory of auditing, which emphasized fraud detection. However, as corporate entities became larger and more complex, auditing practices evolved to focus more on providing assurance on financial statements, strengthening internal controls, and supporting corporate governance structures. The findings reveal that agency theory provides a strong justification for the existence of auditing because it helps reduce agency costs, mitigate information asymmetry, and improve the credibility of financial information. Independent auditors play a crucial role in verifying financial statements and ensuring that management actions align with the interests of capital owners. The study also highlights criticisms of agency theory, including its emphasis on self-interest and its limited focus on capital owners while overlooking other stakeholders. Summarily, the review concludes that agency theory remains highly relevant in contemporary auditing and corporate governance. The study recommends strengthening governance mechanisms, promoting auditor independence, and encouraging future empirical research to explore the impact of technological developments and evolving governance systems on auditing practices.

ABSTRACT This learning strategy is a compilation of six “Back to Basics” exercises presented during the 2024 Excellence in Auditing Education Workshop. These exercises are resources that use analogies and experiential learning to teach basic audit concepts. The exercises cover the following: (1) explaining the demand for audits, (2) introducing the concept of materiality, (3) introducing the Committee of Sponsoring Organizations of the Treadway Commission framework for internal control over financial reporting, (4) explaining management assertions through an audit of petty cash, (5) performing sampling and an inventory count, and (6) explaining audit reports. These exercises can be used in either undergraduate or graduate audit courses, and are flexible to allow instructors to modify, adapt, and expand on them to fit their classroom environment. The Teaching Notes accompanying this learning strategy provide additional guidance on implementation and supplemental files for instructors and students.

Synopsis The research problem This study investigated how national financial technology (FinTech) finance influences the external audit decisions of private, nonfinancial firms in developing economies. While FinTech is transforming financial systems and audit practices globally, its impact on audit demand in low- and middle-income countries remains underexplored. The test hypotheses The study tested two main hypotheses: first, that higher levels of FinTech finance are associated with increased firm-level demand for external audits; and second, that this relationship is mediated by institutional audit conditions and firm characteristics such as size, industry, and international orientation. Target population The analysis focused on private audited and unaudited firms operating across a range of low- and middle-income countries worldwide, drawing data from 2013 to 2020. Adopted methodology The study employed cross-country panel data econometric techniques, using probit models with country and year fixed effects. To strengthen causal inferences, the analysis incorporated instrumental variable regressions, Oster’s coefficient stability tests, and dominance analysis. Analysis The binary outcome variable, whether a firm’s accounts are externally audited, was regressed on national FinTech finance expenditure and a wide set of firm- and country-level controls. Robustness checks included sensitivity tests for sample restrictions, nonlinearities, and lag effects. Mediation was assessed via interaction terms with auditing standards, registration status, and employee training. Findings Results revealed that FinTech finance significantly increases the likelihood of firms undertaking external audits, especially in countries with strong regulatory environments. The effect is stronger for larger, digitally engaged, and export-oriented firms. Mediating factors, such as audit regulations, formalization, and workforce training, amplify this relationship. These findings underscore the growing role of FinTech in shaping audit behavior and highlight the importance of institutional support to maximize its transparency-enhancing effects.

As economic globalization deepens, Chinese enterprises are accelerating their internationalization process, making global operations a crucial strategic choice for enhancing competitiveness and achieving sustainable development. Against this backdrop, the impact of internationalization on audit quality has become a significant topic of interest in both academic and professional circles. This study examines the influence mechanism of internationalization on audit quality using Chinese enterprises from 2003 to 2022 as its sample. The findings reveal a significant positive correlation between the degree of internationalization and audit quality, indicating that international operations can effectively enhance audit quality. Robustness tests, including variable substitution and alternative dependent and independent variables, consistently confirm the core conclusions. Further analysis indicates that the moderating effect of foreign direct investment at the regional level significantly amplifies the positive impact of internationalization on audit quality. On one hand, internationalization reduces information transparency and increases financial risks, indirectly boosting audit demand. On the other hand, it enhances audit supply through talent influx and external audit services, ultimately elevating audit quality. Heterogeneity tests reveal that the quality-enhancing effect of internationalization is more pronounced in manufacturing, high-tech, and technology-intensive firms, with eastern and western enterprises outperforming their central counterparts. This study provides theoretical support for the relationship between corporate internationalization strategies and audit quality, offering valuable insights for policymakers seeking to optimize regulatory frameworks.

The increasing complexity of financial fraud and corporate misconduct has heightened the demand for high-quality investigative audits. Achieving such quality, however, remains challenging, as it requires auditor competence, professional skepticism, and the effective use of digital forensic tools. This study aims at examining how these dimensions are reflected in the academic discourse on investigative audit quality. A bibliometric analysis was conducted using 66 documents indexed in Scopus between 2015 and 2025, mapping global publication trends, thematic clusters, and scholarly collaborations. The results indicate a significant rise in research after 2020, dominated by Business and Accounting, with growing contributions from Computer Science. Four thematic clusters emerged: audit quality and skepticism, fraud detection and competence, digitalization and forensic technology, and ethics and governance. These findings reveal research gaps, particularly in the combined study of skepticism and forensic technology, and emphasize the need for curriculum redesign, professional training, and adaptive regulation.

ABSTRACT This study examines how independent directors’ reputational incentives affect firms’ demand for high-quality audit. We find that firms having a larger percentage of independent directors with low reputational concerns are more inclined to engage high-quality auditors. This evidence aligns with the notion that higher agency costs resulting from reduced monitoring by such directors increase firms’ demand for enhanced third-party assurance. The relationship is attenuated in firms with stronger alternative governance mechanisms but is more pronounced in firms undergoing equity issuance. In addition, we document that high-quality auditors mitigate the adverse effects of independent directors’ low reputational concerns on firms’ financial reporting quality.

We explore the role of auditor reputation in driving the value of smart contract audits (SCAs) within the decentralized finance (DeFi) ecosystem. Given the lack of regulatory oversight and the risk of cybersecurity breaches against the protocols comprising the DeFi ecosystem, a marketplace has emerged for voluntary on-demand assurance to identify vulnerabilities in smart contracts’ coded logic. After documenting that market participants value SCAs and exploring the protocol attributes associated with the demand for smart contract audits, we show that auditor reputation can be established through both advertising (i.e., engagement on Twitter) and the delivery of a high-quality audit, which significantly shape the extent to which an SCA is valued. Additional analyses suggest that the value of an SCA is maximized when both high advertising and high audit quality are present, highlighting the complementary role of these two factors in enhancing auditor reputation. Furthermore, we find that events conceivably damaging the reputation of the auditor (i.e., breaches of protocols recently audited) generate a negative spillover to the auditor’s other recent clients. Overall, our study provides novel insights about the role of auditor reputation in emerging audit markets. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2023.02245 .

Purpose This study aims to examine the impact of peer Management Discussion and Analysis (hereafter referred to as MD&A) risk information disclosure on the corporate audit demand. Design/methodology/approach Ordinary least square is used to analyze data for firms listed on China’s A-share market from 2011 to 2021. Findings The study finds that peer MD&A risk information disclosure significantly increases the demand for audits, manifested by the increase of hiring experienced auditors’ and increased audit fees, exhibiting a positive spillover effect. The mechanism test results show that peer MD&A risk information disclosure promotes corporate audit demand by increasing the perception of corporate business risk, investor attention and industry competitive pressure, thereby incentivizing companies to opt for high-quality audit services. The results of moderating effect test indicate that accounting information comparability, analyst attention and institutional investor ownership significantly enhance the positive spillover effect of peer MD&A risk information disclosure on corporate audit demand. Moreover, peer MD&A risk information disclosure improves audit quality, as reflected in reduced earnings management. Corporate audit demand can play an intermediary role in this relationship. Practical implications This study not only enriches the research in the fields of risk information disclosure and auditing but also provides a reference for information users to understand nonfinancial information disclosure. It suggests that the government should enhance the scrutiny and regulation of the quality of nonfinancial information disclosure by listed companies, creating a favorable market information environment and promoting the sustainable development of the capital market. Social implications This study provides new evidence demonstrating that strengthening and improving the nonfinancial information disclosure plays an important role in promoting audit practices, enhancing the transparency and standardization of capital markets and achieving long-term sustainable development goals. Originality/value This study innovatively explores the relationship between MD&A risk information disclosure, corporate audit demand and sustainable development. Based on this exploration, we propose policy recommendations emphasizing the need for regulatory authorities to strengthen oversight of nonfinancial information disclosure. This would promote audit practices and market transparency, thereby supporting the achievement of sustainable development goals.

The growing demand for high-quality and relevant auditing by the state, society, and business underscores the importance of digitalizing auditing practices. Enhancing the profession’s social and business standing, as well as upholding its core values, is paramount. This necessitates fostering an IT mindset among young professionals, helping them grasp the benefits of digital transformation, the potential of artificial intelligence, and the role of big data analytics in managing audit risks. This article aims to provide a retrospective analysis of the digital technologies currently in use and those with promising potential for automating audit processes. It also highlights the need to refine the methodology of digitalizing auditing and to introduce digital products that elevate the profession to a new level. The study examines the factors, challenges, and opportunities driving the acceleration of digitalization in auditing, drawing on analytical reviews, scientific research, and monitoring of digital technology adoption. The most soughtafter software tools, including those for related services, are identified. The work emphasizes the auditors’ high social responsibility for the accuracy of financial statements and the importance of expanding digital information resources. It underscores the need for increased research to provide a conceptual and applied foundation for digitalizing auditing. An examination of best practices reveals that digital solutions enhance not only financial statement audits but also the overall quality management system and the range of audit services. The introduction of new international audit quality management standards has significantly raised the requirements for digital technologies, audit networks, information and communication systems, and risk management. This analysis provides a valuable direction for improving the conceptual and applied aspects of using digital technologies in auditing.

Environmental, Social, and Governance (ESG) -related information has become a primary non-financial consideration for investors. Carbon Auditing has emerged as a significant accounting framework for providing ESG information. As climate change intensifies, the demand for transparent and accurate carbon auditing has risen. This Study aims to understand how emerging carbon auditing could proactively prevent future scandals, e.g., Volkswagen's Diesel gate Scandal, and mitigate environmental risks. This paper examines the level at which carbon auditing effectively curbs emissions, considering Volkswagen's "Dieselgate" scandal as a case study. It assesses how well carbon auditing works in controlling environmental risks and discusses how enhancements in carbon accounting in the future can help avoid such scandals. The Study was conducted through case study analysis and scenario analysis. The Study found that the Diselgate Scandal reduced share prices, raised awareness through Academia, and produced some policy implications. Scenario 1 analysis shows that a lack of carbon auditing triggers environmental degradation, leading to financial losses. On the other hand, in scenario 2, the Study shows that continuous monitoring leads to long-term financial stability.

This research paper explores in-depth the audit procedures followed by Chartered Accountant (CA) firms, emphasizing the significance of standardized auditing practices in achieving financial transparency, accountability, and statutory compliance.It focuses on each audit stage-planning, risk assessment, internal control evaluation, substantive procedures, evidence gathering, documentation, and reporting-offering a holistic view of the auditing process.By combining primary data from practicing auditors and secondary literature from regulatory sources such as ICAI, this paper examines the real-world challenges faced by auditors and how evolving technology and regulatory frameworks are reshaping auditing in India.Auditing plays a critical role in establishing trust in financial information presented by organizations.With increasing scrutiny from stakeholders, including investors, regulators, and financial institutions, the importance of accurate audits cannot be overstated.Chartered Accountant firms in India follow auditing standards set by the Institute of Chartered Accountants of India (ICAI) under the Companies Act, 2013.These firms conduct a variety of audits-statutory, internal, tax, compliance, forensicand each audit demands a structured, evidence-based approach.The present study investigates the audit lifecycle in Chartered Accountant firms, assessing how theory aligns with practice, and analyzing the impact of digital tools, client behavior, auditor training, and regulatory expectations on audit quality. Statement of the ProblemDespite the well-laid standards by ICAI, practical auditing often encounters inconsistencies and challenges: Are CA firms uniformly applying audit procedures across engagements?How do firms ensure compliance with ICAI's auditing standards amidst dynamic client demands?What role does technology play in transforming audit procedures?How do auditors deal with independence threats, especially with long-term clients?What are the recurring challenges CA firms face while conducting audits? Objectives of the Study1. To analyze each phase of the audit cycle followed by CA firms.2. To assess the implementation and adherence to ICAI auditing standards.3. To identify the tools and technologies used in modern auditing practices.4. To explore the ethical dilemmas and independence issues in audits.5. To examine the role of documentation and audit evidence in forming opinions.6.To recommend enhancements to existing audit methodologies and firm practices. Scope of the StudyThis research focuses on statutory audit procedures conducted by small and mid-sized CA firms in India.It spans various industry sectors including manufacturing, IT services, retail, and financial services.The paper limits itself to external audits and excludes tax and internal audits unless mentioned contextually.

This research paper explores in-depth the audit procedures followed by Chartered Accountant (CA) firms, emphasizing the significance of standardized auditing practices in achieving financial transparency, accountability, and statutory compliance.It focuses on each audit stage-planning, risk assessment, internal control evaluation, substantive procedures, evidence gathering, documentation, and reporting-offering a holistic view of the auditing process.By combining primary data from practicing auditors and secondary literature from regulatory sources such as ICAI, this paper examines the real-world challenges faced by auditors and how evolving technology and regulatory frameworks are reshaping auditing in India.Auditing plays a critical role in establishing trust in financial information presented by organizations.With increasing scrutiny from stakeholders, including investors, regulators, and financial institutions, the importance of accurate audits cannot be overstated.Chartered Accountant firms in India follow auditing standards set by the Institute of Chartered Accountants of India (ICAI) under the Companies Act, 2013.These firms conduct a variety of audits-statutory, internal, tax, compliance, forensicand each audit demands a structured, evidence-based approach.The present study investigates the audit lifecycle in Chartered Accountant firms, assessing how theory aligns with practice, and analyzing the impact of digital tools, client behavior, auditor training, and regulatory expectations on audit quality. Statement of the ProblemDespite the well-laid standards by ICAI, practical auditing often encounters inconsistencies and challenges: Are CA firms uniformly applying audit procedures across engagements?How do firms ensure compliance with ICAI's auditing standards amidst dynamic client demands?What role does technology play in transforming audit procedures?How do auditors deal with independence threats, especially with long-term clients?What are the recurring challenges CA firms face while conducting audits? Objectives of the Study1. To analyze each phase of the audit cycle followed by CA firms.2. To assess the implementation and adherence to ICAI auditing standards.3. To identify the tools and technologies used in modern auditing practices.4. To explore the ethical dilemmas and independence issues in audits.5. To examine the role of documentation and audit evidence in forming opinions.6.To recommend enhancements to existing audit methodologies and firm practices. Scope of the StudyThis research focuses on statutory audit procedures conducted by small and mid-sized CA firms in India.It spans various industry sectors including manufacturing, IT services, retail, and financial services.The paper limits itself to external audits and excludes tax and internal audits unless mentioned contextually.

Introduction. The USA accounting and audit industry is a complex and influential sector encompassing institutional structures. The Big Four, regional (local) firms, and independent auditors are the most common among them. In turn, the Securities and Exchange Commission (SEC) ensures that professional standards and financial reporting are met through its rigorous oversight. The demand in the industry springs from business expansion, economic prosperity, and the implementation of certain regulatory norms and standards for unsettled debts. The problem is the investigation of the peculiarities of the accounting and audit industry in the United States, size, regulatory framework, dominance of the Big Four firms, and ever-increasing technology use in the field. Aim and tasks. This study examines the peculiarities of accounting and auditing in the USA in the context of agribusiness development. Results. An analysis of leading audit firms (Deloitte, PwC, EY and KPMG) showed an average increase of 40% in income over the period 2018-2023. Accounting and auditing in the USA remains the leading sector among developed countries, showing the highest projected turnover growth due to strong B2B demand, rising labour costs (71.2% of total industry expenses) and increasing industry profitability (27.5%). However, despite the growth in the overall number of companies, the industry remains fragmented, with the top five companies accounting for 17.2% of production value in 2023. Technology is still developing, and new laws are being set every so often in the accounting and auditing industry. A comprehensive set of approaches is required to characterise agribusiness in the United States. Conclusions. The analysis of the Financial Accounting Standards Board (FASB), which has the authority to supervise and regulate accounting, revealed the audit standards that the FASB conducts for review and takes action against firms that violate the standards and rules of ethics. The most important aspect of the supply of professional auditors is meeting the demand for credible audits in the market.

Does CEO age matter in auditor choice and audit pricing? The role of CEO dominance

This study empirically examines the relation between audit quality and auditors’ cognitive and social skills. Using a novel data set of online job postings by accounting firms, we document substantial variation in the stated demand for auditors’ cognitive and social skills, suggesting that audit offices are not homogeneous in their preferences for such skills. We find a positive relation between audit quality and the prevalence of cognitive and social skills within an audit office’s job postings. This association is stronger for audit engagements that are more complex or require greater coordination, suggesting that cognitive and social skills are particularly important in engagements where effective communication and knowledge transfer, as well as sound professional judgment and skepticism, are needed. The association is also stronger for audit offices with greater investments in new technology, consistent with the complementary relation between cognitive and social skills and the use of technology. Overall, our study offers empirical evidence linking specific auditor skills to audit quality. This paper was accepted by Suraj Srinivasan, accounting. Funding: C. Ham acknowledges financial support from the Blanche “Peg” Philpott Faculty Fellowship. R. N. Hann acknowledges financial support from KPMG. W. Wang acknowledges the financial support from the Hong Kong Research Grant Council [Grant 11503720]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01640 .

The increasing number of companies in the form of Go Public is a sign that the development of activities on the Indonesia Stock Exchange (IDX) is increasing, this will trigger a high demand for effective and efficient financial statement audits. Companies that have gone public have an obligation to submit financial reports in a timely manner. Delays in submitting financial reports are caused by audit report lag. Financial factors such as company size, profitability, leverage, liquidity, earnings per share, and financial distress are indicated to be the cause of audit report lag. So that these financial factors require special attention so that the submission of audited financial reports is timely. This study aims to determine the effect of company size, profitability, leverage, liquidity, earning per share, and financial distress on audit report lag in manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the period 2020-2022. The population in this study are all manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the period 2020-2022. The sampling technique in this study used purposive sampling method, so that a sample of 86 companies was obtained with a total of 217 observations. The results showed that company size and profitability had a significant negative effect on audit report lag, leverage and liquidity had no effect on audit report lag, and earning per share and financial distress had a significant positive effect on audit report lag

PurposeThis paper aims to examine the effect of executive compensation incentives, specifically CEO inside debt holdings, on the choice of industry specialist auditor.Design/methodology/approachHigh inside debt holdings are expected to constrain excessive managerial risk-taking and align the interests of managers and outside debtholders. The authors hypothesize that reduced debtholders’ expropriation concerns will decrease the demand for high audit quality, measured by industry specialization. The authors investigate a sample of US firms from 2006 to 2018 using OLS regression and use CEO relative leverage to proxy for CEO inside debt holdings. The authors conduct an additional two-stage least squares regression analysis to address potential endogeneity issues.FindingsThe paper finds that firms with higher levels of CEO inside debt tend not to appoint an auditor with industry specialization. This result is consistent with the notion that inside debt mitigates agency conflicts between managers and debtholders, reducing the demand for high-quality audits as a monitoring mechanism. The paper also finds that among firms which are excessively leveraged, those with higher levels of CEO inside debt tend to appoint an industry specialist auditor.Originality/valueThe findings contribute to the literature on agency cost and auditor choice by demonstrating that CEO inside debt has both substitutive and complementary effects on demand for industry specialist auditors.