Effective Audit Research Articles

CONSERVATISM INDEX IN FINANCIAL REPORTING INTEGRITY: BASED ON GOOD CORPORATE GOVERNANCE, KAP REPUTATION, LEVERAGE AND AUDIT TENURE

The integrity of financial statements is very important for companies in order to gain the trust of users of financial statements. This study aims to analyze the effect of good corporate governance, reputation, leverage and audit tenure on the integrity of financial statements. 135 manufacturing companies listed on the Indonesia Stock Exchange in 2017-2020 became the population and 15 were selected as samples by purposive sampling. This research method uses a quantitative approach with data analyzed using multiple linear regression analysis. Audit committee variables and audit tenure variables have a positive effect on the integrity of financial statements, managerial ownership and CPA reputation variables have a negative effect on the integrity of financial statements, while the independent commissioner, institutional ownership and leverage have no effect on the integrity of financial statements. This study implies that in manufacturing companies the factors that are thought to affect the integrity of financial statements in this study still show different results from previous studies so that they cannot be generalized in various sectors and research periods. These factors still need to be re-examined in further research to get more valid results.

Pengaruh Audit Internal dan Akuntabilitas Sektor Publik terhadap Kualitas Penyajian Laporan Keuangan dalam Mengelola Alokasi Dana Desa di Kecamatan Pontang Tahun 2022

The purpose of this study was to find out the effect of internal audit and public sector accountability on the quality of presentation of financial reports in managing village fund allocations in Pontang District in 2022. This study used a quantitative approach with data collection techniques using a questionnaire. The population in this study were 30 village officials in the Pontang District, while the sample used the saturated sampling technique, which is a sampling technique when all members of the population are used as samples, so that the samples taken in this study were 30 people. The results of this study in hypothesis 1 there is an effect of internal audit on the quality of presentation of financial reports in managing village fund allocations in Pontang District in 2022. Hypothesis 2 there is an effect of public sector accountability on the quality of presentation of financial statements in managing village fund allocations in Pontang District in 2022. Hypothesis 3 there is the influence of internal audit and public sector accountability together on the quality of presentation of financial reports in managing village fund allocations in Pontang District in 2022.

Effect of Internal Audit on Financial Management in Tertiary Educational Instutions: A Study of College of Education Oju, Benue State, Nigeria

Effective financial management is a key determinant to the success of any organization. Mismanagement of funds in educational institutions has become a stumbling block in the operations of educational institutions in Nigeria. Internal audit is of great importance in curbing financial mismanagement. This study investigated the effect of internal audit on financial management at the College of Education oju, Benue State. Four research objectives and hypotheses guided the study. Descriptive survey design was adopted, 71 principal staff were used as the population. Through census strategy the entire population was sampled and used for the study. Data were collected using questionnaires. Pearson product moment correlation statistics was used to test the hypotheses at 0.05 alpha level of significance. Major findings were that internal audit has significant effects on revenue generation, accountability in the use of funds, transparency in the use of funds and prevention of diversion of funds. Based on the findings, the researcher recommended among others that skilled auditors should be engaged to take up internal audit roles.

Audit consortium impact on audit quality assessment: evidence from Egypt

Purpose Audit consortium of joint and dual audits is one of the most controversial mechanisms aimed at improving audit quality and resolving several related debatable issues. This study aims to empirically investigate the impact of audit consortium on audit quality assessment in Egypt. It specifically examines whether audit opinion modification level is triggered by joint and dual audits existence and whether it is influenced by the relative importance of the auditor pair combination types. Design/methodology/approach A sample of companies listed on the Egyptian Stock Exchange constituting the EGX 30 index is examined over a period of five years, from 2016 to 2020. A quantitative research methodology is used, using content analysis of companies’ audit reports and carrying out longitudinal panel ordinary least squares multiple regression tests. Findings Results show that audit quality is significantly enhanced by conducting joint and dual audits of Egyptian companies’ financial statements. Findings indicate that both joint and dual audits significantly increase auditors’ propensity to modify audit opinions as compared to companies that engage in single audits. However, this increase in audit quality is not supported by the presence of Big 4 joint auditors or affiliated joint auditors, while the impact of Big 4 dual auditors cannot be confirmed. Nevertheless, such a potential increase in audit opinion modification is boosted by the presence of affiliated dual auditors, which appears to translate into higher quality. Research limitations/implications The study has important implications for researchers, corporates, those charged with governance, financial statement users, auditors, regulators and standard setters, who might be interested in whether an audit consortium and a particular auditor pair combination are associated with superior audit quality. It provides empirical evidence that might contribute to the continuous challenge of promoting the quality and effectiveness of the external audit. Originality/value This study adds to the relatively limited and challenging literature on the potential contribution of audit consortium, using audit opinion modification level as a direct assessment of audit quality. It extends the scope of prior research by examining the existence of joint and dual audits and the relative importance of joint and dual auditor pair combination types. The study provides key insights from a distinctive and complex emerging audit market.

Credit Rating and Board Evaluation of Family Firms

Purpose: The purpose of this paper is to shed the light on board evaluation for following analyses that will explore whether and how does credit rating agencies react to board performance evaluation. Design/methodology/approach: To test our research questions, we hand-collect board evaluation information for Taiwan publicly firms from annual reports and firm websites for the years 2019 to 2021. Then, we use the ordered probit model to examine our research questions. Finding: First, our results show that there is a relationship between family firms and unfavorable ratings. However, effective board evaluation was shown to strengthen transparency and accountability in internal governance environment, thereby moderating such negative relationships. Second, when family firms are mandated to establish audit committees or change auditors, they are more likely to receive unfavorable ratings. Specifically, effective board evaluation moderates’ negative effects on ratings and positively impacts rater perceptions. Third, rating agencies assign a more unfavorable rating to family firms that ignore gender diversity on audit committees, however, effective audit committee’s evaluation could moderate the concern whether gender diversity on audit committees affect the effectiveness of corporate governance. Research limitations/implications: First, we focus on the context of family governance to examine the effect of board evaluation on credit ratings. Therefore, our findings may not be applicable to non-family firms. Second, we are not able to directly observe the mechanism of board evaluation because our study uses hand-collected data of board evaluation obtained from publicly available MOPS reports and website news. In addition, our sample period is limited from 2019 until 2022 due to the significantly higher hand-collecting cost of using board evaluation data. Third, with respect to our extended analyses on audit changes, we didn’t consider the types of auditor changes because it is difficult to distinguish between auditor resignations and dismissals. Finally, although we include control variables consistent with prior studies, our research models may have not fully captured variables associated with credit ratings. Originality/value: First, our results contribute to the family firm literature on the relationship between corporate governance and economic consequence by focusing on the importance of board evaluation. Second, our findings can be useful to regulators and policy-makers in making governance policies aiming to mandate the establishment of audit committees’ complementary rules by encouraging family firms to fulfill the board evaluation for improving the quality of governance environment. Third, our findings not only contribute to the auditing literature but also imply that the board’s performance evaluation plays a positive factor in credit raters’ considerations. Fourth, our findings contribute to the audit committee literature examining the effects of gender diversity and performance evaluation.

Pengaruh Audit Internal terhadap Penerapan Good Corporate Governance pada PT.Bank Mandiri Persero Tbk KCP Sudirman Palembang

This study aims to determine the effect of internal audit on the implementation of good corporate governance at PT. Bank Mandiri (Persero) Tbk KCP Sudirman Palembang. Good corporate governance is the dependent variable in this study, while internal audit is the independent variable. The sample in this study was 31 employees who were obtained using a non-probability sampling technique. This type of research is causal associative, where there is a causal relationship between the dependent and independent variables. The data collection techniques used were interviews and questionnaires using a multiple linear regression analysis approach through IBM SPSS version 21 software. The results of this study indicate that the implementation of internal audit has a significant influence on good corporate governance with a significant value of alpha 0.000 (0.000 <0.05).

Examining the critical factors of internal audit effectiveness from internal auditors’ perspective: Moderating role of extrinsic rewards

An effective internal auditor can support an organization in achieving its goals and protect its assets and funds. However, to be effective, the internal auditors need to be empowered with relevant resources. This study aims at probing the influence of the empowerments (management support, external auditors' collaboration, independence, size of internal audit units, and extrinsic rewards) on the internal auditors' effectiveness, and to examin whether extrinsic rewards moderate the association between respective empowerments and the effectiveness of Jordanian public sector internal auditors'. The current work relied on 117 surveys collected from Jordan's internal audit and financial managers in the public sectors. According to the Resource-Based View (RBV), the findings show that management support, external auditors cooperation, independence, and extrinsic rewards all have a significant influence on the effectiveness of internal auditor. The of the Internal Audit Department (IAD) size was discovered to be insignificant. Also, the results have revealed partial support for the influence of the extrinsic reward as a moderator. Because of the prominence of the public sector in the Jordanian market, this current research expands on the idea of enabling internal auditor (IA) to accomplish their assigned objectives. The findings might help authorities develop new norms and legislation for the internal audit profession. These empowering characteristics may also improve internal auditors' capacity to execute their duty in saving public monies and limiting corrupt practices inside public sector organizations.

AUDIT COMMITTEE CHARACTERISTICS AND FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN CAMEROON

This study examines audit committee characteristics and financial performance of manufacturing companies in Cameroon. The study adopted ex-post facto research design. The population consisted of the 133 manufacturing companies in Cameroon. A sample of 20 companies was used and data collected from secondary sources within the period 2013 to 2022. The data were analysed with the aid of a panel regression analysis. The results showed that audit committee size, expertise, and independence all positively affect financial performance proxy by return on assets, net profit margin and Tobins Q. the study recommends that manufacturing companies should make an effort to add an audit committee that is more educationally diverse and inclusive. This opens up the possibility of doing more risk assessments because audit committee members who are also knowledgeable in accounting have established precedents for better risk assessment and asset management for improved operational performance. Manufacturing firms should strictly abide by the corporate governance guidelines promoted regarding the number of audit committee members, as it has been demonstrated that the more members, the more effective resources in terms of independence and expertise to facilitate an effective audit function disposition for efficient business decisions that will favorably affect financial performance. In maintaining the required number of audit members, manufacturing businesses should always include an equal number of shareholders and managements representatives. This will lead to the formation of an unbiased audit committee that is fair and free from outside interference.

The Relationship between Political Institutional Factors and Internal Audit Effectiveness in Vietnamese Enterprises

Using qualitative research methods, we have clarified the content of internal audits and the effectiveness of internal audits. A literature review has shown that the Political Institutions factor has not received much research attention in Vietnam. That's why we identified the gap and conducted this research. Data collected from interviews with 20 experts working in the field of accounting and auditing were analyzed using King's (2004) format and Cresswell's (2003) analysis process. The analysis results have shown that the Political Institutions factor, and its measurement factors are regulatory capacity, political stability, legal effectiveness, police accountability, and corruption control impact on internal audit effectiveness. Next, the study conducted a survey with 80 employees working in the field of accounting and auditing. This is a research step to ensure transparency in determining influencing factors. The results of this survey are consistent with the direct interview method. This means that the effectiveness of internal audits is affected by political and institutional factors.

The bridge to quality financial reporting: Audit committees’ mediating role in IFRS implementation for emerging markets

AbstractThis study aims to examine the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting quality in Saudi Arabia, with a specific focus on the mediating role of effective audit committees (ACs) and the specific characteristics of ACs that have a negative correlation with earnings management (EM) practices. The research collected financial data from 92 listed firms spanning the period from 2012 to 2020 encompassing both the years before and after the IFRS adoption in 2017. The study used regression and rigorous mediation analysis based on the Baron and Kenny (1986) approach to investigate the relationship between IFRS adoption, ACs, and EM. The findings indicate that IFRS adoption has a negative and significant impact on EM practices. Additionally, the study found that AC expertise is positively influenced by the IFRS adoption, while the AC size has a positive correlation with EM levels. The study further revealed that AC expertise has a negative correlation with EM levels and fully mediates the relationship between IFRS adoption and EM. The research's findings carry significant practical implications for a range of stakeholders. Regulators and policymakers in Saudi Arabia should consider the positive impact of IFRS adoption on financial reporting transparency and accountability when evaluating their regulatory framework. Firms can strengthen their corporate governance practices by focusing on the recruitment and training of AC members with robust financial and accounting backgrounds. This emphasis on AC quality, rather than size, is crucial to mitigating EM practices and enhancing the effectiveness of IFRS implementation. Lastly, investors and analysts can utilize these findings to assess the reliability of financial statements and identify firms with robust governance structures. Furthermore, the study contributes to the discourse on financial reporting and governance dynamics in emerging markets, offering insights for future research and policy discussions.

Evaluating a Physician Audit and Feedback Intervention to Increase Clinical Trial Enrollment in Radiation Oncology in a Multisite Tertiary Cancer Center: A Randomized Study

Clinical trial participation continues to be low, slowing new cancer therapy development. Few strategies have been prospectively tested to address barriers to enrollment. We investigated the effectiveness of a physician audit and feedback report to improve clinical trial enrollment. We conducted a randomized quality improvement study among radiation oncologists at a multisite tertiary cancer network. Physicians in the intervention group received quarterly audit and feedback reports comparing the physician's trial enrollments with those of their peers. The primary outcome was trial enrollments. Among physicians randomized to receive the feedback report (n = 30), the median proportion of patients enrolled during the study period increased to 6.1% (IQR, 2.6%-9.3%) from 3.2% (IQR, 1.1%-10%) at baseline. Among those not receiving the feedback report (n = 29), the median proportion of patients enrolled increased to 4.1% (IQR, 1.3%-7.6%) from 1.6% (IQR, 0%-4.1%) at baseline. There was a nonsignificant change in the proportion of enrollments associated with receiving the feedback report (-0.6%; 95% CI, -3.0% to 1.8%; P = .6). Notably, there was an interaction between baseline trial accrual and receipt of feedback reports (P = .005), with enrollment declining among high accruers. There was an increase in enrollment throughout the study, regardless of study group (P = .001). In this study, a positive effect of physician audit and feedback on clinical trial enrollment was not observed. Future efforts should avoid disincentivizing high accruers and might consider pairing feedback with other patient- or physician-level strategies. The increase in trial enrollment in both groups over time highlights the importance of including a comparison group in quality improvement studies to reduce confounding from secular trends.

Internal Audit Effectiveness: Effectiveness of Internal Control System and Management Support as a Moderating Variable

Internal Audit Effectiveness: Effectiveness of Internal Control System and Management Support as a Moderating Variable

Factors of Effective Internal Audits for Patient Safety in Primary Health Care Centers of Taif, Saudi Arabia

Introduction: Internal audit is one of the tools to ensure safety in patient care. Literature on the internal audit effectiveness (IAE) in patient safety is scarce in Saudi Arabia. This study therefore aimed to assess the factors which influence the IAE in patient safety. Methods: A cross-sectional study was conducted among primary healthcare centers’ general directors and medical directors in Taif, Saudi Arabia. Data were collected using a validated structured questionnaire in Arabic and English. The questionnaire besides sociodemographics characteristics collected data on support of management, interdepartmental coordination, independence, objectivity, competence, and IAE. Analysis was done on SPSS version 26.0. Pearson correlation was used to see the relationship between factors and the IAE in patient safety. Results: A total of 94 participants were included in the analysis. The mean scores in each of the domains on a scale of 5 were; support of management 4.04, interdepartmental coordination 3.95, independence 4.03, objectivity 4.20, and competence 4.46, while for the IAE the mean score was 4.36. Correlation analyses found that the IAE was significantly associated with all five factors. All the factors had moderate association except for objectivity which had a weak correlation with IAE. Conclusions: Overall, there were satisfactory scores for the factors which affect IAE with room for further improvement. All the factors studied were positively associated with the IAE, indicating a need for healthcare organizations to consider these factors while planning internal audit activities. Further research on large scale is required to provide robust and generalizable results.

Moderating Effect of Audit Liberty on Reporting Timeliness of NonBank Financial Firms in Nigeria

This study investigated the effect of auditors’ liberty on audit reporting timeliness of financial firm in Nigeria from (2011-2020). Two research hypotheses were formulated for the study. Expost facto research design was employed in the study. The population of the study included all financial firms quoted and trading on the Nigerian Exchange Group (NXG) (NSE) as at 31st December 2021 with a sample size of Twenty-three (23) financial firms selected from the population sector. The study relied on secondary sources of data which was obtained from Annual reports of sampled firms as provided by individual firms and Nigerian Exchange Group (NXG) website. Random Effect Panel least square regression analysis was employed in validating the hypotheses. The study revealed a significant negative effect of audit fees on audit reporting timeliness while there is no moderating effect of audit committee gender diversity on the association between audit fee and audit reporting timeliness. Consequent on the findings, the study therefore recommends amongst others that companies should engage Audit firms with better exposure who will put due diligence and professional ethics above any pressure resulting from high or low fee. The study also recommended that firms should budget an optimal amount for audit fees to ensure they do not spend more than necessary yet not compromising audit quality and reporting timeliness. Further studies can be undertaken on other specific factors that affect audit report lag in manufacturing companies and the oil and gas sector.

Embedding reuse into infrastructure projects by carrying out ‘pre-redevelopment audits’

There is significant potential for large infrastructure projects with multiple demolition phases to kick start a second-hand materials market and unlock a truly circular economy. Civil engineers are well placed to lead this by carrying out reuse appraisals, commonly known in the buildings sector as ‘pre-redevelopment audits’. The paper sets out current practice and emerging policies regarding reuse in the construction sector, then describes the steps for undertaking an effective audit. The aim is to assess and maximise the reuse and recovery of materials from the start, thereby helping to reduce the industry’s overall greenhouse gas emissions.

Auditor's professional judgment, audit efficiency and interplay between legal liability and regulatory oversight

This paper analyzes the impact of two enforcement mechanisms – regulatory oversight (inspection by the Public Accounting Oversight Board – PCAOB) and legal liability – on audit effectiveness and audit efficiency, when auditor's professional judgment is at stake. Professional judgment is a double-edged sword: used wisely, it enables efficient audit performance, but can also be used as an excuse to put in an insufficient effort, leading to an ineffective audit. The model shows that regulatory oversight is better at enforcing audit effectiveness, while legal liability is better at inducing efficiency. Moreover, switching from a pure legal liability regime to a joint regime that includes both enforcement mechanisms is found to improve audit effectiveness, limit auditor's professional judgment, and worsen efficiency. The study provides insights into the effects of the creation of the PCAOB and offers policy implications for regulators.

EXTERNAL AUDIT ATTRIBUTES AND INCOME SMOOTHING OF LISTED BANKS IN NIGERIA

The present study seeks to examine the effect of external audit attributes on income smoothing-INSM in listed deposit money banks in Nigeria covering a study period of ten (10) years spanning from 2012 to 2021 over ten (10) banks. The regressed is income smoothing measured by loan loss provision while the regressor is external audit attributes measured by Audit Firm Size (AFS), Non-audit Service Fees (NASF), Audit Tenure (ATN), and Joint Audit (JOA). The study covered ten selected deposit money banks listed on the Nigerian Exchange Group (NEG) as at 31st December 2021 while data were collected from the annual reports of the selected banks. Further, the ex-post facto research design was used and emphases were laid on banks’ data. The study adopted panel data multiple regression estimation technique while data were analyzed through the Eviews-9 statistical package for data analysis. The study reported that, Audit Firm Size (AFS) exerted a negative significant effect on INSM of listed deposit money banks in Nigeria. Meanwhile, Non-audit Service Fees (NASF) and Audit Tenure (ATN) exerted a positive significant effect on INSM of listed deposit money banks in Nigeria. However, Joint Audit (JOA) exerted a negative yet minimal effect on ISMN of quoted banks in Nigeria in. Hence, the paper concludes that, external audit attributes have mixed effects on ISMN tendencies of bank managers in Nigeria. As such, bank owners must ensure that they engage the services of credible auditing firms with track records of delivering reports that show the actual situation of the bank. Meanwhile, the Financial Reporting Council (FRC) should have stiffer penalty for bank managers/auditing firms caught engaging in the act of ISMN.
 Keywords: External Audit Attributes, Audit Firm Size (AFS), Non-audit Service Fees (NASF), Audit Tenure (ATN), and Joint Audit (JOA), Income Smoothing.

Effectiveness audit in the state procurement management system

The article discusses the possibilities of efficiency audit in the field of state procurement of Georgia. Taking into account the competitive environment in the modern tender market, in order to ensure the fair and efficient use of budget funds, a special place in the management of public finances is occupied by the efficiency audit. The purpose of the study is to analyze the state of competitiveness in the state procurement process in Georgia based on the efficiency audit and to evaluate its relationship with the decrease in the tender price. In order to achieve the set goal, in the process of the research, the author has processed the factors that affect such a dependent variable as - "decrease in price". A regression analysis has also been conducted to check the influence of independent factors. Based on the necessity of competition in state procurement, the article also discusses the issues related to the challenges still existing in Georgia in this direction. At the same time, approaches are proposed that ensure the improvement of competition in the procurement process. The article highlights the importance of efficiency audit in the state procurement system, which is primarily a prerequisite for optimal use of state funds and effective management of the public management process. Keywords: public procurement, efficiency audit, competitiveness price, SPA tender with reverse auction

CAPITAL INVESTMENT: TREATMENT AND REGULATION FOR ACCOUNTING AND AUDIT PURPOSES IN POST-WAR UKRAINE

Despite the considerable number of studies of capital investments, the question of the actual definition of this definition for the purposes of accounting and auditing, taking into account the post-war development of Ukraine, still remains open. The purpose of the article is to generalize the main problems of identification and legal regulation of capital investments for the purposes of their accounting and auditing from the point of view of finding ways to solve them. The article analyzes the interpretation of the term “capital investment” in the scientific debate, the international and domestic regulatory framework, and its influence on the organization of effective accounting and auditing. It was established that the definition of the concept of “capital investment” in national legislation is ambiguous, and it is absent in international accounting regulations, which creates a problem of managing capital investment at the enterprise level. To solve this problem, it is proposed to use definitions of capital investments from the point of view of economic interpretation and for accounting purposes. The work identifies the problems of capital investment management, for the solution of which the development of a standard is proposed, which will prescribe the elements of regulation at the state and enterprise levels. The presence of such regulation, on the one hand, will create confidence in the national economy on the part of external investors, on the other hand, it will allow to organize effective accounting, reliable reporting, and independent audit of capital investments of enterprises. The directions of further research are defined elements of the accounting policy in terms of accounting, internal control, and audit of capital investments, which will allow to take into account the peculiarities of the activities of domestic business entities.

The Influence of Cultural, Legal and Institutional Factors on Auditors' Roles, Responsibilities and Perceptions of Audit Quality

This study provides an international perspective on auditing practices by comparing and contrasting the qualitative aspects of auditing across different countries and regulatory environments. It examines how cultural, legal, and institutional factors shape auditors' roles, responsibilities, and perceptions of audit quality. The research explores the influence of these factors on auditors' professional ethics, independence, and accountability. By analyzing the similarities and differences in auditing practices, the study sheds light on the variations in regulatory frameworks and cultural contexts that impact the profession. It highlights the importance of understanding these factors to ensure effective and high-quality audits. The findings contribute to a better understanding of the global auditing landscape and provide insights for regulators, standard-setting bodies, and auditors to enhance auditing practices and standards. The study also emphasizes the need for further research in this area to deepen our understanding of the complex interplay between cultural, legal, and institutional factors in auditing.