Large Public Accounting Firms Research Articles

Pengaruh Pengalaman Auditor, Profesionalisme Auditor, Task Complexity, Time Pressure, Gender dan Etika Profesi Terhadap Auditor Materiality Judgments (DKI Jakarta, Indonesia)

Abstract Public Accounting Firms are professional institutions that are obliged to uphold ethics and professionalism, and are capable of global competition on an international and national scale. Auditors are responsible for implementing professional standards and upholding the required provisions. In the implementation of audited financial reports, misinformation is still found and there are even frauds in financial reports, so that it raises questions about the professionalism of Public Accountants who should provide reports that are reliable, accurate and free of material misstatement. This debate has never been resolved, apart from involving large public accounting firms in the country and abroad. This research aims to examine the impact of experience, professionalism, complexity, pressure, gender and ethics on the auditor's assessment of materiality in audited financial reports. The research population is registered auditors at the Indonesian Institute of Public Accountants (IAPI) in the DKI Jakarta area. The simple random sampling method was used to select samples, distribute questionnaires to auditors who work at Public Accounting Firms (KAP) in the area. A total of 80 auditors filled out and returned the questionnaire as a sample. Data were analyzed using multiple linear regression with SPSS software, and tested the hypotheses in this research. Examination of the data shows that experience, professionalism, complexity, pressure and gender influence the consideration of materiality levels in financial reports. Meanwhile, professional ethics has no impact or influence on the consideration of the level of materiality in financial reports. Keywords: Experience, Professionalism, Task Complexity, Time Pressure, Gender, Professional Ethics, Materiality

Exploration of themes based twitter data in fraud-forensic accounting studies

The rapid development of information technology is also followed by developing databases and information based on social media. Social media Twitter is one area for disclosing accounting information in tweets, retweets, and other posts. This study aims to explore fraud-forensic accounting disclosures from the viewpoint of the four largest public accounting firms in the world (The Big 4) on the Twitter database. The approach used in this research is exploratory qualitative, with the content analysis method using NVivo software R1. The data collected a target of around 1000+ tweets. Researchers logged onto Twitter (as @agunggdeagung) and searched for all tweets containing the hashtag #fraud #forensic #accounting # big4. This research produces the theme of business, knowledge, time, and reports, and the themes of accounting, fraud, and forensics, which have already been defined as keywords in disclosure on social media Twitter. This research implies that in carrying out a qualitative approach with the twitter database, elements of the domain, community (user), information posts, and powerful data-based analysis software must be fulfilled.

Valuation Issues, Auditor Fraud, and PCAOB Confirmation: Findings From an Analysis of Lawsuits Against Large Public Accounting Firms

In this article, we bridge the gap between academia and practice by analyzing and presenting the results of allegations in more than 200 lawsuits against the largest public accounting firms. Our findings are critical as the lawsuits damage the firms’ reputations, the credibility of the profession in general, and may result in large monetary losses and loss of clients. We find three key results not found in previous legal research. First, we find that Generally Accepted Accounting Principles (GAAP) issues, especially those focused on valuation, dominate Generally Accepted Auditing Standards (GAAS) issues in the allegations. Second, fraud allegations against the auditors themselves are a significant problem, although often ignored in the fraud literature. Third, the Public Company Accounting Oversight Board (PCAOB) reports on the accounting firms provide an unintended source of information for third parties in future legal allegations against those same firms.

Has the new world order taught the big four to manage client portfolio risk? Examining extreme loss occurrences before and after Sarbanes Oxley

This paper analyzes ongoing efforts by the large public accounting firms to manage their legal liability. For this purpose, the paper focuses on extreme financial losses from the audits of U.S. publicly traded clients incurred by Big Four firms. The possibility that this form of legal liability has changed as a result of the new world order brought to the accounting profession by the Sarbanes-Oxley Act of 2002 (SOX) is the paper's main premise. This paper finds a major decline in the severity of these cases. However, the results show that firms have not necessarily improved the management of this risk. The drivers of extreme legal liability continue to be client continuance decisions and larger clients.

Pengaruh Pengalaman Auditor, Time Budget Pressure dan Ukuran Kantor Akuntan Publik Terhadap Audit Report LAG Pada Auditor Kantor Akuntan Publik Di Kota Surabaya

The job of the auditor is to provide useful information, therefore when the audited report is delayed it will reduce the use value of the financial statements presented. Therefore, it is important to identify and have a deeper look at several factors related to the occurrence of audit report lag. Thus, it is necessary to study whether these factors significantly influence the audit report lag. This is important because the audit report lag phenomenon can reduce client interest and affect the reputation of auditors and public accounting firms where auditors work. Hypothesis 1 in this study is rejected, this means that the experience of auditors does not significantly affect the Audit Report Tag. work and the number of inspection tasks. The experience variable does not have a significant effect because audit quality is not determined by the length of work and the number of audit tasks. Hypothesis 2, namely that time budget pressure has an effect on audit report lag, is rejected. Time budget pressure is vital in the process of completing an audit report. In this case the time budget pressure does not have a significant effect because the budget pressure is determined when planning to determine the audit task but the implementation of the audit can be different influenced by the existing situation. For example during a pandemic, uncontrollable situations lead to leeway in the completion of audited reports. So that the existing time budget pressure must be adjusted. The hypothesis in this study is accepted, this is because the size of KAP basically determines the level of efficiency and effectiveness of each auditor's task. In medium and large KAPs, there is usually a structured system and maturity from the audit planning process to the audit. This is because large public accounting firms usually try to maintain quality and reputation to keep their clients interested

How does the FASB make decisions? A descriptive study of agenda-setting and the role of individual board members

This study provides descriptive evidence on how the Financial Accounting Standards Board (FASB) sets Generally Accepted Accounting Principles (GAAP). Based on 211 financial accounting standards issued between 1973 and 2014, we summarize the reasons that the FASB adds or removes projects from its agenda, the entities most frequently bringing issues to the FASB's attention, and commonly recurring topics across different standards over time. We find that reducing diverse practices and inconsistent guidance is the most frequent reason cited by the FASB to take on a project and more than half of the standards are intended to enhance comparability. We find that the SEC, AICPA, and large public accounting firms are identified most frequently by the FASB as the parties bringing issues to its attention. Accounting for financial instruments is the most frequent recurring topic across accounting standards, which potentially explains the growth in fair value measurement in U.S GAAP over time. We analyze the dissenting opinions written by Board members and find some evidence that the stated reasons for disagreements are associated with their professional backgrounds. However, our analyses indicate Board members' positions on fair value accounting are context-specific and cannot be fully explained by their professional backgrounds.

The Impact of Consulting Services on Audit Quality: An Experimental Approach

ABSTRACTWe use experimental markets to examine whether providing consulting services to a non‐audit client impacts audit quality. Our paper directly addresses concerns raised by the Public Company Accounting Oversight Board that the largest public accounting firms’ growth in their consulting practices threatens audit quality. We conduct an experiment proposed using a registration‐based editorial process. We compare a baseline where the auditor does not provide consulting services to conditions where auditors provide consulting to audit clients or where auditors only provide consulting services to non‐audit clients. Our unique design provides evidence on whether providing consulting to non‐audit clients strengthens the salience of a client‐cooperative social norm that reduces audit quality. We do not find differences in audit quality by condition in our planned analysis, however we find greater variation in audit quality in the conditions where auditors provide consulting services compared to the baseline. In unplanned analyses, our results suggest providing consulting services increases auditor cooperation with managers, increasing audit quality when managers prefer high audit quality and decreasing audit quality when managers prefer low audit quality.

The Impact of Consulting Services on Audit Quality: An Experimental Approach

We use experimental markets to examine whether providing consulting services to a non‐audit client impacts audit quality. Our paper directly addresses concerns raised by the Public Company Accounting Oversight Board that the largest public accounting firms’ growth in their consulting practices threatens audit quality. We conduct an experiment proposed using a registration‐based editorial process. We compare a baseline where the auditor does not provide consulting services to conditions where auditors provide consulting to audit clients or where auditors only provide consulting services to non‐audit clients. Our unique design provides evidence on whether providing consulting to non‐audit clients strengthens the salience of a client‐cooperative social norm that reduces audit quality. We do not find differences in audit quality by condition in our planned analysis, however we find greater variation in audit quality in the conditions where auditors provide consulting services compared to the baseline. In unplanned analyses, our results suggest providing consulting services increases auditor cooperation with managers, increasing audit quality when managers prefer high audit quality and decreasing audit quality when managers prefer low audit quality.

The Work Environment in Large Audit Firms: Current Perceptions and Possible Improvements

SUMMARY This study examines the work environment in the audit division of large public accounting firms. Based on 18 semi-structured interviews (eight partners and ten staff auditors currently or recently employed by large public accounting firms), we find that the interviewees cite several positive aspects of auditing careers including the people, intellectual stimulation, challenge, and responsibility. However, they also cite significant negatives, including PCAOB regulation, stress, and hours. None of the staff interviewees plans to stay in public accounting long term, and while all of the partners would recommend public accounting to others, most focused only on public accounting as a place to start a career. The findings raise a number of concerns regarding the profession's ability to sustain the quality of its human capital, especially since there are no signs of a radically improved work environment in public accounting that may appeal to Millennials. We conclude by discussing possible improvements in the public accounting work environment that would address the issues raised in the interviews.

The Influence of Mood on Subordinates’ Ability to Resist Coercive Pressure in Public Accounting

AbstractThis study reports on an experiment conducted to assess the influence of different affective mood states on auditors’ ability to resist obedience pressure to commit or overlook unethical acts in six audit contexts. Obedience pressure from superiors to comply with unethical directives is of particular concern in public accounting, given the hierarchical structure of audit teams and the power imbalance in superior–subordinate relationships. One hundred and seventy audit seniors from two large international public accounting firms participated in an experiment. Three different moods were induced in participants through work‐related trigger events: one positive active mood state (arousal) and two negative passive mood states (fear and insignificance). These mood states were anticipated to influence auditors’ expressed willingness to comply with their superiors’ unethical directives as set forth in our ethical scenarios. Our results indicate that low levels of arousal and high levels of fear and insignificance influenced compliance intentions. Our results also indicate overall high levels of expressed willingness to comply with superiors’ unethical directives. Implications of our findings for understanding the antecedents of unethical conduct within the accounting profession and for future research are discussed.

The Diversity of 'Diversity' in Canadian Accounting Firm Recruitment Websites

We examine use of the term ‘diversity’ in the recruitment websites of Canada’s eight largest public accounting firms. We find a range of distinct uses of the term. We note differences in the use of ‘diversity’ between Big Four accounting firms and the next four largest firms. The Big Four vary in their approaches to diversity, with Deloitte’s and KPMG’s websites addressing the most dimensions of diversity and the highest number of references to diversity. Diversity in the discourse of diversity arguably stems from variance in the institutional logics held by accounting firms. Our analysis reveals the business case logic and commercial logic are the most prevalent institutional logics in use. Some Big Four firms also adopt an inclusiveness logic.

An Analysis of Auditing and Accounting Professionalss Work-Life Balance in the Post-Sarbanes-Oxley Era

The Sarbanes-Oxley Act (SOX) of 2002 fundamentally changed the accounting profession and dramatically increased the workload of accounting professionals, resulting in lower work-life balance for a large segment of the accounting profession (Gullapalli 2005). At the same time, work-life balance has surpassed compensation and benefits as the most important factor in employee job satisfaction for accounting professionals (AICPA 2004). Yet, despite the importance of work-life balance issues in the accounting profession (AICPA 2011), prior research has not examined work-life balance perceptions across different segments of the accounting profession. In this study, we survey 1,063 accounting professionals from a wide range of organizational contexts to (1) empirically compare accounting professionals’ perceptions of work-life balance issues (i.e., work-family conflict, burnout, and AWAs) across large and small public accounting firms; (2) to compare audit professionals’ perceptions of work-life balance issues to the perceptions of tax professionals; and (3) to compare public accounting professionals’ perceptions of work-life balance issues to private accounting professionals’ perceptions. We find that accounting professionals at larger firms perceive higher levels of work-family conflict and job burnout compared to accounting professionals at smaller firms. Furthermore, although accounting professionals across all firm types (i.e., Big 4, mid-sized, and local firms) generally perceive similar levels of organizational support for AWAs, Big 4 accounting professionals perceive significantly lower levels of viability regarding the use of AWAs (i.e., Big 4 accounting professionals are less likely to believe that they could remain effective employees while using AWAs). We also find some evidence of within-firm workload stability given that we observe no significant differences between the perceptions of audit and tax professionals across our work-life balance measures. Finally, using open-ended participant responses, we offer several recommendations for firms to improve their work-life balance efforts.

Assimilation of New Hires in Public Accounting

SUMMARY:In spite of vast resources committed to orientation programs, many promising recruits never fully assimilate into public accounting firms. The resulting impact on commitment and early turnover can be devastating for individuals and firms. This study uses in-depth personal accounts of current and former employees to derive a model that may assist firms and their employees. Participants asserted that diverse measures, including careful job choice by recruits, daily supervision and team building, partners' involvement with new hires, and predictable periods of normalcy, can assist in new hires' adaptation to large public accounting firms.

An examination of the ethical discourse of the US public accounting profession from a Foucaultian perspective

Purpose – The purpose of this paper is to examine the evolution of the ethical discourse of the US public accounting profession over the last century in relation to Foucault's concept of “codified discourse”. The ethical discourse of the US public accounting profession has evolved from its first code of ethics promulgated in 1917, which focused primarily on protecting the economic interests of the profession, to a position in the most recent promulgation of the code of professional conduct, which contains aspirational elements regarding ethical behavior, but which incorporates few enforceable provisions. It is therefore necessary to look elsewhere for the ethical discourse of the profession, which appears to be located more in the behaviors of accountants practicing in large international public accounting firms, in which the professional accountant becomes molded into an “ethical being” in the Foucaultian sense, as one who is self-regulated and self-formed into an ideal member of the profession. Design/m...

An examination of the perceptions of auditors and chief financial officers regarding principles versus rules based accounting standards

The debate over the adoption of International Financial Reporting Standards (IFRS) by United States issuers, or its convergence with U.S. Generally Accepted Accounting Principles (U.S. GAAP) has been going on for several years now. However, as of this writing, the Securities and Exchange Commission (SEC) has still not taken a definitive position on the issue. This is in part due to issues involving the cost of adoption, independence concerns relating to the IFRS promulgation body, the International Accounting Standards Board (IASB), and the debate over which type of accounting standards is superior for financial reporting: IFRS, which are said to be “principles-based,” or U.S. GAAP, which are said to be “rules-based.” In this paper we examined the views of two stakeholders in the U.S. financial reporting system, auditors in large public accounting firms and Chief Financial Officers in the Fortune 1000. We elicited their perceptions involving ten situations where specific rules are incorporated in U.S. GAAP. We asked if the elimination of the specific rule would be likely to better achieve the “qualitative characteristics of useful financial information” as defined by the Conceptual Framework for Financial Reporting adopted by the Financial Accounting Standards Board (FASB) in 2010 (FASB 2010) and the similar document adopted by the IASB at the same time (IASB 2010). We found that in eight of the ten situations both groups preferred the rules-based accounting regime (the current U.S. GAAP rules) over a principles-based approach.

Audit Partner Perceptions of Post-Audit Review Mechanisms: An Examination of Internal Quality Reviews and PCAOB Inspections

SYNOPSIS This study reports the results of a survey of 107 audit partners from large public accounting firms that investigates and compares partner perceptions of Public Company Accounting Oversight Board (PCAOB) inspections' and Internal Quality Reviews (IQRs): (1) predictability, (2) conduct, (3) reviewer qualifications and behavior, and (4) effects (i.e., on audits, partners, and firms). A majority of partners can or try to predict the year of both reviews and perceive that, relative to PCAOB inspections, IQR reviewers have a better understanding of firms' audit methodologies, IQRs focus more on whether firms follow their methodology, and IQRs examine more audit areas. In addition, partners believe that PCAOB inspectors are more focused on finding deficiencies than are IQR reviewers, and that IQR feedback is more timely and helpful for improving audit quality. Both reviews are perceived to impact professional reputation; however, partners perceive that PCAOB inspections increase their firms' litigation risk more so than do IQRs. Finally, less experienced partners perceive reviews as more invasive and as posing more consequences than do more experienced partners. We provide credible, informed perceptions of partners directly involved in both PCAOB inspections and IQRs (which heretofore have not been examined directly by practitioner or academic research) that should be beneficial to accounting researchers, practicing auditors, and regulatory bodies interested in understanding the perceived effects and effectiveness of PCAOB inspections and IQRs.

Examining Commitment in Electronic Knowledge Repository Usage

Electronic knowledge repositories (EKRs) are used by organizations to codify, store, and disseminate knowledge. This study presents and tests a research model that examines the role of commitment in the use of EKRs in professional service firms. In particular, this study examines how three types of commitment (affective, calculative, and normative commitment) affect employees' EKR usage behavior. Survey results of 230 EKR users from four large public accounting firms indicate that both affective and calculative commitments exhibit significant positive influence on EKR usage. The effect of an organization's collaborative norms and a user's organizational identification on the three types of commitment is also explored. This study raises implications for researchers and practitioners interested in knowledge management and particularly for professional service firms on how to leverage EKRs to gain a competitive advantage.

Leveraging Organizational Knowledge through Electronic Knowledge Repositories in Public Accounting Firms: An Empirical Investigation

ABSTRACT We investigate one of the most widely used knowledge management tools in public accounting firms, electronic knowledge repositories (EKRs), using a research model theoretically grounded in the expectation-confirmation theory (ECT). The research model was tested with survey data collected from 230 employees from four large public accounting firms. The results indicate that perceived usefulness and subjective norms exhibit a sustained positive influence on individuals' EKR behavioral intention, while individual satisfaction has no significant impact on EKR behavioral intention. The supplementary group analyses on firm type, individual experience level, and individual usage level reveal that individual and firm characteristics affect individual EKR usage intention. We contribute to knowledge management research by being one of the first studies to explore the use of EKRs in public accounting firms. The results offer insights on the factors that impact individuals' attitude and intention to use EKRs, and elucidate how firms can leverage EKRs to promote knowledge reuse and retention. Data Availability: Data may be requested from Professor Lin.

Cash Flow Decision Making And Financial Accounting Presentation: A Computerized Experiment

The use of financial information to estimate future cash flows may be influenced by the format and scaling of financial statement data. This study experimentally manipulated format by providing a graphical alternative to the conventional tabular presentation, and scaling by offering a probabilistic alternative to the single point estimates of financial statements. Subjects, recruited from large public accounting firms in the U.S., received the complete experiment in a self-contained computer diskette. The interaction of scaling and format characteristics produced significantly different cash flow estimates. Furthermore, subject tended to adjust their cash flow estimates based on the interaction of presentation and the skew of the distributional information when probabilistic information was provided. Subject also altered their cue utilization for the estimate of cash flow when they receive differently designed information. Implications for financial reporting and accounting education, centering around the revision of the basic information package, are drawn.

Ethical issues facing tax professionals

PurposeThe resolution of tax issues present significant ethical dilemmas for tax practitioners. The nature and extent of ethical concerns has important implications both for the tax profession and tax administration. The purpose of this paper is to investigate whether there are significant differences in the ethical perceptions of tax agents and Big 4 practitioners.Design/methodology/approachA mail questionnaire was used to elicit data as to the frequency and importance of a range of ethical issues in tax practice.FindingsBoth groups rated highly those issues which relate primarily to the conduct of professional responsibilities. Ensuring “reasonable enquiries” were taken, maintaining an appropriate level of “technical competence” and “continuing to act” for a client, when not appropriate, were of most concern to practitioners.Research limitations/implicationsThe paper focuses on the tax profession in Western Australia, so the outcomes may not be generalisable elsewhere in either Australia or the rest of the Asia‐Pacific region.Practical implicationsThere was a significant difference between the two groups with regard to “loophole seeking”. This has implications for client expectations of alternative roles: as “tax exploiter” for the Big 4, and as “tax enforcer/compliance” for the tax agent.Originality/valueThere have been few empirical studies reporting the range of ethical issues encountered in tax practice. To date the literature tends to treat the tax profession as a homogenous group, whereas this research demonstrates differences in ethical outlook between sole‐practitioners and large international public accounting firms.