Effect Of Audit Firm Size Research Articles

The Effect of Audit Firm Size on Earnings Management: Using the CEO Compensation as Moderator

This study investigates the impact of the audit firm size on earnings management by using the CEO compensation as a moderating variable. This study was conducted in service and industrial firms listed on the Amman Stock Exchange from 2015 to 2019. The results of this research were examined using a fixed-effect model, and many robustness tests were used to show that the conclusions are reliable when using different measures. The size of the audit company and the management of earnings were shown to be significantly correlated in the research. However, show how the combined effects of CEO remuneration and audit firm size have a considerably detrimental impact on the management of profitability. When making decisions on external audits and earnings management, the government, investors, and shareholders would benefit from this study. It highlights several strengths and flaws in the audit firm size and CEO compensation that aid in restricting earnings management.

The Effects of Audit Firm Size, Audit Tenure, and Audit Rotation on Audit Quality

This study examines the effect of audit firm size, audit period, and audit rotation on audit quality. The data come from annual reports of infrastructure, utilities and transportation companies listed on the Indonesia Stock Exchange (IDX) from 2016 to 2020. The sampling method used is purposive sampling. A sample of 267 companies was obtained based on the purposive sampling method. The analysis technique used is logistic regression analysis with SPSS software. This study's results confirm agency theory's role in explaining the relationship between parties with different interests. The research findings reveal that the role of audit professional services performed by audit firms can minimize agency problems that arise. Empirically, study findings show that the size of an audit firm and its audit period positively affect audit quality. Conversely, audit rotation does not affect audit quality. The study results provide a practical contribution so that non-big-4 audit firms can improve audit quality as big-4. Audit firms should also pay attention to sufficient audit tenure, short enough or too long, to produce good audit quality.

The Value Relevance Of Accounting Information On Amman Stock Exchange: The Moderating Role Of Audit Quality

The study aimed to measure the value relevance of return on assets (ROA), return on equity (ROE), earnings per share (EPS), and operating cash flow (OCF) on the share prices of listed firms on the Amman Stock Exchange (ASE) from 2018 to 2022. The research is based on the Ohlson model (1995), derived from valuation theory. The results revealed that all independent variables were positively correlated with share prices. Conversely, the moderating effect of audit firm size negatively impacted the variables. The findings indicated that the value relevance of earnings and operating cash flow had a more significant effect on share prices within the context of the ASE. This indicates that investors prefer short-term investment strategies that priorities quick investment returns. This study contributes significantly to the limited body of research addressing the value and relevance of accounting information within the Jordanian context. Shedding light on this topic offers valuable insights to decision-makers in both firms and the investor community. Specifically, it underscores the importance of considering the effective utilisation of accounting ratios in informing strategic decisions and investment choices.

Audit Quality and Earnings Manipulations in Nigeria: Beneish Model

The significance to prepare reliable information discloses the need to fall back on an external auditor and a quality auditing process that can caution against the management of earnings. In line with the business practice, auditing does not provide sufficient coverage for some earnings management (EM) activities that result in financial statement fraud. Over the years, capital markets around the globe have witnessed numerous corporate financial scandals largely because of financial and accounting figures' manipulation. This has led to casting doubt on the quality of published financial reports and questioning the ability of the audit process. Against this background, this study examined the relationship between audit quality and real earnings management of listed manufacturing companies in Nigeria. Specifically, this study evaluated the effect of audit firm size, audit firm industry specialization, audit firm tenure, and audit firm independence on real earnings management. The study sampled 38 out of 55 listed manufacturing companies that cut-across different sectors from 2013 to 2020. From the multivariate analysis, the findings revealed a significant relationship between audit quality (audit firm size and audit firm independence) with a p-value of 0.014 and 0.003 respectively. It was concluded that firms audited by Big-4 firms with independence attract greater publicity and tighter scrutiny; hence, companies tend to desist from managing their earnings. The study, therefore, recommended that the management of manufacturing firms in Nigeria should persist in engaging experience audit firms with international affiliations, and they should work strictly with the CAMA, 2020 as amended by rotating audit firms after every three years as this will promote the reliability of financial statement prepared by management, and finally reduce manipulation of earnings.

PENGARUH AUDIT QUALITY DAN INDEPENDENSI AUDITOR TERHADAP MANAJEMEN LABA RIIL MELALUI FINANCIAL DISTRESS

This research investigates the effect of audit firm size and auditor industry specialization that proxies audit quality, and auditor independence on real earning management through financial distress as an intervening variable. This study used 96 samples of manufacturing companies listed on the Indonesia Stock Exchange in the 2017-2019 research period with a purposive sampling method. By using the Structural Equation Model, the results show that auditor industry specialization and auditor independence have a positive effect on real earnings management through financial distress. Conclusions from the the results of the study explain that financial distress can be a motivation for management to did real earnings management so that it can be an indication for auditor to detect real earnings management. Financial distress can motivate management to use their flexibility to modifiy company profit, so that it requires high quality of audit and independence of auditor. The result of this research are related to role and performance of auditor for understanding client’s condition and detecting irregularities, so this research contributes to examine audit quality and independence of auditor to detect real earning management through financial distress condition

비정상감사시간과 비정상심리시간이 자기자본비용에 미치는 영향과 감사인 규모의 조절효과

[연구목적] 본 연구는 비정상감사시간과 비정상심리시간이 자기자본비용에 미치는 영향을 실증적으로 분석하고 이들의 관계에서 감사인 규모가 조절작용을 하는지를 검증하고자 한다. [연구방법] 본 연구는 2014년부터 2016년까지 유가증권시장과 코스닥시장에 상장된 709개의 기업－연도 표본이다. 실증분석을 위해 자기자본비용은 Easton(2004)의 PEG모형을 이용하여 추정하였고 비정상감사(심리)시간은 표본을 양(＋)인 집단과 음(－)인 집단, 그리고 전체 집단으로 구분하여 분석하였다. [연구결과] 실증분석 결과는 다음과 같다. 첫째, 비정상감사시간과 자기자본비용 간의 분석결과 전체집단과 음(－)인 집단에서는 유의적인 결과가 나타나지 않았지만 양(＋)인 집단에서는 유의한 양(＋)의 영향을 미치는 것으로 나타났다. 둘째, 비정상심리시간과 자기자본비용 간의 분석결과 전체 집단과 음(－)인 집단에서는 유의한 음(－)의 영향을 미치는 것으로 나타났다. 그러나 양(＋)인 집단에서는 유의적인 결과가 나타나지 않았다. 셋째, 비정상감사시간과 자기 자본비용 간의 관계에서 감사인 규모가 조절작용을 하는지 분석하였다. 분석결과 전체집단과 음(－)인 집단에서는 유의한 결과가 나타나지 않는 반면 양(＋)인 집단에서는 Big4 감사인이 Non－Big4 감사인 보다 재무제표의 신뢰성을 증가시키는 노력을 기울인 결과 정보비대칭과 정보위험을 낮추어서 피감사기업의 자기자본비용을 감소시키는데 이바지하는 것으로 나타났다. 넷째, 비정상심리시간과 자기자본비용 간의 관계에 감사인 규모의 조절작용을 분석한 결과는 모든 집단에서 유의한 결과가 나타나지 않았다. [정책적 시사점] 본 연구의 결과는 감사시간이 가진 학문적 의미를 밝혀줌으로써 회계감사분야에 관한 연구의 외연을 확장하고 후속연구의 토대를 마련하는데 기여할 것이다. 또한 규제당국과 감사인 조직에서 감사품질을 제고하기 위한 품질관리 정책 및 절차의 수립에 필요한 증거와 논리적 근거를 제공할 것이다.

Audit firm transparency disclosures and audit quality

This study examines whether audit firm transparency disclosures are associated with audit quality and explores the effect of audit firm size on this association. Using control and treatment samples of Australian audit firms pre‐ and post‐introduction of a disclosure requirement, we document that firms affected by the regulation display improvement in audit quality. We find that the extent of transparency disclosures is positively associated with audit quality, and audit firm size affects this association in a non‐linear manner. That is, the association is stronger for large non‐Big 4 than Big 4 firms and insignificant for medium and small non‐Big 4 firms. The results suggest that large non‐Big 4 firms (and Big 4 to a lesser extent) attempt to distinguish themselves through audit quality by providing extensive disclosures about their systems and practices. The incremental effect for Big 4 firms is smaller, as these firms have an already established reputation for quality in the audit market.

IFRS adoption/reporting and auditor fees: the conditional effect of audit firm size and tenure

PurposeThis paper aims to investigate the impact of International Financial Reporting Standards (IFRS) adoption on audit and non-audit fees in the UK setting. The study investigates whether UK firms adopting IFRS for the first time or reporting under IFRS, in general, are being charged higher audit and non-audit fees and whether this impact is conditional on audit firm size and tenure.Design/methodology/approachUsing empirical data for UK listed firms from 2003-2007, the paper uses a regression model that explains audit and non-audit fees by independent variables measuring auditors’ and auditees’ characteristics including IFRS adoption and reporting. Additional regressions with interaction terms were performed to test the hypothetical conditional impact of auditor size and audit firm tenure on the above-mentioned association.FindingsAudit and non-audit fees increase significantly for companies adopting IFRS for the first time and this increase is persistent during later years. In addition, results suggest that both Big four and non-Big four auditors charge higher audit and non-audit fees to their clients adopting or reporting under IFRS in a similar manner. Furthermore, findings indicate that audit firms increase audit and non-audit fees for old and new clients using IFRS which suggests no low-balling effect is detected.Research limitations/implicationsResults reported in this study provide insights to regulators in jurisdictions similar to the UK regarding the cost of IFRS adoption which includes higher audit and non-audit fees imposed by both Big four and non-Big four audit firms. In addition, this study argues, to some extent, against the notion that auditors may charge lower fees in the early years of the audit engagement to win new audit clients.Originality/valueTo the best of the knowledge, the findings are unique at two levels. First, the paper provides evidence on the cost of using IFRS in the UK jurisdiction which was not explored by previous research. Second, the paper investigates the potential conditional effect of auditor size and audit tenure on the association between IFRS adoption and auditors’ fees.

An investigation into the effect of audit firm size, auditor tenure, institutional ownership, board characteristics on auditor independence

The independence of an auditor is a crucial issue because of its potential impact on audit quality. This study examines the effect of audit firm size, auditor tenure, institutional ownership, board independence, and board diversity on the audit quality. The sample comprised 52 listed service firms on the Jordanian Stock Exchange, whose data were obtained for the years from 2013 to 2016, and 208 firm-year observations were involved in the analyses process. In this study, auditor independence served as the proxy for audit quality. The results reveal that audit firm size and institutional owners and board independence significantly and positively influence audit quality. The results reveal that companies with a higher proportion of institutional ownership and independent members of the board and being audited by a Big 4 firm are more likely to maintain the independence of the external auditor. However, auditor tenure and board diversity had no significant relationship with auditor independence. The results could be useful for the management of companies that are interested in enhancing the quality of audit work in their companies.

An investigation into the effect of audit firm size, auditor tenure, institutional ownership, board characteristics on auditor independence

An investigation into the effect of audit firm size, auditor tenure, institutional ownership, board characteristics on auditor independence

ANALISIS FAKTOR - FAKTOR YANG BERPENGARUH TERHADAP AUDITOR SWITCHING

Auditor switching could happen mandatorily (because of the rules which persistent it and also voluntarily. Many question rise when a company voluntarily switches its auditor because happen outside rules which has been specified. This research aims to analyze the effect of audit firm size, financial distress, public ownership, management turnover, changes in audit committee, audit opinion, audit fee on auditor switching in Indonesia. Data collecting method which used in this research is method purposive sampling, that based on the objectives of research. ,Based on method purposive sampling, research sample total is 180 manufacturing companies which is listed in "Bursa Efek Indonesia" (BEI) in 2009-2014 period. Hypothesis in this research are tested by logistics regression analytical method. Result of this research shows that variables having which significantly effect the auditor switching are audit firm size and management turnover. On the other hand, other variables in this research like audit firm size, client size, client growth rate, financial distress, board of commissioners, and audit opinion do not have significant effect on company decision to do auditor switching.

Does Audit Firm Size Matter? The Effect of Audit Firm Size Measured by Audit Firm Revenues, Number of Offices, and Professional Headcounts on Audit Quality and Audit Fees

Using audit firm size measured by audit firm revenues, the number of offices, and professional headcounts, we find that audit firm size measured as continuous variable is positively associated with engagement-level audit quality proxied by discretionary accruals and modified opinions, and is also positively associated with audit fees. The Big 4 audit firms differ considerably in size and their size also measured by revenues, the number of offices, and professional headcounts is significantly associated with the audit quality and audit fee differences across Big 4 auditors. However, we find only limited evidence of the hypothesized relation between associate-to-partner ratio (i.e., human capital leverage) and audit quality, and find no evidence that associate-to-partner ratio is associated with audit fees.

The Effect of Audit Firm Size on Independent Auditor’s Opinion: Conceptual Framework

Independent auditor’s opinion enhances the confidence of investors in the reporting system and leads to an increased in capital markets efficiency. Thus, the effectiveness and quality of opinion developed by the auditor about the financial statements is significantly important, because financial statements should be reliable, useful and relevant for investors and creditors. A s ignificant issue frequently raised in the accounting literature is whether judgments of auditors from large firms vary substantially from those of auditors employed by other firms. Then past researchers attempted to find the relationship between the size of company and auditor’s opinion and its quality. Review on the literature revealed that the size of firm can not affect auditor’s opinion but this survey found that some factors such as experience, education, skills and employee competence may have influence on quality of auditors and their opinion. This paper has categorized these views under special category of capital known as human capital. Thus, the study anticipates improvement in the relationship between audit firm’s size and independent auditor’s opinion by introducing human capital as a mediator variable.

The effect of audit firm size on audit prices

In a recent issue of Journal of Accounting and Economics, Francis, 1 1 The authors are indebted to Francis for his contributions to this study. developed a theory for determining the effect of audit firm size on audit prices (EAFSA). The present study offers an extension to his multivariable theory, which is otherwise viewed as an excellent attempt at presenting a realistic model of EAFSA. Further analysis of the data included in the present paper ranks the dominant variables and factors as (1) External audit fee (AFE), and Percentage of Assets (AST), and (2) Loss in last three years (LLS). In addition, this analysis reduces the multicollinearity and data redundancy of the original 11 variables by creating 6 less redundant factors from them. These new factors yield a EAFSA model of measurement with a fewer number of terms, a lower multicollinearity, and a multivariate normal distribution. The variable entitled Return on Investment (ROI) is ranked as the most subordinant, and most dependent, while (AFE) is ranked as the most dominant variable.

A Theory of Audit Partnerships: Audit Firm Size and Fees

In this paper we analyze the effect of audit firm size on audit fees.' An economic model is developed using an agency framework, taking into consideration the uncertainties involved in the audit process and the auditor's incentives. Optimal fee schedules are derived for a fixed level of audit effort.2 If clients can perfectly observe audit effort, fees will be paid for the actual level of audit effort. This is the first-best contract between client and auditor. However, if auditors are effort averse and their actions are

The effect of audit firm size on audit prices: A study of the Australian Market

The effect of audit firm size on prizes is a complex function of competition in the market for audit services, product differentiation, and scale economics to large firms. In this study, a competitive market is supported in Australia with product differentiation to Bif Eight accounting firms. Specially, Big Eight accounting firms have significantly higher audit prices than non-Big Eight firms. This results holds for ‘large’ and ‘small’ auditees. A test is also made of price cutting in the Australian market. Price cutting is defined as lower initial audit fees than continuing engagement fees for a comparable audit. Test results do not evidence price-cutting behavior by accounting firms. There is in fact weak evidence that initial audit fees are higher than continuing engagement fee levels. Higher initial fees suggest that accounting firms may recover at least some of the audit start-up costs immediately.