Audit Report Research Articles

Auditor tenure and non-GAAP earnings

PurposeThis study aims to examine whether the newly available auditor tenure information is associated with non-GAAP earnings, as the recent requirement to disclose the initial year of auditor-client relationship in audit reports may give the impression that longer auditor tenure may be related to lower audit quality.Design/methodology/approachUsing a sample of firm-quarters from 2017 to 2020, the authors conduct both univariate and regression analyses. We use hand-collected data for auditor tenure, SEC comment letters, and non-GAAP variables.FindingsFirst, the authors find that the likelihood of disclosing non-GAAP earnings monotonically increases with auditor tenure on a univariate basis. Second, auditor tenure is negatively associated with aggressive non-GAAP reporting. Third, the authors document evidence of aggressive reporting in general; that is, items excluded in calculating non-GAAP earnings are associated with future performance. However, the association declines with longer auditor tenure. Finally, the authors report evidence that the likelihood of receiving an SEC comment letter that contains non-GAAP comments decreases with longer auditor tenure.Practical implicationsThe results show that regulators need to consider both GAAP and non-GAAP disclosures’ costs and benefits when enacting auditor tenure regulation. Investors can benefit from the findings in evaluating the quality of non-GAAP earnings. The findings are also relevant to the SEC when allocating limited resources in monitoring non-GAAP reporting.Originality/valueTo the best of the authors’ knowledge, this is the first study showing that auditor tenure is associated with the quality of non-GAAP earnings. Given that financial reporting quality should be understood as a comprehensive system comprising both mandatory and voluntary disclosures, this study complements the literature that examines the effect of auditor tenure on financial reporting quality using GAAP reporting.

Audit firm tenure disclosure and nonprofessional investors' perceptions of auditor independence: The mitigating effect of partner rotation disclosure

AbstractIn 2017, the PCAOB began requiring audit firm tenure disclosure within the audit report for SEC registrant clients. Many commenters raised the concern that prominent disclosure of firm tenure would lead investors to inappropriately infer a negative relation between audit quality and long tenure. This is particularly troubling given that empirical evidence generally does not support this concern. In our first experiment, we predict and find that disclosing an audit firm's long tenure within the audit report increases investors' perceptions that the audit firm's independence was impaired while conducting the audit. However, we also identify an intervention that mitigates the effects of disclosing long tenure—an accompanying disclosure in the audit report of the firm's adherence to the SEC's mandatory partner rotation requirement. We find that such a disclosure moderates the effect of long tenure disclosure such that in the absence (presence) of a partner rotation disclosure, investors do (do not) perceive increased independence impairment when long firm tenure is disclosed. In a second experiment, we predict and find that long firm tenure disclosure reduces investors' preference to invest in an otherwise quantitatively optimal investment and that this relation is driven, in part, by perceptions of independence impairment. Again, this result is attenuated by partner rotation disclosure. Our results should be useful to regulators in understanding the effects of their disclosure mandate and to audit firms in understanding a practical way in which they might mitigate the implications of such effects.

115 Early identification of functional problems and self-management support for people with thoracic cancers using an Allied Health Professional Screening Tool - An audit report

115 Early identification of functional problems and self-management support for people with thoracic cancers using an Allied Health Professional Screening Tool - An audit report

Communication of Key Audit Points in the Independent Auditor's Report: An Analysis of Determinants to Users of Financial Information in Cameroon

Communication of Key Audit Points in the Independent Auditor's Report: An Analysis of Determinants to Users of Financial Information in Cameroon

The role of the external auditor In reducing material misstatements and their Impact on the auditor's report

The role of the external auditor In reducing material misstatements and their Impact on the auditor's report

Does Institutional Ownership Moderate the Relationship Between Audit Committee Composition and Audit Report Lag: Evidence From Saudi

This research explores the moderating effect of institutional ownership on the relationship between audit committee attributes and audit report lag. The paper sampled data from 102 Saudi non-financial listed firms from 2012 to 2021. The data was analyzed using a fixed effect regression, while the generalized method of moments approach (GMM) was employed for robustness check. The research finding strongly suggests that the audit committee size may increase audit report lag. In contrast, it was found that audit committee independence and financial expertise may reduce audit report lag. In addition, the interaction effect reveals that the impact of audit committee financial expertise and the committee meetings on reducing audit report lag may be higher as institutional shareholding rises. Thus, the outcome validates the agency theory perspective that the active monitoring of institutional investors may shape firms’ internal governance systems. More importantly, the finding implies that firms should prefer a smaller audit size with a higher ratio of independent directors and financial experts to improve financial reporting quality. They should also embrace institutional shareholding to reduce audit report lag. Thus, lowering audit report lag may mitigate information disparity between firms and prospective investors, reducing agency conflicts and boosting firm value.

Survey of Preeclampsia/Eclampsia in relation to maternal mortality at a tertiary hospital in Gambia

Obstetrics haemorrhage was the leading cause of maternal death for over 3 decades but since 2020s we have observed that preeclampsia/eclampsia cases are increasing. This survey aims to reveal the magnitude of preeclampsia in relation to maternal mortality in our setting. Methodology: A retrospective study was conducted at the Edward Francis Small Teaching Hospital from January to December 2022. Maternal annual audit report was used to extract specific data which was entered into a computer database and analysed with descriptive statistics. Results: Total maternities from Jan to Dec 2022 was 2893 deliveries. Total number of recorded Preeclampsia/Eclampsia was 427. The prevalence was 427/2893 (14.8%). There were 54 pregnancy related deaths, Preeclampsia/Eclampsia was 24 (44%); Haemorrhage 12 (22.2%); Sepsis 7 (12.9%). All Preeclampsia/Eclampsia related deaths were referred. Conclusion: The menace of preeclampsia/Eclampsia is overwhelming and has maintained the leading cause of maternal mortality in Gambia. Hence measures to predict this condition is highly needed.

PENGARUH FINANCIAL DISTRESS, GOOD CORPORATE GOVERNANCE, AUDIT REPORT LAG DAN OPINI AUDIT TERHADAP KETEPATAN WAKTU PUBLIKASI LAPORAN KEUANGAN

The purpose of this study is to determine the effect of financial distress, good corporate governance, audit report lag, and audit opinion on the timeliness of financial statement publication in banking companies listed on the Indonesia Stock Exchange. Research conducted based on quantitative methods. The determination of this research sample used the purposive sampling method so that research samples were obtained from as many as 5 state-owned banking companies listed on the Indonesia Stock Exchange. This research data uses the financial statements of banking companies for the 2018-2022 period. The data analysis method used is multiple linear regression. The results proved that financial distress had a significant effect on the timeliness of financial statement publication, good corporate governance had a significant effect on the timeliness of financial statement publication, audit report lag had a significant effect on the timeliness of financial statement publication and audit opinion had a significant effect on the timeliness of financial statement publication. The results together / combined obtained financial distress, good corporate governance, audit report lag, and audit opinion have a significant effect on the timeliness of financial statement publication in banking companies listed on the Indonesia Stock Exchange with a calculated F value (4,875) or an effect of 62.5%. This result proves that the timeliness of financial statement publication is supported by low financial distress value, high good corporate governance, fast audit report lag, and unqualified audit opinion.

The Effect of Audit Committee Expertise on Audit Quality: Empirical Evidence from Bangladesh

The purpose of this study is to examine the effects of diverse expertise types on audit quality, providing valuable insights for corporate governance and enhancing the audit process. This research uses 651 firm-year observations for 2001-2021 year. This research applies Breusch-Pagan LM, Pesaran Scaled LM, Bias-corrected Scaled LM, and Pesaran CSD test to check the cross-sectional dependency of the series. The study uses second generation panel unit root tests to check the stationary of the variables. After applying the panel cointegration test, this study uses the long run estimation model and robustness checking to examine the relationship. The findings reveal that financial, accounting, and non-accounting expertise all positively and significantly affect audit quality, suggesting that audit committees with diverse expertise can effectively enhance the audit process. This study finds single causal indicating that audit committee expertise improves audit quality. This study emphasizes the importance of incorporating experts from various backgrounds on audit committees to improve audit quality and increase stakeholder confidence in financial statements. This study implies that companies must focus on the expertise on the audit committee during the appointment of the members to maintain the quality of audit reports. This research is unique to the existing literature on audit committee expertise and audit quality by examining the influence of accounting and non-accounting expertise types in Bangladesh context and providing empirical evidence in support of the agency theory.

경제 불확실성이 감사보고서의 발행을 지연시키는가?

[Purpose]This study examines the relationship between macro－uncertainty and audit report lag. Also, it analyzes whether this relationship manifests differentially when considering audit hours by rank and auditor characteristics. [Methodology]For analysis, we use a sample of listed firms for the period from 2014 to 2019. Audit report lag was proxied by the number of days from the fiscal year－end to the audit report date. Macro－uncertainty was measured using the volatility index VKOSPI provided by KRX. [Findings]The analysis yields the following results. Firstly, it confirms an increase in audit report lag under high uncertainty. This could be interpreted as auditors increasing audit efforts in response to a rise in audit workload under uncertainty. Secondly, the relation between uncertainty and audit report lag becomes more pronounced in subsamples where audit hours put into by junior and senior staff are high. Thirdly, the relationship between uncertainty and audit report is stronger for Big4 and industry specialist auditors. This could be interpreted as auditors with higher reputation risk or litigation risk allocating relatively more audit effort in response to increased audit risks under uncertainty. [Implications]Despite previous research indicating that uncertainty reduces audit fees and audit hours, this study’s results suggest that reduced audit fees or audit hours does not necessarily imply a decrease in audit effort. Our results provide insight to investors and auditors in providing evidence that increased audit report lag may be due to external environmental factors rather than an increase in firm－specific risk factors.

Company Age, Company Size and Earnings Management in Listed Industrial Goods Manufacturing Companies in Nigeria: A Moderating Role of Political Connection of Board Members

The study analysed the effect of company age, company size and political connections of Board members on earning management of quoted industrial goods manufacturing companies in Nigeria. The specific objectives of the study include assessing the effect of company age, company size and evaluating the moderating effect of political connections of board members on earnings management of quoted industrial goods manufacturing companies in Nigeria. The study used 130 firm-year data involving thirteen (13) quoted industrial goods manufacturing companies purposely selected over the period of 2012-2021. The data were sourced from the annual audited reports and accounts of the companies obtained from the Nigerian Exchange Group. The study used E-Views 8.0 statistical package and used panel regression techniques to analyse the data after carrying out diagnostic tests such as normality test, Panel Unit Root Test, Multicollinearity Test, Redundant Fixed Effects Tests, Hausman test, Heteroskedasticity Test, Serial Correlation Test to select the most appropriate model and fixed effect model was used for the model. The findings revealed that company age and company size do not influence earnings management. Also, the study revealed that political connection of board members insignificantly moderated the effect of company age and company size on earnings management. The study recommended that increased attention be given to internal control mechanisms to help curtail aggressive corporate earnings manipulation, reduce the effect of political connection, and enhance the financial reporting quality, particularly in Nigeria. Keywords: Firm Characteristics, Political Connections, Accruals, Real Earnings Management. Journal Reference Format: Adesuyi, T. Y. & Owoseni, G. D. (2024): Company Age, Company Size and Earnings Management in Listed Industrial Goods Manufacturing Companies in Nigeria: A Moderating Role of Political Connection of Board Members. Humanities, Management, Arts, Education & the Social Sciences Journal. Vol. 12. No. 1, Pp 49-72. www.isteams.net/humanitiesjournal. dx.doi.org/10.22624/AIMS/HUMANITIES/V12N1P4

University Social Responsibilities-Based Green Accounting: Implementation of Green Universities

The research aims to examine the differences in the implementation of green accounting based on University Social Responsibilities (USR) at the Sepuluh Nopember Institute of Technology (ITS) and Brawijaya University (UB). The data analysis method uses a different test approach with a sample size of 150 respondents from the academic community. The data collection method uses a mail survey with Google Forms. The research results prove no difference in implementing environmental awareness, environmental involvement, environmental reporting, environmental audit, and university social responsibility at ITS and UB. UB initiated the green campus concept and ITS with the eco campus concept. However, there are no audit reports related to green accounting at either campus. The contribution of this research will lead to policies for drafting environmental audit report regulations because campuses also produce waste from the impact of their activities. This regulation can strengthen sustainable practices on campus environments in Indonesia and ensure a sustainable environmental legacy for future generations.

Pengaruh Solvabilitas, Likuiditas, Profitabilitas Dan Ukuran Perusahaan Terhadap Audit Report Lag

The aim of this research is to determine the effect of solvency, liquidity, profitability and company size on audit report lag in companies listed on the Jakarta Islamic Index 70 on the Indonesia Stock Exchange in 2020-2022. The method used in this research is a quantitative method. This research uses secondary data in the form of annual reports of the companies sampled in the research and can be obtained from the Indonesian Stock Exchange website. Samples were taken using purposive sampling technique, totaling 14 companies. The data obtained and collected was then processed using the SPSS 27 application. The data analysis techniques used were descriptive statistics, classical assumption testing, multiple linear regression analysis, and hypothesis testing. Based on the research results, it shows that partially solvency has an effect on audit report lag, while profitability, liquidity and company size have no effect on audit report lag. Simultaneously, solvency, liquidity, profitability and company size have no effect on audit report lag.

Accountability and Transparency of Zakat, Infaq, Shodaqah Fund Management (Case Study on LAZISMU Pasuruan Regency)

This study aims to determine the effectiveness of the application of accountability and transparency in the management of zakat, infaq and shodaqah funds at LAZISMU Pasuruan Regency. The method used in this research is a qualitative method with a case study approach. Data collection techniques used in this study include interviews and documentation in the form of financial reports and other supporting documents related to the accountability and transparency of ZIS fund management. Data analysis used data triangulation. The results showed that the form of accountability of LAZISMU Pasuruan Regency, among others: evaluation of board members every month led by the chairman of the board, the existence of ZIS fund management reports in the form of magazines for donors every month and brochures for other than donors, and the existence of audit reports conducted once every 1 month, once every 3 months, once every 6 months conducted by the Muhammadiyah Regional Leadership and once a year conducted by a public accountant. While the forms of transparency of LAZISMU Pasuruan Regency include: in the collection of ZIS funds carried out by means of child philanthropy, socialization through local community activities, and digital fundrising.

The International Standards on Auditing and the Accuracy of Auditors’ Going Concern Disclosures: Evidence for Private Firms in a Low Litigious Environment

ABSTRACT This paper examines the effect of adopting the International Standard on Auditing (ISA) 570 on going concern (GC) disclosures in the audit report in a European environment characterized by low litigation and reputation risk. We exploit a natural experiment in Belgium, where the global GC standard ISA 570 replaced the local GC standard. We examine whether this shift in standards changed the accuracy of auditors’ GC disclosures. Using a sample of 30,339 stressed private companies with audited financial statements for periods ending on or after 15 December 2012 till 14 December 2016, our findings suggest that the adoption of the ISA 570 improves the accuracy of auditors’ GC disclosures. Specifically, we find that the implementation of the ISA 570 is associated with an 8 percent decrease in false positive misclassifications (GC opinion without subsequent bankruptcy), while the rate of false negative misclassifications (bankruptcy without prior GC opinion) remains unchanged.

Development of the Scientific School of the financial university in the field of accounting-analytical and control Systems in the Modern Economy

The article is devoted to the formation and development of the scientific school of accounting, analytical and control systems of the Financial University. As the basic provisions of the school, the principle of methodological unity of accounting, analysis and audit (control) and its role in information support and decision- making at different levels of management, harmonization and interconnection of methodological documents used by different governing bodies to regulate the activities of economic entities of the main organizational and legal forms At the same time, an organization with a risk-oriented approach, a consistent increase in efficiency and the implementation of a development strategy for managed objects is ensured, which is the basis for the compliance of legislative, regulatory acts and methodological documents adopted at different levels. The following areas of research have been identified as key issues of updating and adapting the school to the modern stage of economic development: improving the methodology and methodology for developing reporting of economic entities, taking into account changes in their organizational structures (corporate reporting), including consolidated reporting, reporting in the format of sustainable development, containing a wide range of non-financial information (ESG agenda) and integrated reporting, as well as strengthening the role of internal (production, management) control, based on new opportunities, information and communication systems; the formation of internal and external control and audit systems of various directions, facilitating reliable feedback between production and management bodies; strengthening and developing the interaction of accounting systems (accounting, operational production, statistical) of all levels to create on this basis high-quality databases for information support of management; increasing the efficiency of all parts of the national economy and implementing the strategy for the development of the economy of the country, regions and industries. When considering these issues, the evolution of scientific research is shown, in which specialists from the Financial University and other leading universities in Russia participate. Within the Financial University, the school of accounting, analytical and control systems in the modern economy is headed by Roman Petrovich Bulyga, Doctor of Economics, postgraduate professor and doctoral student at the Financial University, head of the Department of Economic Analysis and Audit, Department of Audit and Corporate Reporting, and currently — Department of Audit and Corporate Reporting.

Agenția Sighet a Băncii Naționale a României în perioada 1921–1950

Based on our research of archived documents, this paper retraces the history of the Sighet Agency of the National Bank of Romania (NBR) in the period between 1921 and 1950, that is from the time of its establishment to the time of Romania’s first administrative reorganisation during the communist regime. The establishment of the agency was part of the process of expanding the branch and agency network of the National Bank of Romania after the Union of 1918 and can be explained in several ways: the demographic, economic, and banking potential of the town of Sighet within Maramureș county, notwithstanding the challenges presented by the status of local means of transportation, the railway in particular, given that it was not entirely built on Romanian territory; the completion of monetary unification before the establishment of the local agency; the stages of acquiring the Sighet offices of the former Austrian-Hungarian Bank and the appointment of the agency’s first bank officers. The agency’s actual discount lending (rediscounting) operations, bearing the lowest existing interest rate, are exemplified by listing the agency’s customers and their loans, as well as by data showing the growing business volumes in the period from 1923 to 1929. For relevance purposes, the data is compared with similar data from the Craiova and Cluj branches. The impact of the Great Depression can be seen in the evolution of another banking operation, namely bank transfers, as well as in the audit reports prepared by auditors from the bank’s head office. There is also a list of people whose professional destiny was linked to the NBR Sighet Agency in the period between the two World Wars, both bank managers and other bank officers, among whom one may notice the remarkable figure of Romulus Roman, whose life tragically ended in a communist prison, after an exceptional career with the central bank. The consequences of the territorial changes which took place between 1938 and 1940 near Romania’s north-western border on the activity of the Sighet Agency are also traced back from the time when railway transportation was discontinued to the time when the bank’s offices were evauted. The last part of our paper is dedicated to the events which happened between 1945 and 1950, namely: the return of bank officers to the NBR Sighet offices in the context of the presence of Red Army troops in the region at a time of turmoil surrounding the establishment of Romania’s northern border; the withdrawal of foreign legal tenders (the Hungarian pengő, the Soviet pengö, roubles, Soviet lei); the resumption of bank operations in the context of the dramatic changes imposed by the communist regime, culminating at the time in the nationalisation of the NBR, the dissolution of banks, the disestablishment of Maramureș county and the establishment of the Baia Mare Region, following which the Sighet Agency of the Bank of the Romanian People’s Republic – the State Bank became the Sighet Region Subsidiary subordinated to the Baia Mare Regional Branch.

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Auditor communication on critical audit matters: Timing, inspection likelihood, and the audit committee

AbstractIn response to the extended audit report regulations implemented in the United States and internationally, both audit firms and regulators have increased scrutiny over critical audit matters/key audit matters (collectively referred to as CAMs) through internal and external inspections. At the same time, auditors and audit committees (ACs) have altered the content and timing of CAM‐related discussions by communicating specific planned audit procedures earlier in the audit process. This study explores the effect of early communication of CAM‐related audit procedures to the AC and increased scrutiny from inspections on auditors' propensity to adjust planned audit procedures in the presence of newly identified audit risks. Based on self‐justification theory, we predict and find that early communication of planned audit procedures to the AC causes auditors to be less likely to adjust planned audit procedures even when additional risks arise that necessitate change, especially when inspection is likely. This has the potential for diminished audit quality. Interviews with audit partners provide context for how these findings relate to the current auditing environment.

Two-tier board characteristics and expanded audit reporting: Evidence from China

This paper investigates the relationship between the characteristics of the two-tier board structure (board of directors and supervisory board) and the disclosure of key audit matters (KAMs) in the expanded audit report. Using a sample of 10,857 firm-year observations of Chinese listed firms spanning the 2017–2020 period, we offer two main results. First, with regard to the board of directors, we find that the auditor discloses a greater number and lengthier content of KAMs when there is a CEO duality and the board meetings are more frequent. Second, conversely, we find that the size and independence of the supervisory board are related to a lower number and length of KAMs disclosure. When we distinguish between account-level KAMs and entity-level KAMs, our further analysis shows that our results are principally associated with account-level KAMs rather than entity-level KAMs. Specifically, we find that CEO duality and the frequency of board of directors meetings are positively related to account-level KAMs. We also find that the size and independence of the supervisory board are negatively related to account-level KAMs. Our further analysis also shows evidence that these two-tier board structure characteristics are associated with the tone of KAMs disclosure in a consistent fashion. Our findings are robust and address endogeneity problems. Overall, our results suggest that the characteristics of the two-tier board structure drive KAMs disclosure, which should be of interest to regulatory bodies, policymakers, auditors, multinational firms, and users of financial reports.