Local Audit Research Articles

China’s audit market competition and the competitive strategies of the international Big 4 audit firms

ABSTRACT This study investigates the competitive strategies of the international Big 4 audit firms when faced with regional competition from the local Big 6 audit firms. We find that for the Big 4, competition reduces their audit fee premiums and forces them to recruit high-risk clients, while does not affect their audit quality. In further analyses, we find that competition led to greater changes for the Big 4 after the CICPA’s proposal in 2007 and when the local Big 6 are in leading positions. We also find that the local Big 6 compromise on audit quality in addition to audit fee premiums and client criteria when faced with competition from small local audit firms. Overall, this study reveals the competitive strategies of the Big 4 under competitive pressure from the local Big 6, which suggests that local audit firms can compete with international audit firms for audit services by scale development.

Audit Market Measures in Audit Pricing Studies: The Issue of Mechanical Correlation

Mechanical correlation bias is inherent in audit pricing studies when independent variables (X) are derived from firm level audit fees (Y). Such variables are endogenous by construction leading to biased estimates, since (mechanically) X determines Y and Y determines X. After reviewing the extant auditing/accounting literature where mechanical correlation obtains we employ mathematical derivations and simulations to quantify the bias associated with a range of mechanically correlated market competition and industry specialist variables. Since auditor market competition variables are important to regulators and antitrust authorities, we analyze the mechanical correlation issue with regard to an extant study which introduces a novel measure of audit market competition (derived from audit fees). The study provides evidence that smaller incumbent auditors are pressured into offering lower fees when competing against a large local audit firm. However, when the current client’s audit fee is ‘decoupled’ from this new competition measure to mitigate bias, it is statistically insignificant in our multivariate regression analysis. Additionally, we employ auditee sales and total assets to construct proxies for competition variables (which are not mechanically correlated) and find them to be statistically insignificant. We conclude with suggestions of how to address the issue of mechanical correlation in future studies.

Use and safety of enteral nutrition protocols in acute care: A scoping review of literature and retrospective audit of practice.

Standardised enteral nutrition protocols are recommended in critical care, however their use and safety are not well described in other inpatient populations. This mixed methods study reports on the use and safety of enteral nutrition protocols for non-critically ill adults. A scoping review of published literature was conducted. In addition a retrospective audit of practice at an Australian tertiary teaching hospital with an existing hospital-wide standardised enteral nutrition protocol was performed. Data on use, safety and adequacy of enteral nutrition prescription were collected from medical records for patients receiving enteral nutrition on acute wards (January-March 2020). Screening of 9298 records yielded six primary research articles. Studies were generally low quality. Published literature suggested that protocols may reduce time to enteral nutrition initiation and goal rate, and improve adequacy of nutrition provision. No adverse outcomes were reported. From the local audit of practice (105 admissions, 98 patients), enteral nutrition commencement was timely (median 0 (IQR 0-1) days from request; goal rate: median 1 (IQR 0-2) days from commencement and adequate (nil underfeeding), without prior dietitian review in 82% of cases. Enteral nutrition was commenced per protocol in 61% of instances. No adverse events, including refeeding syndrome, were observed. Most inpatients requiring enteral nutrition can be safely and adequately managed on enteral nutrition protocols. Evaluation of protocols outside of the critical care setting remains a gap in the literature. Standardised enteral nutrition protocols may improve delivery of nutrition to patients, whilst allowing dietitians to focus on those with specialised nutrition support needs.

Improving the multidisciplinary Team Brief; a trainee led quality improvement project.

Background: The project was developed following the NatSSIPs2 consultation and recent publication to improve patient safety, team working, and efficiency.1 To meet the Team Brief standards and improve their quality we wanted to introduce a formalised approach at the Royal London Hospital. Methods: Quality improvement (QI) methodology was used to guide the project during the ‘CANDLE’ (Curriculum and Delivery Learning Event) regional QI training. A driver diagram was created and stakeholders analysed. The project began in September 2022 with the aim to implement the Team Brief standard by January 2023. Results: A snapshot audit and staff survey were performed in October 2022. Thirteen Team Briefs from a broad range of specialties were audited, and 27 staff members responded to the survey. The results of this were used to define the issues with team brief and to create a multidisciplinary team brief proforma. This was initially trialled over a 2-week period from 16 to 29 November. After the initial trial, the design was refined based on feedback. Well-being was included with individual and team ‘RAG’ (red, amber, green) ratings and inclusion of ‘Greatix’ QR code to encourage reporting of good feedback. Appropriateness of staffing was also recorded. The use of the new proforma was audited between 26 November 2022 and 20 January 2023. Usage was sporadic, only 38% of lists (183/480), except in the orthopaedic trauma theatres where uptake was much higher. The staff in these theatres were interviewed to ascertain why uptake was so good; it was because of nurse in charge adoption. The project was presented at local audit meetings, and a QI celebration event. This led to buy-in from the senior management team. The proforma was reintroduced in February 2023. The project became self-sustaining with recruitment of other members to the QI team and became imbedded in the local culture. Feedback from the most recent theatre audit meeting was excellent. From 20 February to 10 March 2023 the proforma was used in 79.3% (119/150) of main theatre lists. Conclusion: The multidisciplinary Team Brief project has introduced a proforma which has been adopted consistently in theatres and created a self-sustaining change. The proforma includes structured organisational information to improve patient safety and communication but also focusses on team working, psychological safety, and well-being. The CANDLE course for curriculum and delivery of QI supported trainee leadership, teamwork, and delivery of QI. 1.National Safety Standards for Perioperative Care 2. Centre for Perioperative Care. January 2023. Available from https://cpoc.org.uk/sites/cpoc/files/documents/2022-12/CPOC_NatSSIPs2_Summary_2023.pdf (accessed March 2023)

Impact of Audit and Financial Factors on Audit Report Lag: Evidences from Indonesian

Financial report relevance, which is one of the qualitative features of financial reports, can be affected by audit report lag. Less pertinent is the audited financial report of a local government the longer the audit report is delayed. Thus, the user of a local government financial report may experience negative consequences. This study’s objective was to examine empirical evidence about the influence of audit results, auditor switches, local government size, leverage, and profitability on local government audit report lag in Indonesia. This study utilized 506 out of 514 local governments (districts and cities) in Indonesia during 2017 and 2018, with a total sample size of 1,012. This study utilized secondary data collected from 2017 to 2018 audit reports of the Supreme Audit Institute – SAI (BPK). The data was collected from the electronic database services of the Information and Documentation Executive Authority (E-PPID) at http://e-ppid.bpk.go.id. The Purposive Sampling Technique was used to acquire the sample, and the data was analyzed using Ordinary Least Squares (OLS). According to the research, audit findings, local government size, and leverage influenced local government audit report latency, but auditor changes and profitability had no significant effect. Many variables, including audit opinion, audit quality, auditor experience, the quantity of capital expenditures, special allocation funds received by local government, and the qualifications of the local government report compiler, might be investigated further. In addition, splitting municipal governments depending on island location would provide for an intriguing extra audit report lag study.

548 Volatile Sedation in the Burn Intensive Care Unit: A Quality Improvement Initiative

Abstract Introduction Achieving optimal sedation and analgesia in patients with major burn injuries can be challenging. Reliance on benzodiazepines results in longer durations of mechanical ventilation, delirium and withdrawal. Recent evidence and local experience in our critical care unit has supported the application of volatile agents such as isoflurane for sedation. A local audit determined that 70% of mechanically ventilated patients in our burn center are managed on 3 or more continuous sedative infusions. The aim of this initiative was to reduce the number of continuous sedative infusions to maintain target sedation range (SAS 2-4) by 25% in the 48 hour period following initiation of isoflurane. Methods A multifaceted education approach was applied to engage all bedside staff, including burn surgeons, respiratory therapists and nurses. Training occurred though self-directed modules, in-person learning and just-in-time training upon new patient initiation. Data from the 18 month period since implementation were collected retrospectively via manual chart review. Results Since implementation in March 2021, 18 patients were sedated using isoflurane in our burn intensive care unit (ICU). Within 48 hours of isoflurane initiation, 50% (9/18) of patients had a decrease in the number of sedative infusions and 56% (10/18) obtained an optimal level of sedation using isoflurane and hydromorphone alone. Conclusions Volatile agents provide a safe and reliable method of sedation in mechanically ventilated patients with major burn injuries. Despite limitations related to specialized equipment and training, the introduction of this strategy has been well received, with positive feedback relating to both ease of implementation and titration. Applicability of Research to Practice Patients with major burn injuries require multiple painful surgeries and dressing changes. Volatile sedation has been shown to reduce the number of sedative infusions, specifically, our reliance on benzodiazepines.

The relationship between auditing industry specialization and the relative derivatives use for earnings management: evidence from China

PurposeThis study investigates the effect of auditing industry specialization (AIS) on the relative derivatives use for earnings management.Design/methodology/approachThe sample chosen in this study comprises 30,599 firm-year observations of Chinese public companies from 2005 to 2018. The sample is divided into two time periods (2005–2013 and 2014–2018) according to the year when IFRS 9 was implemented (IFRS 9, first discussed by the International Accounting Standards Board in March 2008, is based on an expected credit loss model for determining new and existing expected credit losses on financial assets. The definition was completed in July 2014 and implemented in 2018). AIS was gauged with respect to audit firms and individual auditors, and measured by market share in number and scale of clients. Linear regression is adopted to test hypotheses. Moreover, two-stage least square model (2SLS) is used to eliminate the concern of possible endogeneity.FindingsWhen gauged with respect to client scale, the scale-based AIS constrained the level of derivatives use for earnings management in the first period (2005–2013) while increased the level in the second period (2014–2018). The findings sustain for the analysis of audit firms and that of individual auditors, and for different definitions of AIS.Research limitations/implicationsThe positive AIS-IN relation after the adoption of IFRS 9 implies the sacrifice audit independence. This could be indebted to the government policy that favors local audit firms to be comparable to international Big 4 audit firms, and therefore results in competition among local auditors/audit firms in securing number rather than quality of clients.Originality/valueThe data of AIS in China are collected using a Python web crawler.

Recruitment Determinants For Central and Non-Local Auditors: an Analytical on the Tehran Stock Exchange

Purpose: The object of this analysis is to investigate empirically the determinants of the audit selection by local or Non-local Auditor (NLA) and their effect on companies listed on the Tehran Bourses. Theoretical framework: The selection of an independent auditor is influenced by numerous factors. The agency theory predicts that when firm size, debt leverage, and staff compensation costs rise, the likelihood of electing a qualified volunteer auditor in the ordinary general assembly will as well (Hassas Yeganeh & Heidari, 2008). Design/methodology/approach: The study seeks to examine whether local or NLA are chosen in companies mentioned on the Tehran Stock Exchange (TSE). The research sample contains 108 companies listed on the Tehran Bourses between 2013 and 2019. Findings: The findings show that the probability of contracting with a NLA decline to a considerable degree if there is a rise in the number of local auditor (LA) regardless of auditor rating. Also, the likelihood of choosing a NLA is lower for high-quality financial reporting companies. Besides, if a NLA is selected, audit fees (AF) are likely to be reduced. Research, Practical & Social implications: Independence is a determinant of employment for central and non-local auditors. The studies focus on auditor independence, which non-local auditors may not have when compared to local auditors in companies in which the government contributes to financing part of its capital. Originality/value: The research adds to the literature on corporate governance by emphasizing that Board oversight is not a good alternative to auditor monitoring of Financial Statements (FS) credibility and indicates that an auditor may have licensing criteria.

European e-Delphi process to define expert consensus on electrochemotherapy treatment indications, procedural aspects, and quality indicators in melanoma.

Skin metastases are an important co-morbidity in melanoma. Despite broad adoption, electrochemotherapy implementation is hindered by a lack of treatment indications, uncertainty regarding procedural aspects, and the absence of quality indicators. An expert consensus may harmonize the approach among centres and facilitate comparison with other therapies. An interdisciplinary panel was recruited for a three-round e-Delphi survey. A literature-based 113-item questionnaire was proposed to 160 professionals from 53 European centres. Participants rated each item for relevance and degree of agreement on a five-point Likert scale, and received anonymous controlled feedback to allow revision. The items that reached concordant agreement in two successive iterations were included in the final consensus list. In the third round, quality indicator benchmarks were defined using a real-time Delphi method. The initial working group included 122 respondents, of whom 100 (82 per cent) completed the first round, thus qualifying for inclusion in the expert panel (49 surgeons, 29 dermatologists, 15 medical oncologists, three radiotherapists, two nurse specialists, two clinician scientists). The completion rate was 97 per cent (97 of 100) and 93 per cent (90 of 97) in the second and third rounds respectively. The final consensus list included 54 statements with benchmarks (treatment indications, (37); procedural aspects, (1); quality indicators, (16)). An expert panel achieved consensus on the use of electrochemotherapy in melanoma, with a core set of statements providing general direction to electrochemotherapy users to refine indications, align clinical practices, and promote quality assurance programmes and local audits. The residual controversial topics set future research priorities to improve patient care.

A Quest for Enhanced Recovery After Liver Transplant at The Colombo North Center for Liver Disease: The First Decade

Cirrhosis is a significant contributor to non-communicable disease related deaths in Sri Lanka and the only cure for cirrhosis constitutes liver transplant. Nonalcoholic fatty liver disease (NAFLD) which is the hepatic component of the metabolic syndrome is the main aetiology of cirrhosis in patients presenting for liver transplant at CNCLD. Enhanced recovery after surgery (ERAS) is a concept originally adopted in colorectal surgery, and is a multimodal- multidisciplinary approach to perioperative care aiming to reduce perioperative surgical stress response and improve short-term outcome. Targeting improved outcome, components of ERAS have been incorporated in the perioperative care of liver transplant at the Colombo North Center for Liver Disease since 2016. Sri Lanka needs to define its own enhanced recovery after liver transplant (ERALT) protocols based on local data and audit performance.

E010 Checkpoint inhibitor-induced rheumatological adverse events: real-world experience from Northeast England

Abstract Background/Aims Immune checkpoint inhibitors (CPIs), in the form of either single agent anti-PD1 or combination therapy with anti-PD1/anti-CTLA4 monoclonal antibodies, are widely used in clinical practice. Whilst CPI-induced rheumatological immune-related adverse events (RirAEs) are relatively infrequent compared to other toxicities (8-12%), increasing CPI use in oncology settings means a growing number of patients are affected. As part of an audit of inter-specialty referrals, we evaluated patients developing new musculoskeletal symptoms on CPI treatment and the breadth of specialist-confirmed RirAEs. Methods Two sources of data were reviewed. First, consecutive consultant-confirmed RirAE cases in our rheumatological service between 2017 and 2022 (referred to as the ‘RirAE cohort’) were evaluated. Second, an observational cohort of 50 consecutive oncology patients treated with CPIs from 2019-2022 in whom symptom questionnaires had been completed (“Oncology cohort”) was reviewed. Local audit registration/safeguarding approvals were obtained. Medical records were reviewed by two medical professionals, and anonymised data analysed in a spreadsheet. Results 24 patients were identified in the RirAE cohort, of whom most presented with arthritis (Table 1). Amongst 50 patients in the Oncology cohort, 20 (40%) reported new-onset/worsening musculoskeletal symptoms on a questionnaire (“MSK-symptomatic Oncology Cohort”). Three of these were referred, diagnosed and counted amongst the RirAE cohort. Of the remaining 17, 6 were identified as having developed musculoskeletal pain by consulting oncologists; the remaining 11 were not objectively identified as having experienced potential musculoskeletal toxicity (Table 1). Conclusion Confirmed RirAEs comprised predominately seronegative, oligoarticular presentations with notable PMR overlap. In the oncology setting, the self-reported joint symptoms of 20/50 (40%) patients were identified by a physician and 3/9 of these (33%) were referred for a specialist opinion. RirAEs may be more common than appreciated amongst CPI recipients, and the extent of low-grade inflammatory arthritis unreported or “hidden” amongst other irAEs is not clear. Early evaluation of new-onset musculoskeletal symptoms in CPI recipients, and close cross-specialty collaboration, could reduce morbidity for patients who already face significant health challenges. Disclosure A. Gault: None. K. Williams: None. C. Stewart: None. A.E. Anderson: None. R. Plummer: None. A.G. Pratt: None.

Dietitians as change agents for promoting healthy and sustainable food systems

Dietitians as change agents for promoting healthy and sustainable food systems

The Effect Local Ownership, Audit Quality, Audit Committee, And Financial Performance on Company Value

Corporate value is used by management in running the business to maximize shareholder wealth. Local ownership, audit quality, audit committee, and financial performance have prospects in the future so that investors will be interested in investing. This population is in manufacturing companies that pay dividends during the period 2016 to 2021 which are listed on IDX so the sample used is 222 companies. The method used is panel data regression. Findings of local ownership, size audit, audit tenure, audit committee, total asset turnover, and return on assets have a significance on company value, on the contrary debt to assets has no significance on company value. It is suggested that companies can improve local ownership and audit quality in making corporate strategy decisions to increase company value, in addition to financial performance to maximize profits that reflect the company internally

Long-term outcomes on the rates of total knee replacement amongst patients with end-stage knee osteoarthritis who meet surgical criteria and received a non-invasive biomechanical intervention.

Long-term outcomes on the rates of total knee replacement amongst patients with end-stage knee osteoarthritis who meet surgical criteria and received a non-invasive biomechanical intervention.

Lessons learned in cases of late preterm mortality in the Netherlands: Results from nationwide perinatal audits, a mixed method study.

Assess improvable care factors in late preterm mortality, defined as death of a child during labour or in the first 28 days thereafter between 32+0 and 36+6 weeks gestation, in the Netherlands. Perinatal audit has been coordinated and supported at the national level, with selection of nationwide audit themes, and audit sessions are performed at the local level across the country as multidisciplinary meetings with primary and secondary level health care professionals, organised in local perinatal cooperation units. In 2017-2019, late preterm mortality was such a theme. We compiled and systematically categorised all improvable care factors formulated during local audit meetings in a national perinatal audit database. In total, 27 cases were discussed in local perinatal audits and analysed locally and at the national level. Altogether, 52 improvable care factors were identified. Most identified improvable care factors concerned inadequate foetal monitoring by cardiotocography during labour, factors related to care organisation, particularly unclarity around local assigning of responsibilities and work procedures, and poor communication between involved health care professionals especially in transfer of care. Several critical improvable care factors were identified through nationwide perinatal audit of late preterm deaths in the Netherlands.

The introduction of an electronic directory within primary care: A local audit report

The introduction of an electronic directory within primary care: A local audit report

The Influence of Audit Findings, Auditor Change, Local Government Size, Leverage and Silpa on BPK Audit Opinions of Local Governments in Indonesia

This study aims to examine and find empirical evidence of the effect of audit findings, auditor turnover, local government size, leverage and SiLPA (Budget Overtime) on local government BPK audit opinions in Indonesia. This study used a sample of 506 from a total of 514 local governments (districts and cities) throughout Indonesia with the observation year 2017 – 2020, so the total sample used was 1,915. The type of data used in this research is secondary data. The research data source was obtained through the Information Management and Documentation Officer Electronic service (E-PPID) at http://e-ppid.bpk.go.id. The sampling method uses purposive sampling, while the data analysis technique uses multiple linear regression analysis. The study results show that audit findings, local government size and leverage affect local government audit opinions. At the same time, auditor turnover and SiLPA do not affect local government audit opinions in Indonesia. Furthermore, from the results of this study, the variables that can be examined in subsequent studies include performance reports, audit quality, years of service/auditor experience, amount of capital expenditure, Special Allocation Funds received by local governments and qualifications of local government financial report preparers. In addition, the distribution of local governments according to island location will also be an exciting audit opinion study.

Identities in transition: Audit recruits and the German reunification

This paper studies the identity transitions of East German audit recruits during the fundamental ideological, economic, and societal change brought about by the reunification of Germany in 1990. Integrating the identity work literature with key concepts from Pierre Bourdieu and Erving Goffman, we build on semi-structured interviews with two groups of recruits—university graduates and former state auditors—to explore and theorize the marked differences observed in these recruits' transition processes. In line with wider processes of territorial stigmatization, we argue that the West German audit firms pragmatically instrumentalized their local personnel, seeking to deploy them without intending to integrate them into the profession. In turn, the audit recruits met with this exertion of symbolic violence by managing a ‘spoiled identity’. The university graduates found it easier to recognize and accumulate legitimate forms of capital, thereby submitting themselves to the inculcation of the profession's socialization process, which ultimately yielded their institution into the profession. In contrast, the former state auditors' local knowledge and access to client networks provided immediately useful capital to the West German firms, which, however, sought to retain a status differential vis-à-vis these recruits. As a result of such strategies of condescension, the former state auditors maintained key aspects of their identity as a salient part of their self-conception. We further highlight the role of the local audit offices in the recruits' transition processes, as they evolved from flexible spaces, which allowed for experimentation and improvisation, into more structured units. This process embedded professional values and practices, thereby creating localized office identities.

Influence of local independent audit firms’ service quality on customer satisfaction

In many organizations, especially those dealing with services, customer satisfaction is considered a challenge (Pula, 2022). The study is grounded in the theory of customer satisfaction and service quality. The purpose of this study is to examine the relationship between service quality at local independent auditing firms and customer satisfaction. Between September and October 2022, the general accounting and chief accounting departments will be surveyed. There were 250 respondents in the data collection, based on exploratory factor analysis, linear regression, correlation analysis, and scale reliability analysis. According to the study, client happiness and service quality at local independent auditing firms are positively correlated. The effects of the service quality at the component level, however, vary. The findings of the study imply that clients should choose local independent auditing firms that provide high-quality services. There are some suggestions on how to enhance the caliber of their services and the growth of this industry in Vietnam. The study advances our knowledge of local independent auditing firms’ levels of service quality.

The effect of audit quality as a moderator on the relationship between financial performance indicators and the stock return

This study investigates how audit quality moderates the effect of financial performance indicators on the stock returns of Amman Stock Exchange-listed firms (ASE). The panel data analysis selected the data of 95 ASE-listed firms from 2013 through 2021. This analysis demonstrates a significant inverse relationship between a company's book value and its stock returns. A statistically negative relationship was observed between cash flow, dividends per share, and stock return. The empirical results of this study confirm the moderating influence of audit quality in the relationship between financial performance and stock return. Firstly, auditor's fees have a significant impact on the relationship between firm stock returns and EPS, BV, DPS, and cash flows (CFO). The size of the auditing firm moderates the relationship between company stock returns and EPS, DPS, and the CFO, but not with book value (BV). The auditor's opinion moderates the relationship between business stock returns and EPS, BV, and DPS but not the relationship between firm stock returns and cash flows (CFO). The study suggests that regulatory bodies like the Companies Control Department (CCD) and ASE should make sure that local audit firms in Jordan improve their audit quality to be on par with the Big 4 audit firms in order to improve their financial performance measures and stock returns.