Auditor Independence Research Articles

The Effect of the Source of Commitment and Ethical Style of Auditors on Independent Auditors’ Whistle-blowing

The Effect of the Source of Commitment and Ethical Style of Auditors on Independent Auditors’ Whistle-blowing

Ethical considerations in Risk management of autonomous and intelligent systems

Abstract The rapid development of Artificial Intelligence (AI) has raised concerns regarding the potential risks it may pose to humans, society, and the environment. Recent advancements have intensified these concerns, emphasizing the need for a deeper understanding of the technical, societal, and ethical aspects that could lead to adverse or harmful failures in decisions made by autonomous and intelligent systems (AIS). This paper aims to examine the ethical dimensions of risk management in AIS. Its objective is to highlight the significance of ethical considerations in mitigating risks associated with the development, deployment, and use of AIS. The paper provides an overview of various types of AI risks and risk management procedures aimed at mitigating the negative impacts of those risks. We employ a comprehensive risk management approach that combines technical expertise with ethical analysis to ensure alignment with human values and societal objectives. Through the analysis of AI risks and risk management procedures, we advocate for establishing effective mechanisms for ethical oversight and legal control to promote ethical and trustworthy AIS. The findings reveal key risks associated with transparency, accountability, privacy infringement, algorithmic bias, and unintended consequences. To address these challenges, we consider integrating ethical principles into risk management practices, transparent risk communication, continuous engagement with all stakeholders, establishing robust accountability mechanisms, and regular ethical oversight as imperative in ethically designing and operating AI systems. Given the diminished effectiveness of internal audits compared to external audits, we also recommend the implementation of regular monitoring mechanisms through independent external audits when evaluating risk management practices.

Going Concern Audit Opinion: Does it Depend on Disclosure and Previous Years’ Audit Opinion?

A going Concern Audit Opinion is an opinion given by an independent auditor to the auditee. This opinion contains the auditor's assessment regarding the company's sustainability. This opinion is one factor that becomes a consideration for management, creditors, investors, and other stakeholders in making decisions. The population in this study were all companies listed on the Indonesia Stock Exchange for the 2017 - 2019 period. The sample selection technique used purposive sampling, and 25 companies were obtained, so 50 samples were processed. Hypothesis testing uses multivariate analysis, namely logistic regression, with E-Views 10 software. This research aims to determine the effect of disclosure and the previous year's opinion on going concern audit opinion with opinion shopping as a moderating variable. This research found that disclosure did not affect the acceptance of going-concern audit opinions. Still, the previous year's opinion positively affected the acceptance of going-concern audit opinions. These results indicate that investors have to be careful in reading the audit opinion of the previous year regarding the company's going concern.

The Influence of Financial Distress, Auditor Switching, Profitability, Audit Quality on Audit Delay

Audit delay is the period for completing the annual financial report audit, namely from the date the company's books are closed to the date stated in the independent auditor's report. The length of the audit delay affects the value of the audited financial statements. This research aims to find out whether Financial Distress, Auditor Switching, Profitability, and Audit Quality affect Audit Delay. The data used in this research is secondary data in the form of audited financial reports. This research population was obtained using methods from non-cyclical consumer sector companies listed on the IDX during the 2020-2022 period. Based on predetermined criteria, a sample of 129 companies was obtained. The analytical method used is multiple linear regression analysis with the STATA 17 software tool. The research results show that financial distress affects audit delay. Meanwhile, auditor switching, profitability, and audit quality do not affect audit delay.

The Influence of Competency, Independence, Professional Skepticism on Fraud Detection on Financial Statements in The Regional Government of West Java Province

The research aims to determine the influence of competence, independence and skepticism on fraud detection. The research method used was explanatory research, the research population was active auditors/examiners at the BPK RI Representative of West Java Province with a sample size of 80 people. The analysis used uses multiple linear regression tests, coefficient of determination tests and hypothesis tests. The research results show that examiner competency influences fraud detection in local government financial reports which shows that the examiner has good competence. The independence of examiners influences fraud detection in regional government financial reports. This shows that the independence of auditors at BPK RI West Java Province Representative is considered good but needs to be improved to be better. The professional skepticism of auditors in conducting audits influences fraud detection in regional government financial reports which are assessed. Good, although it still needs to be improved to be better.

Pengaruh Faktor Lingkungan Pada Penentuan Materi Kesalahan Dalam Audit Laporan

The purpose in this study was to determine the effect of environmental factors on the determination of error material in the audit of financial statements. Ind facto environment is accountability, independent auditors, experience, auditory performance and auditory professionalism in determining the quality of the audit. The approach used is Quantitative by using multiple linear regression analysis. The results showed that Value from R Square in the study was 0.616 (61.6%) meaning that there were still 38.4% of factors (variable) that could affect the quality of the audit. For this reason, researchers can further add to the use of other variables other than the four variables that have been used in this study, such as leadership styles, auditor competence competencies, and time pressure budget.

#2861 Real-life efficacy of tolvaptan for polycystic kidney disease (PKD) and association with patient adherence in London North-West specialist clinic

Abstract Background and Aims Tolvaptan is approved by NICE in the treatment of PKD afterrandomised controlled trials demonstrated a reduction in decline in eGFR. Aquaresis occurs as an effect, and this may limit tolerability as the second dose in a day causes nocturia and disturbed sleep. Thirty-three patients in our specialist PKD clinic were treated based on criteria of bipolar renal length >=15cm and decline in eGFR by > −5 ml/min/yr. We evaluated their real-life outcome regarding measures of adherence including an adapted Basel Assessment of Adherence to Immunosuppressive Medication Scale © (by permissions.nursing.unibas.ch/) originally validated for immunosuppression medications in transplant patients. A further 24 patients had finished treatment at our centre and were excluded as BAASIS could not be applied in hindsight. However, they illustrated a notably high level of intolerance leading to cessation in 16/24 (9 with nocturia, 4 transaminitis, 1 angioedema, 1 rash, 1 fatigue) emphasizing the importance of this work on adherence and response. Method BAASIS addresses recall of treatment adherence in the preceding 4 weeks, all 33 patients currently treated as of 16/1/24 were screened on telephone by two independent auditors with a standard non-judgemental introductory script designed to result in candid engagement. Investigators were blinded to renal outcomes. A decline in eGFR of less than 5 ml/min/yr was defined as treatment response. Results Of the 33 patients included, 14 males and 19 females, median age 49yrs (range 32-72), were on treatment for a mean of 2.7yr (SD 2.2, range 0.3-7.5). Mean eGFR (CKD-EPI) was 58 ml/min (SD 19, range 28-110) at start and 48 ml/mi (SD 23, range 17-102) at end of treatment. Median total daily dose was 120 mg/d (range 60-120). Attendance at clinic for monitoring was 100%. 18/33 patients had responded to treatment, with delta eGFR –0.1 ml/min/year (SD 3.4) versus non-responders’' delta eGFR –13 ml/min/year (SD 8.7) There was a total of 35 instances of non-implementation in 23/33 patients with missed (20 instances), delayed (13 instances) or self-alteration in doses (2 instances). Only 10/33 patient made no failure to implement Tolvaptan at any time. There were 9 patients with non-persistence of Tolvaptan treatment. Associative analysis of renal outcome with adherence was made for all 31 patients who had more than 6 months treatment, 2 patients being excluded because treatment had been too short-term. 25/31 had non-adherence defined by non-implementation or non-persistence or both, but this did not statistically associate with treatment failure ChiSq 1.951 p = 0.16. The element of non-implementation alone was however associated with treatment failure ChiSq 4.949 p = 0.03, this term includes patient behaviour of not taking and mistiming drug taking, and patient-initiated dose reduction and drug holidays. Conclusion Just over half (55%) of currently treated patients had made a clinical response to Tolvaptan. 23/33 patients had non-implementation within the 4 weeks preceding the validated adherence survey, and this was significantly associated with treatment failure. This study is limited to a small single-centre patient cohort but could easily be applied more widely. This study informs shared-decision making and we should encourage our patients to take this high-cost drug in the right amount and at the right times, and notably not to miss doses, thereby to achieve higher clinical response rates.

A call for open science in forensics

The modern canon of open science consists of five “schools of thought” that justify unfettered access to the fruits of scientific research: i) public engagement, ii) democratic right of access, iii) efficiency of knowledge gain, iv) shared technology, and v) better assessment of impact. Here, we introduce a sixth school: due process. Due process under the law includes a right to “discovery” by a defendant of potentially exculpatory evidence held by the prosecution. When such evidence is scientific, due process becomes a Constitutional mandate for open science. To illustrate the significance of this new school, we present a case study from forensics, which centers on a federally funded investigation that reports summary statistics indicating that identification decisions made by forensic firearms examiners are highly accurate. Because of growing concern about validity of forensic methods, the larger scientific community called for public release of the complete analyzable dataset for independent audit and verification. Those in possession of the data opposed release for three years while summary statistics were used by prosecutors to gain admissibility of evidence in criminal trials. Those statistics paint an incomplete picture and hint at flaws in experimental design and analysis. Under the circumstances, withholding the underlying data in a criminal proceeding violates due process. Following the successful open-science model of drug validity testing through “clinical trials,” which place strict requirements on experimental design and timing of data release, we argue for registered and open “forensic trials” to ensure transparency and accountability.

Pengaruh Pengetahuan Syariah, Independensi Auditor Dan Keterampilan Teknis Dalam Meningkatkan Efektivitas Audit Syariah

The aim of this research is to analyze the influence of sharia knowledge, auditor independence, and technical skills on the effectiveness of sharia audits. Data comes from previous research and library research. The research results show that sharia knowledge, auditor independence, and technical skills have a significant influence on the effectiveness of sharia audits. Sharia knowledge has the strongest influence, followed by examiner independence and technical skills. This research provides important implications for sharia audit practice. First, it is important for Sharia auditors to have sufficient Sharia knowledge to properly understand the Sharia transactions and activities being audited. Second, auditor independence must be maintained so that auditors can provide objective and impartial audit opinions. Third, sharia auditors must have sufficient technical skills to carry out audits effectively.

Audit firm tenure and corporate tax avoidance: evidence spanning COVID-19 pandemic

Purpose This study aims to examine the effect of audit firm tenure (AFT) on corporate tax avoidance (CTA) and the moderating effect of the COVID-19 pandemic. Design/methodology/approach The sample comprises 41,074 firm-year observations from 32 countries from 2015 to 2020, for which data are collected from various sources: financial data from the Refinitiv database, country corporate tax rates from the Tax Foundation, and other country-level data from the World Bank database. The authors use the book tax difference to measure CTA and multiple proxies for AFT. Findings This study finds that a longer AFT is associated with higher CTA, confirming the notion that long AFT impairs auditor independence. The findings remain robust when considering various AFT proxies, incorporating Hofstede’s cultural factors, using weighted least-squares estimation and addressing endogeneity through propensity score matching. This study also finds a non-linear relationship between extended client and auditor relationships and CTA, supporting the mandatory audit firm rotation regulation and increasing investors’ caution regarding the consequences of extended client–auditor relationships on firm behaviour. Research limitations/implications This study offers new evidence on the effect of the COVID-19 pandemic on the link between AFT and CTA and documents a non-linear relationship between AFT, which has not been addressed in prior studies. Practical implications The findings of this study have several significant practical implications. First, governments and policymakers gain insights into the consequences of extended auditor–client relationships, hence calling for a review of auditing and taxation regulations. Second, the findings provide important insights into the issue of auditor independence, especially during long engagements and crises such as COVID-19. Finally, investors and tax authorities should be more cautious about the risks of aggressive tax avoidance during crisis periods. Originality/value To the best of the authors’ knowledge, this is the first study to use a global data set to investigate the effect of AFT on CTA during the COVID-19 pandemic.

Indian Experience of CSR and Corporate Governance in the Post-liberalised Era

Corporate governance (CG) and corporate social responsibility (CSR) have gained considerable space in business management literature in recent times. Both these concepts share many commonalities and overlap in the day-to-day operational and strategic life of business organisations. The purported aim of both CG and CSR is to ensure that corporations behave ethically and responsibly and are governed strictly according to the law while interacting with and empowering all the stakeholders. Therefore, it is important to explore the potential commonalities and hurdles in achieving synergy between CG and CSR in the Indian context. Indian CG serves the monopoly corporations by tweaking the basic principle of a free market economy. It leaves workers, customers, the environment, society and other important stakeholders in the vagaries of predatory market forces. Similarly, CSR in India, like elsewhere, is used to hide the systematic vices of the corporate sector. The unholy nexus of corporates, politicians and bureaucrats is killing the essence of CG and CSR synergy. Therefore, a strong, effective, non-partisan, transparent and independent policy-making, institutional, regulatory, accounting and audit mechanism must be implemented to insulate all stakeholders from the tyranny of monopoly corporations. This article uses an argumentative analytical method to conceptualise and theorise the different aspects of CG and CSR in the Indian context.

ASSESSMENT OF PRIVATIZED CEMENT INDUSTRY’S PERFORMANCE AND CORPORATE GOVERNANCE IN NIGERIA: AN APPLICATION OF TOBIN’S Q MODEL

The paper investigates the application of Tobin’s Q model in assessing the impact of corporate governance on firm value of cement industry. The variables studied were Tobin’s Q as firm value’s proxy (dependent variable) and corporate governance proxies as independent variables. Data was obtained from the secondary source, and the statistical tools employed in the Methodology were; Performance Trend Analysis and OLS regression. Trend analysis result shows that, post-privatisation has higher firm value. Inferential statistics result suggests that, Average Minority ownership, average percentage of executive directors, average foreign ownership, average board size, average percentage of non-executive directors, average percentage of management staff and average workforce have a positive and significant impact on Cement industry’s performance (Tobin’s q). However, average total market value of shares, institutional ownership and privatisation have negative and significant impact on the Cement industry’s market value while, State ownership has positive and insignificant impact on market value of cement industry. In conclusion, the result of inferential statistics has rejected the null hypothesis that corporate governance does not have significant impact on the performance of Cement industry. Admirably, the result confirmed the findings of the performance trend analysis result. The study recommends that cement industry need to; introduce effectives mechanisms of protecting the overall interest of existing shareholders and potential investors, create a strong corporate governance practice that is value-oriented and ensures economic efficient method of production to maximize earnings per share as well as timely dividend payment, the board of directors should increase the numbers of independent audit committee in order to improve transparency, timely and accurate information flow and prudent financial statement and corporate governance reporting system.

АУДИТ ОПОДАТКУВАННЯ В СИСТЕМІ НЕЗАЛЕЖНОГО ЕКОНОМІЧНОГО КОНТРОЛЮ В УМОВАХ ВОЄННОГО СТАНУ: СУТЬ, ПРОБЛЕМИ, ПЕРСПЕКТИВИ

Introduction. Taxation audit is an independent check of the company's tax reporting for the purpose of confirming its authenticity and warning about additional payments to the budget in the form of taxes and fines that may be added by state control bodies in the future. Problem Statement. Today, the definitions of “taxation audit” and “tax audit” are not clearly defined in the economic literature, there is no clear model of taxation audit in the conditions of martial law. Purpose. To improve the categorical apparatus “taxation audit”, to analyze the place of taxation audit in the system of independent audit; to develop measures for improving the organization of its conduct. Methods. Theoretical approaches to the “taxation audit” category by various scientists, official data from the public report of the State Tax Service of Ukraine, results of the research work of the Department of Financial Analysis and Taxation of the State University of Trade and Economics were used. The methods used are: generalization, systematization, comparison, critical analysis, grouping, evaluation, coefficient analysis. Results. The results of research into the economic essence of “tax audit” are highlighted. The author's interpretation of the “tax audit” category is designed. An analysis of tax audit methods was carried out, a general model of taxation audit for small business enterprises was developed. Conclusions. The interpretation of “tax audit” proposed by the authors will make it possible to identify new criteria for distinguishing (detection) and classifying tax audits, thereby improving the provision of management decision-making, which will provide a greater probability of knowing the object.

Do Directors’ Remuneration and Remuneration Committees of the Board affect Bank’s Performance: Application of GMM model?

Abstract This paper assessed the effect of directors' remuneration and the remuneration committee on a bank's performance. The study used 200 observations from 20 licensed banks in Ghana from 2012 to 2023. The study employed dynamic System Generalized Method of Moments as the main analytical estimator using Stata 16.0 software. The study revealed that directors' remuneration, audit committee independence, and the remuneration committee are positively and significantly related to the bank's performance. Furthermore, the study revealed that banks with a remuneration committee as well as an independent audit committee tend to enhance the bank's performance because remuneration and audit committees tend to align directors' remuneration with the bank's performance. The findings highlight the importance of setting up a remuneration committee as well as strengthening its functions. The first recommendation for this study is for the board to strengthen the remuneration committee since it affects the bank's performance positively. Lastly, the study recommends that the remuneration committee should be strengthened to align directors' remuneration with the bank's performance metrics, such as revenue growth, profitability of the bank, and shareholders' returns. Keywords: Audit committee independence; Bank’s performance; Directors’ remuneration; Ghana; Optimal contracting contract.

Faktor-Faktor Yang Mempengaruhi Audit Switching : Opini Audit, Ukuran KAP Dan Audit Delay

This research aims to investigate the factors that influence companies in carrying out audit switching or changing auditors. Specifically, this research analyzes the influence of audit opinion, size of the Public Accounting Firm (KAP), and audit delay on a company's decision to change auditors. The issue of audit switching is important considering the existence of regulations that require regular rotation of auditors to maintain audit independence. Using a sample of companies listed on the Indonesia Stock Exchange, this research applies a logistic regression model to test the influence of independent variables (audit opinion, KAP size, and audit delay) on the dependent variable, namely audit switching. The data used comes from financial reports and company audit reports.

The Relationship of Auditee and Auditor in Performance Audit: A Literature Review

This research aims to conduct a literature review of the relationship between auditees and auditors in public sector performance audits based on their roles. The literature review includes research from various countries in Europe, Asia, America, Australia, and New Zealand, indexed by Scopus through Scimago Journal & Country Rank. Several studies have found that the relationship is not always good. In a cooperative relationship, the auditor requires the auditee's cooperation but at the same time maintains objectivity. Although collaboration can improve audit results, it endangers and hinders auditor independence. Non-cooperative relationships within certain limits make the auditor take strategic actions to influence and control the auditee. This research has limitations because it generally discusses the relationship between auditees and auditors, and does not specifically use research with certain studies such as legitimacy theory or power frameworks, so this research has weaknesses in the focus of studies regarding the relationship between auditees and auditors

Electronic Auditing and Its Impact on Achieving Quality Financial Reports An Exploratory Study at Al-Tafif Islamic Bank, Babylon Branch

This research aims to determine the effectiveness of electronic auditing in improving the quality of financial reports. To achieve the objectives of the study, a cross-sectional survey method was used to collect data from a sample of employees working at Al-Taif Islamic Bank (Babylon Branch), and primary data was collected using structured electronic Likert-scale questionnaires. SPSS statistical software was used to analyze the collected data; The results of the analysis concluded that electronic auditing improves the quality of financial reports in Iraq. The study concluded that banks should adopt the effective and expanded use of electronic auditing because it provides independent, honest and reliable financial audit information. Banks in Iraq must adopt effective and expanded use of electronic auditing to ensure the detection of financial fraud, thus closing routine financial loopholes.

Development of a decision support system for client acceptance in independent audit process

Intelligent Information Technology (IIT) applications are crucial in the audit process, enhancing quality, effectiveness, and efficiency. The client acceptance process (CAP), one of the critical audit steps, involves subjective evaluations where business managers' claims intersect with independent audit firm managers' expectations. This subjective nature introduces the potential for errors or misjudgments, impacting audit time and costs. In this paper, therefore, we propose a decision support system considering both auditors' subjective judgments and financial data variations for accepting or rejecting a client enterprise. The decision support system consisting of the Fuzzy Analytic Hierarchy Process (AHP), the logistic regression model, and the fuzzy inference system comprises four phases. In the first phase, a logistic regression model is developed using financial ratios to determine the client's probability of being in a close monitoring market (CMM) which represents publicly traded firms that are struggling to meet specific financial indicators or that are exposed to certain risks. In the second phase, the evaluation criteria used by the audit firm to measure the market reputation of the client enterprise are defined, and the weights of the evaluation criteria are obtained by using Fuzzy AHP. In the third phase, the Client Acceptance Score (CAS) representing market reputation of the client is calculated by incorporating the results of a reputation survey and applying the weights assigned to the evaluation criteria obtained in the second phase. Finally, client acceptance risk level (CARL) is obtained by using a fuzzy inference system and a rule-based defined by auditors. The CMM probability value and CAS score obtained in previous phases are used as input values of the fuzzy inference system. The CARL score guides the audit firm in deciding whether to engage with the client. To illustrate the applicability of the proposed model, a case study has been given in the paper.

A structured literature review of empirical research on mandatory auditor rotation

This study reviews 128 empirical studies on mandatory auditor rotation (MAR) in light of the long-standing debate on the effectiveness of MAR and the different regulatory choices made worldwide over time. A structured literature review was conducted to address three research questions. How has empirical research on MAR developed from 2000 to 2022? What is the focus and critique of the empirical research on MAR? What is the future of MAR empirical research? The findings reveal growing empirical evidence on MAR. However, this evidence is fragmented and country-based. Scholars have primarily focused on audit firm rotation rather than audit partner rotation. While quantitative research based on archival data predominates, survey questionnaires prevail in a few regions. Evidence on how MAR impacts auditor independence, the auditor–client relationship, and audit market concentration is scant, whereas audit quality is the most investigated research question. Nonetheless, assessing whether MAR benefits audit quality remains challenging because the research outcomes depend on the research question, rotation type, research method, and regulations enforced in the empirical setting. Based on this comprehensive and rigorous overview of worldwide MAR empirical research, knowledge gaps are underlined, avenues for future research are suggested, and warnings are issued to shareholders and policymakers.

Competence vs. Independence: Auditors' connections with members of their clients’ business community

Prior research finds that auditors' social connections with their clients harms audit quality. We examine auditors' social connections with members of their clients' business community, a setting in which auditors' connections may improve audit quality. While social ties within a client's business community should improve auditor competency, they also threaten auditor independence. We test the effects of auditors' network connections on audit quality using data from China, where data on social connections and individual auditors are available. Auditors' business connections should be particularly beneficial in a relational economy like China, where clients heavily rely on social networks for contracting. We find that auditors with strong local business and government connections deliver higher quality audits as evidenced by fewer financial irregularities among their clients. Our findings are consistent with the improved competency that arises from auditors' business connections outweighing the potential costs of impaired auditor independence.