Specialist Auditors Research Articles

The Joint Effects of Audit Committee Financial Expertise and Auditor Industrial Expertise on the Quality of Earnings

Purpose: The aims of this study are to investigate the joint effects of financial experts on audit committees (ACs) and industry expert auditors on earnings quality, and to investigate whether the joint effects differ based on subtypes of financial experts on ACs and the mixture of those subtypes. Design/methodology/approach: This study measures AC f inancial expertise and auditor industrial expertise using indicator variables. To measure the quality of earnings, this study employs the approach of Kothari et al. (2005). Findings: The study finds evidence that only the interaction between AC financial expertise and auditor industrial expertise has a positive effect on earnings quality. Specifically, earnings quality improves only when firms have accounting professors or finance experts (excluding finance professors) on ACs, and at the same time, when firms receive external audit from an industry specialist auditor. The study also finds that the positive association becomes obvious when ACs have both accounting and non-accounting experts. More importantly, the positive association is stronger when ACs have both non-accounting experts and more than one type of accounting experts. These results suggest that it is crucial that internal and external audit functions work cooperatively rather than separately, and that ACs include both non-accounting experts and several types of accounting experts. Research limitations/implications: The effects of AC financial expertise on accounting information quality may vary depending on how ACs are actually operated. Thus, it would be worthwhile for future research to explore the effectiveness of ACs in consideration of the operation of ACs. Originality/value: Contrary to prior research, this study examines the interplay of AC financial experts and industry specialist auditors. In addition, this study examines the interplay by using subtypes of financial experts on ACs and the combination of those subtypes. This study can be valuable to policy makers, academicians and investors by providing a more comprehensive view of the effectiveness of internal and external audits.

High investor sentiment and initial engagement discounts: evidence from Korea

ABSTRACT This study examines whether high sentiment affects auditors’ risk assessment in a less litigious environment. Specifically, we use a Korean setting with relatively low litigation risks and investigate whether audit fees are lower when firms change auditors during high sentiment times. Lower audit fees responding to high sentiment in a weak legal environment may indicate that auditors perceive the overall audit risk including reputation risk and regulation risk as low within the given period, increasing the possibility of their failure to detect managerial opportunistic behaviour. Using 17,469 Korean public firm-year observations from 2003 to 2017, we find that initial audit fees are significantly lower when investor sentiment is high, while changing auditors has no influence on audit fees when investor sentiment is low. Furthermore, this result is maintained even when auditors are changed to Big4 or industry specialist auditors (SPEC), which are known to have high ability and risk sensitivity. We also find that Big4 and SPEC initial auditors input significantly less audit hours during high investor sentiment periods, suggesting that optimistic bias caused by high sentiment makes auditors expect that relaxed audits are tolerable regardless of the legal environment.

LGBT(Lesbian, Gay, Bisexual, and Transgender)- Supportive Corporate Policy and Audit Fee

This study investigates the relationship between Lesbian, Gay, Bisexual, and Transgender (LGBT) supportive corporate policy and audit pricing using U.S. firms’ data from 2000 to 2011. Prior studies show that firms embracing diversity, including LGBT-supportive policy, enhances credit rating and earnings quality. Despite its growing importance of diversityrelated LGBT-supportive policy, less attention is paid to the LGBT-supportive firms and its effect on audit pricing. Our results suggest that, LGBT-supportive firms demand high audit quality and pay higher audit fee than firms that do not adopt LGBT-supportive policies. We conduct instrumental variable analyses and propensity score matching analyses to mitigate endogeneity and test results reinforce our main results. Further we find that LGBT-supportive firms appoint city-level industry specialist auditors, which supports our audit demand hypothesis. Overall results suggest that LGBT-supportive firms demand high-quality audit and pay high audit fees by appointing high-quality auditors to provide transparent and reliable financial information which would satisfy various stakeholders‘ information needs. Our study has practical and policy implications for auditors and regulators by identifying new determinants of audit fee and auditor choice decisions using U.S. data.

Does Industry Specialist Auditor Provide More Insights in Their audit report? An Empirical Study of Key Audit Matters Section

Abstract In 2015, International Auditing and Assurance Standards Board (IAASB) released new International Standards on Auditing 701 and required auditors to disclose key audit matters (KAM) in the audit report. Similar standards were also released in the United States in 2017 and the United Kingdom and Ireland Financial Reporting Council (FRC) in 2014. As KAM are expected to inform on matters of the greatest significance during an audit, before exploring the question regarding whether investors will obtain useful information from additional matter disclosures, the anterior consideration may be in regard to how audit quality affects the disclosure quality of KAM. This study use hand-collected data of the KAM disclosed in the audit reports of Taiwanese listed companies in 2016 to explore the association between auditor industry specialization and audit quality by the disclosure of KAM in new audit reports. The empirical results show that the association between the industrial specialist audit partner and the measurement of KAM quality is significantly positively related. The findings support our hypothesis that specialist auditors’ KAM are more informative than those issued by non-specialist auditors, and provide new evidence supporting prior studies about the superior auditing ability and disclosure quality of auditor industry specialist. Keywords: Key Audit Matters, KAM, International Standards on Auditing 701, International Auditing and Assurance Standards Board.

Audit Quality Characteristics and Accounting Conservatism: Empirical Study in Indonesian Company

This research investigates the effect of audit quality on accounting conservatism in Indonesian companies. The research uses a sample of 510 observations of publicly listed companies on the Indonesian Stock Exchange for the fiscal year that ends on December 31, 2015 through 2019. Audit characteristics are proxied by the size of the public accounting firm (ASIZ), auditor specialization (ASP), and auditor tenure (ATEN), while accounting conservatism (ACON) is measured using the accrual method. The sampling process was carried out using a purposive method. The study finds that that auditor specialization and auditor tenure have positively affect accounting conservatism, while the size of the accounting firm negatively affects accounting conservatism. This result enriches the conservatism literature in the fair value accounting era which was adopted in 2012 especially in emerging market environment. Since accounting conservatism is one of agency problems solution as well as to protect investors, the result of this study may affect firms’ accountant to prepare financial information for interest users. The scope of the study period and the sample size due to empirical data conditions that do not meet the criteria and the use of only one measure of conservatism, namely the accrual method, may lead to the not optimal generalization of research results.

Audit Quality Characteristics and Accounting Conservatism: Empirical Study in Indonesian Company

This research investigates the effect of audit quality on accounting conservatism in Indonesian companies. The research uses a sample of 510 observations of publicly listed companies on the Indonesian Stock Exchange for the fiscal year that ends on December 31, 2015 through 2019. Audit characteristics are proxied by the size of the public accounting firm (ASIZ), auditor specialization (ASP), and auditor tenure (ATEN), while accounting conservatism (ACON) is measured using the accrual method. The sampling process was carried out using a purposive method. The study finds that that auditor specialization and auditor tenure have positively affect accounting conservatism, while the size of the accounting firm negatively affects accounting conservatism. This result enriches the conservatism literature in the fair value accounting era which was adopted in 2012 especially in emerging market environment. Since accounting conservatism is one of agency problems solution as well as to protect investors, the result of this study may affect firms’ accountant to prepare financial information for interest users. The scope of the study period and the sample size due to empirical data conditions that do not meet the criteria and the use of only one measure of conservatism, namely the accrual method, may lead to the not optimal generalization of research results.

The Effect of Audit Fee, Auditor Rotation, Auditor Firm Reputation, and Auditor Specialization on Audit Quality

The purpose of this research was analyze the influence of audit fee, audit switching, audit firm reputation and auditor specialization on audit quality. Data in the current research were secondary data obtained from the financial statements of consumer good industry companies listed on the Indonesia Stock Exchange in the period 2017-2019. This study used purposive sampling method to select sample from the population. Based on method, obtained 26 companies with 78 samples. Data was analyzed using the multiple regression analysis. Proxy measurements for audit quality is using discretionary accruals Kaznik model (1999). The result showed that the audit switching give impact on audit quality. While audit fee, audit firm reputation and auditor specialitation do not impact on audit quality.Keywords: Audit Fee, Audit Switching, Audit Firm Reputation, Auditor Specialization, Audit Quality.

Radiofrequency Electromagnetic Field Levels at Workplaces of Technical Specialists of Cellular Communication

Introduction: One of the main professional groups of workers in cellular radiotelephone communication includes technical specialists who serve and ensure trouble-free operation of radio transmitters of cellular base stations (BS). Transmitting antennas and BS equipment are powerful sources of radiofrequency electromagnetic fields (RF EMFs) and one of the main adverse physical factors of the working environment for technicians. RF EMFs affect the functional state of various systems of the human body including the nervous, cardiovascular, and immune systems. The objective of our study was to assess the exposure to RF EMFs of cellular communication technical specialists and to establish occupations with the highest exposure levels. Materials and methods: Instrumental testing of energy flux density of the electromagnetic wave generated by BS receiving and transmitting equipment was carried out at service sites of cellular communication facilities by technical specialists of the industry. The time spent by technicians at workplaces with high EMF levels during the average work shift was measured. Results: The analysis of collected data showed that 28 % of energy flux density values measured at workplaces exceeded the maximum permissible level for the personnel serving radio transmitters and spending from 12 to 61 % of the work shift in the specified conditions. We established that network construction engineers, network operation engineers, power engineers, technical audit specialists, network development engineers, and mechanics were exposed to increased RF EMF levels. Conclusion: Our findings indicate the necessity to monitor and reduce occupational exposures of technical specialists of cellular communication in order to improve their working conditions and prevent, inter alia, RF EMS-related diseases.

Auditors’ Professional Experience and its Effect in Reducing the Impact of Audit Problems – An Empirical Study in the Private Offices of Audit in Iraq

This study aims to identify the benefits of the auditor's professional experience in reducing the impact of audit’s problems. The elements representing the professional experience of the auditor were identified by three elements and considered representative of the independent variables of the study, namely: (1) the period of the auditor's professional experience, (2) the level of qualifications that the auditor holds, (3) the nature of the auditor's specialization. It also diagnosed the problems that the auditor faces in his work based on previous studies and through polling the auditors' opinions . These Problems are : (1) Problems related to laws and legislation, (2) Problems related to professional associations and colleagues, (3) problems related to clients and managements, (4) behavioral aspects of Colleagues and social pressures.. The research uses the questionnaire method to gather the necessary information and data , and the statistical methods are used to analyze the information gathered. The results of the statistical tests showed that there is a positive linear relationship between the three independent variables and the four problems the auditor faces in his professional work. The analysis of the results indicates that the first variable(The length of the professional experience) takes the priority in terms of its impact on the problems faced by the auditor.

Pengaruh Workload, Spesialisasi Auditor, Rotasi Auditor, Dan Komite Audit Terhadap Kualitas Audit

Abstract: This research will explain and show the effect of workload, auditor specialization, auditor rotation, audit committee as an independent variable on audit quality which is the dependent variable in manufacturing companies listed on the Bursa Efek Indonesia from 2015 to 2019. This research is important to do because the slow growth of competent public accountants is an important matter that must be considered, given the growing growth of investment activities which has an impact on the increasing need for public accounting services. Seeing from various phenomena of audit failure due to not being an independent auditor and seeing from the point of view of failures based on violations of the code of ethics in the form of inadequate evidence collection so that it is related to the level of workload experienced requires further study. The results of the research and testing of the hypothesis conducted show that the first hypothesis is accepted where there is a significant negative effect between the workload and the quality of the audit results. The second hypothesis is accepted where there is a significant positive effect of auditor specialization on audit quality. The third hypothesis is rejected where there is no significant effect of audit rotation on the audit results. The fourth hypothesis is rejected, where there is no influence from the audit committee on the quality of the audit results.

Industry specialist auditors and affiliated business groups: An examination of fee lowballing and audit quality

We examine the lowballing fee strategy of industry specialist auditors and their related audit quality, for engagements with affiliated business groups (ABGs) in Taiwan. Taiwanese auditors must sign their audit reports. This enables us to identify specialist audit engagement partners and examine their association with fee strategies and audit quality for specific clients. ABGs are generally large and complex and have extensive related‐party transactions. This elevates the levels of audit risk and audit effort and suggests a need for higher fees. Industry specialist auditors generally do not need to lower their fees to compete for clients. Yet, for new ABG clients, we find they are associated with lowballing, especially for ABGs with high business‐relatedness. We do not find evidence of lower audit quality for these new ABG clients. We thus conclude that industry specialist auditors evidently anticipate higher future value from increasing their market share among certain ABG clients.

Money laundering control systems, external auditor specialization and tax haven use: An empirical analysis of U.S. multinational financial corporations

This study investigates the association between money laundering control systems (MLCS) and tax haven use based on a sample of U.S. multinational financial corporations (MFCs). We also examine the impact of external auditor specialization on the association between MLCS and tax haven use. We find that MLCS is significantly negatively associated with tax haven use. Our result is also economically significant. Based on our regression estimates, a one‐standard deviation increase in MLCS is associated with a decrease in tax haven use by around 2.75%. Additional analysis shows that external auditor specialization magnifies the negative association between MLCS and tax haven use. Overall, our study indicates that MLCS and the external audit function have important consequences for tax haven use by MFCs.

Control-Ownership Wedge and Industry Specialist Auditor

This study extends agency theory by explaining the client's understanding of audit quality. This study contributes to the audit literature by examining the effect of wedge control-ownership on industry specialist auditors that have not been researched in Turkey. The interests of minority and controlling shareholders are not completely compatible. The research analysis method used a logistic regression model, finding that firms that practice a larger difference between control rights and cash flow rights tend to prefer high audit quality measures by industry specialist auditors. This study encourages regulators to improve law enforcement to enhance the role of corporate governance in Turkey to address the features of ownership-control firms and offer a suitable environment for investment and minority shareholders.

Role of Auditor Specialization in Moderating Corporate Governance and Quality of Audit Reporting in Indonesian Manufacturing Companies

This study aims to examine the effect of corporate governance mechanisms on audit reporting. Whereas the specific purpose of this study was to investigate the impact of the number of audit committees, the role of independent (non-executive) board members, institutional ownership, and ownership concentration on the quality of audit reporting. Besides, this study also examines whether the role of the external auditor's reputation can moderate the relationship of corporate governance mechanisms to the quality of audit reporting. The results of testing of 189 units of analysis of manufacturing companies in Indonesia, obtained evidence that the size of the board of commissioners, the proportion of independent commissioners, institutional ownership influential and significant effect on the quality of audit reporting. Meanwhile, the audit committee, auditor industry specialization, ownership concentration proved not to affect the quality of audit reporting. For testing the external auditor's moderating variable reputation proxied by industry specialization, it turns out that only the relationship between the size of the board of commissioners and ownership concentration on audit reporting quality is proven to be moderated by the auditor industry specialization.

ECONOMIC AND MATHEMATICAL MODELING AND INFORMATION TECHNOLOGIES IN MARKETING AUDIT

The article is devoted to determining the role of economic and mathematical modeling and information technologies in conducting a marketing audit. The importance of a relatively new direction in marketing science – marketing audit – is emphasized. The main areas and directions of its implementation, in particular the audit of marketing environment, strategy, systems, products, as well as marketing functions – goods, prices, advertising, sales promotion, product promotion, sales staff – are identified. Emphasis is placed on key methods of marketing audit, in particular general scientific, general economic, marketing ones, and the directions of their use are determined. The importance of mathematical and statistical methods in making management decisions and solving marketing problems is noted. The main methods that play a key role in solving the tasks of marketing audit, in particular correlation-regression, dispersion, variational, discriminant, factor, cluster analysis methods, are named. It is noted that balance sheet, optimization, network planning methods, inventory management models, demand and consumption modeling, queuing theory, game theory, decision making in the conditions of uncertainty and risk are the main economic and mathematical models in marketing.
 It is emphasized that information technologies are a key tool in conducting a marketing audit. Modern capabilities of computer technology create the conditions for accurate, high-quality, timely information and provide its high-quality, scientifically sound processing. It is noted that information technologies provide the development and implementation of management decisions. It is substantiated that with the help of information technologies the access of audit specialists to the data and knowledge bases necessary for the analysis, as well as for the implementation of economic and mathematical models, without which it is impossible to imagine a modern marketing audit, is open. It is stated that information technologies have also become a key means of communication, transmission of information, holding operational business meetings and conferences.

MD&A readability, auditor characteristics, and audit fees

AbstractThis paper investigates the relationship between audit fees and MD&A readability in China. We find that audit fees generally are higher when MD&A readability is lower. However, we find Big4 auditors and industry specialist auditors do not increase audit fees when MD&As are less readable while the other auditors do. We also find that it is the content unique to the reporting firm, rather than standard industry and market content in a MD&A that affects auditor fees. Our results also support that audit risk and audit efforts are two channels through which MD&A readability affects audit fees.

Related-Party Transactions and Audit Fees

This research aims to analyze the association between the related-party transactions and audit fees. This study used 781 observations listed on the Indonesia Stock Exchange from 2010 to 2017. The analysis technique used in this research was the Ordinary Least Square Regression analysis model processed with STATA 14.0 software. This study found that related-party transactions are positively and significantly related to audit fees. The result indicated that the related-party transactions increase audit fees paid by companies. It also investigated the moderating effect of industry specialty auditors. This indicated that auditor specialization strengthened the relationship between the related-party transactions and audit fees. The market share proxy was used to measure industry specialization. However, this proxy still has disadvantages as it can generate different market shares. This study found that related-party transactions increased audit fees. The results of this study can be used as consideration in making decisions for related parties.

Formation of a new paradigm of anti-money laundering: The experience of Ukraine

The increase in the level of money laundering is associated with digitalization and technification of all spheres of society, the globalization of financial markets, the consequences of quarantine measures caused by the COVID-19 pandemic, and the new ways of committing money laundering crimes. The paper aims to identify the peculiarities of anti-money laundering activities in Ukraine and outline approaches to increase the effectiveness of combating money laundering in the country. The current state of the problem of money laundering is analyzed based on the study literary sources, regulatory framework and their discussion in the Ukrainian society. An attempt was made to systematize the factors influencing the increase in the level of money laundering. The consequences of increasing the level of money laundering for Ukraine have been determined: a shortfall in state budget revenues, a decrease in the level of the social sphere financing, reduced living standards of the population. It has been emphasized that there is a need for a comprehensive approach to the problem of money laundering, which will include ongoing training for financial audit specialists, the establishment of special units to investigate money laundering crimes, enshrining the classification of money laundering crimes in regulatory documents and the establishment of criminal liability for their commission.

The effect of audit tenure on information asymmetry: Investigating the role of auditors in achieving a more transparent organization (Target 16.6 SDGs)

One of the SDGs targets is the achievement of transparency of the organization. Information asymmetry is a condition in which management’s information is not in balance with shareholders/stakeholders. This study also investigates whether specialist auditors can reduce information asymmetry. Regression analysis using 274 observations of financial data from firms listed on the Indonesia Stock Exchange, this research finds that the audit tenure relationship and information asymmetry are u-shaped (a quadratic relationship) with a minimum point at eight years. These results indicate that, in the early years of the audit engagement, the longer a public accounting firm audits a company (tenure), the information asymmetry will decrease. These results indicate that after eight years, the bonding between auditors and clients is getting more robust so that auditors find it difficult to maintain their independence. After eight years, it is necessary to change (rotate) the public accounting firm that audits a company because its independence begins to decline. These results indicate that public accountants have played a significant role in achieving a more transparent and accountable organization, as one of the SDGs’ goals.

글로벌 산업전문 감사인의 감사보수 프리미엄과 감사품질

본 연구는 한국의 감사시장에서 글로벌 산업전문 감사인이 감사보수 프리미엄을 받는지 여부와 고품질의 감사를 제공하는지를 살펴본다. 이 분야의 국내 선행연구는 산업전문감사인이 고품질의 감사를 제공하고, 그 대가로 더 많은 감사보수를 받는다는 것을 보여준다. 그러나 이러한 연구에서 감사인의 산업전문성은 국내시장점유율에 기반한 측정치이지 글로벌 수준에서 측정된 지표가 아니다. 글로벌 회계법인 네트워크는 감사인이 산업전문성을 획득할 수 있는 경로를 국내고객을 넘어 국외의 제휴된 회계법인과 그 고객까지 포함하여 감사인의 산업전문성의 개념을 한 국가 수준에서 글로벌 수준으로 확대시키고 있다. 본 연구는 한국의 감사시장에서 고객회사들이 글로벌 산업전문성의 가치를 어떻게 평가하고 있으며, 글로벌 회계법인 네트워크 내에서의 산업고유 지식의 활용이 감사품질에 어떠한 영향을 미치는지 실증적으로 살펴본다. 이를 위하여 본 연구는 2015년부터 2017년까지 유가증권 및 코스닥시장에 상장된 비금융, 12월 결산법인 4,766개의 기업-연도 표본을 이용하여 글로벌 산업전문성과 감사보수 및 (재량적 발생액으로 측정된) 감사품질과의 관계를 살펴보았다. 본 연구에서 감사인의 산업전문성은 고객회사의 매출액 기준 시장점유율을 이용하여 측정하였다. 실증결과 글로벌 산업전문성만 있는 감사인은 감사보수 프리미엄을 받지는 못하지만 양질의 감사서비스를 제공하는 반면 한국의 산업전문성이 있는 감사인은 감사보수 프리미엄을 받지만 이에 상응하는 높은 품질의 감사서비스를 제공하지 않는 것으로 나타났다. 본 연구는 글로벌 산업전문 감사인과 한국의 산업전문 감사인의 감사보수 및 감사품질을 비교 분석함으로써 한국 감사시장에서 글로벌 수준의 산업고유지식의 활용정도와 그에 대한 고객회사의 평가를 살펴보았다는 점에서 의의가 있다.