Mandatory Audit Research Articles

The current state of the audit services market

The article outlines the main directions of development of auditing activities at the present stage. Positively assessing the prospects for the functioning of a single market for audit services within the framework of the EAEU, the author also predicts would be difficulties in terms of additional administrative burden on auditors and audit organizations. According to the example of the study of the essence of mandatory audit, the blurring of the risk-based approach in the implementation of external control over the activities of audit organizations providing audit services to socially significant organizations has been demonstrated. The practical inconsistency of certain preventive measures within the framework of state control in the field of auditing is illustrated.

IMPACT OF THE AUDIT ON THE TRANSPARENCY AND DISCLOSURE OF FINANCIAL INFORMATION

This research work focuses on auditing and its impact on companies. The general objective is to exhaustively analyze the “impact of auditing on the transparency and disclosure of financial information in companies” by conducting interviews with an auditor to know her opinion on the importance of the audit and the positive impact that companies have when applying it. To achieve this objective, a qualitative approach was used. The mandatory tax audit is a legal requirement and not an option, its value is established by the SET and must be requested. According to the suppliers, the accounting is rated with a “5”. The audited companies provide additional details, such as purchase forms by items or areas and by type of products, which increases the reliability of financial information.Auditors monitor the implementation of policies and procedures, identify errors and poor practices, and offer recommendations for improvements. Although auditing is not the only source for investment decisions, more than 85% of investors consider it. Interpersonal relationships improve significantly with the auditors’ opinion, increasing the transparency of the company. It is suggested that the audit should be carried out without being mandatory to have a greater impact. The audited companies must know the technical control standards to comply with them rigorously, and the results The final results of the audits must be objective, comply with the technical processes and the law. In conclusion, this research work provides valuable information on the implementation of the audit in companies.

Is earnings management impacted by audit fees and auditor tenure? An analysis of the Big Four audit firms in the US market

Research background: Audits are intended to ensure the reliability of financial statements, as this is fundamental for different stakeholders. However, both auditor tenure and audit fees could affect the earnings management of companies. In 2014, the European Union established a mandatory audit firm rotation policy. In the United States, although there is still no mandatory regulation in this regard, there has been a large public debate over the advisability of this policy. Another unresolved controversy is whether audit fees determine audit quality. Purpose of the article: The aim of this research is to study the effect of auditor tenure and audit fees on earnings management, i.e., to determine whether a longer-term relationship between the auditor and the audited company, as well as higher audit fees, reduce the audited company's earnings management, thereby making the financial statements more reliable for stakeholders and increasing the quality of the audit report. In addition, the Big Four auditing companies in the United States were analyzed in order to determine the influence of corporate culture. Methods: A sample of companies listed in the S&P 500 stock market index was employed for the analysis, covering the years 2012 to 2021, resulting in a dataset comprising 3,010 observations. To examine the research hypotheses while mitigating the potential bias from omitted variables, a linear regression analysis was conducted using panel data with fixed effects regression. To enhance the robustness of the results, winsorized variables were also employed. Findings & value added: Overall, the results confirm that the quality of financial statements improves as auditor tenure increases, and so implementing a mandatory auditor rotation may not be in a company’s best interests. The results also support the market segmentation theory, as higher audit fees are aligned with higher quality financial reporting. Furthermore, by analyzing the Big Four audit companies in the US, it is shown that the influence of audit fees and auditor tenure on earnings management also depends on the internal aspects of the particular audit firm, especially its ethical culture. In sum, US policymakers should neither set limits on audit fees nor enforce a mandatory audit firm rotation similar to that of the EU.

CONTROL OF QUALITY OF AUDITING SERVICES IN CONDITIONS OF MODERN INCLUSIVE ENVIRONMENT: THE THEORETICAL-PRACTICAL ASPECT

Introduction. In the article in theory the modern checking of quality of public accountant services and professional ethics system is investigational and she is described component elements, the functions of regulators are exposed and analyses normatively is the legal providing; the dynamics of amount of subjects of public accountant activity, amount of orders of subjects of public accountant activity, actual volume of the rendered services, middle accuses of one subject of public accountant activity, amount of verifications, is certain in connection with a receipt from physical and legal persons, and also public organs of complaints, statements, appeals from that improper implementation of professional duties was seen by the subjects of public accountant activity on results a grant by them public accountant services and accordingly amount penalty, on their result for period 2015 -2017; directions of upgrading of public accountant services are reasonable within the framework of integration. Purpose. Purpose is theoretical and practical investigation of quality of audit services and professional ethics. Results. The analysis of generalized information on audit activity during 2015-2017 indicates changes due to the introduction of new legislative acts and from the side of regulators. For gaining of the aim it is defined the next tasks: the analysis of quantitative and qualitative indicators of audit activity and of system control of quality of audit services and professional ethics for the period of 2015-2017 years, the defining of directions of improvement of quality audit managing processes, substantiated directions of improvement of audit services quality within the framework of European integration. Subjects of mandatory quality control of audit services are subjects of audit activity that provide services for mandatory audit of financial statements. Quality control of audit services involves testing of internal procedures, verification of working documents, audit reports and other reports, contracts for the provision of audit services, internal administrative acts of the audit activity subject, which determine the policy and procedures to be applied in the provision of audit services.

Auditor Tenure and Misreporting: Evidence from a Dynamic Oligopoly Game

We estimate an infinite-horizon dynamic oligopoly model of audit firm tenure and misstatements and evaluate a policy counterfactual involving mandatory audit firm rotation. Longer tenure lowers the cost of producing audits, increasing audit quality and reducing audit fees. Thus clients are less likely to misstate and more likely to keep the incumbent audit firm as tenure increases. By reducing the value of retaining audit firms, mandatory rotation leads to large increases in auditor switches, even before the term limit, implying increases in the switching costs borne by clients. Misstatement rates increase because audit firms endogenously lower audit quality and newly hired audit firms have lower quality. Overall, the model suggests caution when evaluating the costs and benefits of government oversight over the audit profession. This paper was accepted by Suraj Srinivasan, accounting. Funding: The authors thank the financial support from the Olin Busiiness School and the Wharton School of the University of Pennsylvania. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.4944 .

A methodology to characterize energy consumption in small and medium-sized enterprises at national level in European countries

The 25 million of European small and medium-sized enterprises (SMEs) represent 99% of businesses and account for the two thirds of total employment and a half of Gross Domestic Product. Thus, SMEs are considered as the backbone of European’ economy. The crucial importance of energy efficiency and its potential in SMEs is worldwide recognized. However, the energy use and consumption information of SMEs are very limited, and the disaggregated data between SMEs and large enterprises are often not available at national or European level. The aim of this work is to present a methodology for the energy consumption characterization of European SMEs at national level. The proposed methodology, based on the combination of official national energy statistics and energy consumption data according to the European Energy Efficiency Directive Article 8, has been developed and applied to Italy and Austria. Preliminary results show significant differences in the relative weight of SMEs’ energy consumption between the two countries mainly due to their specific productive structures. The application of this methodology to the available data on further five European countries provides useful insights on the impact of different national approaches to comply with Art.8. This methodology shows that harmonizing the different strategies to monitor energy audits obligation would significantly help to characterize the energy consumption of SMEs in Europe. Additionally, the knowledge of the distribution of energy consumption between large enterprises and SMEs would help in assessing the impact of mandatory and voluntary energy audits on potential savings in industrial and tertiary sectors.Graphical abstractCharacterization of energy consumption in SMEs: Problem and data availability identification, development of analysis methodology, and application to seven European countries (focused on Italy and Austria)

Mandatory Audit of Business Entities in Bankruptcy Proceedings: Law Enforcement Aspects

The article presents the results of the analysis of the decisions of arbitration courts on disputes arising in connection with the application of Article 70 of the Federal Law “On Insolvency (Bankruptcy)” on the involvement of an auditor to conduct a mandatory audit of the debtor. As circumstances identified by the courts for the correct resolution of these disputes, the mandatory nature of the audit, as well as the content of the auditor’s activities and the documentation prepared by him, are considered. The approaches that have been formed in judicial practice regarding the ratio of the obligation to conduct financial analysis in bankruptcy proceedings and the obligation to engage an auditor are identified and disclosed. It is proposed to clarify paragraph 2 of Article 70 of the Federal Law “On Insolvency (Bankruptcy)” in terms of specifying the content of the duties of an interim manager and the auditor involved by him. It is concluded that it is necessary to supplement part 1 “Legal support of bankruptcy procedures” of the Unified training program for arbitration managers with a topic devoted to the legal regulation of audit activities.

Does a mandatory cleaner production audit have a synergistic effect on reducing pollution and carbon emissions?

The mandatory cleaner production audit (MCPA) is an important initiative to promote energy conservation, emission reduction and green transformation and upgrading of enterprises. This paper matches 16,841 enterprises that implemented MCPA between 2003 and 2012 to the Chinese Industrial Enterprise Database and the Chinese Enterprise Pollution Emission Database. And carrying out the MCPA as a quasi-natural experiment, a difference-in-differences model based on propensity score matching is used to identify the net effect of it on the reduction of enterprise sulfur dioxide (SO2) emissions. The paper discovers that MCPA can significantly reduce the intensity of SO2 emissions, and this finding is robust to multiple scenarios. According to heterogeneity analysis, the MCPA is more conducive to reducing the intensity of SO2 emissions in domestic enterprises, enterprises with low financing constraints and heavily polluting industries. Mechanism tests show that MCPA can reduce SO2 emissions by optimising energy structure, increasing energy efficiency, and encouraging green process innovation. Further analysis reveals that the MCPA is an effective tool for achieving the synergistic effect of reducing SO2 and carbon dioxide (CO2) emissions in enterprises, and it serves the dual function of winning the pollution battle while also achieving the carbon peaking and carbon neutrality goals.

The Implementation of Mandatory Audit Firm Rotation as tool to enhance Audit Reform in South Africa: A Case of KwaZulu-Natal

Using a quantitative research method, this article examined the perceptions of audit experts concerning the influence of mandatory audit firm rotation on audit reform (AR) in the province of KwaZulu-Natal. Data was gathered from 102 audit experts knowledgeable in the field of accounting and auditing from Tier 2 audit firms and two public institutions and used for data analysis. The empirical results of this study were two-fold. Firstly, the descriptive statistics provided a general overview of the respondents’ opinions. The majority of respondents agreed that MAFR implementation would strengthen audit reform, thereby validating the initial position of the Independent Regulatory Board of Auditors. In addition, most participants agreed that the ramification of the imposition of additional costs could not be ignored. Moreover, the utilization of SPSS on ordinal logistic regression also found that the probability of a decrease in the progress of audit reforms is significantly higher when mandatory audit firm rotation is in place, and a non-significant positive predictor of mandatory audit firm rotation would increase audit independence. This article contributes to existing knowledge and the continuous discourse on mandatory audit firm rotation rule in South Africa. Conclusively, the study, therefore, recommends that since the research was limited to Kwazulu-Natal, future studies should broadly include registered auditors and academics from institutions and firms in different South African provinces to obtain diverse views about pre-and post-implementation of the rule in 2023 to compare the effects of the policy on audit independence.

Mandatory auditor rotation and audit quality

PurposeIn the post-Enron era around the world, the role of auditor is widely debated. There is an increasing concern that an auditor’s continuous involvement with clients could impair audit quality – the negative view. There is also a positive view that a long auditor tenure leads to accumulation of client-specific knowledge over time, which could lead to high-quality audits. The empirical result with regards to impact of mandatory auditor rotation (MAR) is mixed world-wide. This study aims to examine whether MAR rules implemented in 2017 impact audit quality in India.Design/methodology/approachUsing a unique setting in which MAR was required from 2017 to 2018 onwards in India, this study provides empirical evidence of the impact of MAR regulation on audit quality (modified audit opinion). The study uses data for 714 firms (4,284 firms) for six years (three years before MAR and three years after MAR regulation in India).FindingsThe study found that auditor tenure and MAR had significant negative impacts on audit quality, validating the “positive” view of audit tenure and audit quality. In addition, concentrated ownership had a negative impact on audit quality, implying the control and influence by concentrated ownership on auditors and audit opinion. The analysis shows that MAR regulation has not yielded the intended objective of improving audit quality in India. MAR is not a good template for improving audit quality.Research limitations/implicationsThe findings of the study are useful to policymakers, regulators, managers, investors and users of financial reports. The study calls for public policy on auditor rotation based on objective scientific evidence. In light of the evidence in India that MAR does not lead to better audit quality, the study calls for reset of regulatory policy in India.Practical implicationsThe study provides valuable insights to analysts, regulators and other users of financial accounts about the implications of MAR in India.Originality/valueThe study is one of the few to report on the impact of MAR, particularly in the context of an emerging market economy such as India.

Revenue reflection in the auditor’s report on accounting statements

Organizations whose securities are traded with the organizers of trading on the securities market, which include public joint-stock companies, are subject to mandatory audit. In the audit reports, according to the requirements of the international auditing standard 701 issued to such organizations, the key audit issues should be disclosed. Very often, auditors opt for such a key issue as “revenue recognition”. The article deals with situations when the choice of the subject of a key question on revenue seems insufficiently justified, and the wording of the key questions is as identical as if their text were standardized, while the adoption of standard 701 had the opposite goal — information transparency, specificity and reflection of the characteristics of the activities of each audited entity. The article uses examples to reveal various approaches to the disclosure of revenue information in key audit issues. During the research, such methods as analysis and synthesis, comparison, grouping, analogy, logical and systematic approaches were used. The research results obtained in this article can be applied in the practical work of modern organizations, in the educational process of higher educational institutions and in the development and reform of regulatory documents on accounting, reporting and auditing. The results presented in this paper will also be useful to a wide range of readers interested in modern problems of accounting, reporting and auditing at the domestic and international level.

Effect of mandatory cleaner production audits on manufacturing firms’ environmental efficiency in China: Renovation or innovation?

Technological innovation is an important solution that can help improve environmental efficiency. However, the role of technological renovation in enhancing environmental efficiency has been ignored. This study provided initial evidence of the effects of cleaner production audits in China on manufacturing firms' environmental efficiency, which was measured by the emissions of sulfur dioxide and chemical oxygen demand per total output. Cleaner production audits were used as exogenous shocks. Their impact was estimated using the staggered difference-in-difference method combined with samples of ever-treated or never-treated firms using propensity score matching. The findings showed that firms that conducted cleaner production audits (vs. those that did not) experienced 4.7% and 11.9% reductions in the emission intensities of sulfur dioxide and chemical oxygen demand, respectively. Cleaner production audit implementation significantly improved firms' environmental efficiency. Additionally, a heterogeneous analysis showed that non-heavy polluters, small and medium-sized firms, and non-state-owned firms demonstrated the most improvement in environmental efficiency. Finally, the mechanism analysis results showed that firms' technological renovation in the production process is the main solution for improving environmental efficiency. This is a feasible and cost-effective way of reducing resource consumption and pollutant emissions. Accordingly, a cleaner production audit plan for different countries should be formulated with a focus on technological renovation in the production process. It should entail clean-cut incentives to stimulate firms to perform technological innovation, thereby continuously improving firms' environmental efficiency. This study sheds light on the environmental impact of cleaner production audits and regulated firms’ choices between technological renovation and innovation.

Compromising your morals: The perils of new beginnings as an auditor

AbstractThis real‐world inspired case describes an ethical dilemma for a recently hired auditor and new Certified Public Accountant (CPA)/Associate Chartered Accountant (ACA) who must choose between cheating on a mandatory firm audit training and exam and suffering the possibility of negatively affecting her advancement with the firm and future compensation. The purpose of this case is to provide students the opportunity to identify an ethical dilemma, apply accounting ethics codes to evaluate potential responses and recommend an ethical course of action. Students completing this case will (1) understand the common pressures and complexities associated with an ethical dilemma; (2) be exposed to the American Institute of Certified Public Accountants' (AICPA Code) Code of Professional Conduct and the International Ethics Standards Board (IESBA Code) International Code of Ethics for Professional Accountants; (3) apply knowledge of the AICPA Ethics Decision Tree to a real‐world inspired ethical dilemma; (4) evaluate and analyse the various courses of action to an ethical dilemma; and (5) demonstrate the impact tone at the top and organizational culture have on employees and the firm. The case was very effective in exposing and enhancing student's overall knowledge 4.28 (σ = 0.57) and application 4.28 (σ = 0.65) of the AICPA Code.

Does mandatory CSR disclosure affect audit efficiency? Evidence from China

PurposeThis study aims to examine the causal relationship between mandatory CSR disclosure and financial audit efficiency.Design/methodology/approachThe authors use the unique institutional setting of China, where a subset of listed firms are mandated to disclose their corporate social responsibility (CSR) reports. The authors use propensity score matching and difference-in-differences approaches to compare audit efficiency in the pre- and post-mandatory CSR disclosure periods between the treatment and control groups. The regression models are estimated with robust standard errors clustered at the firm level.FindingsThis study finds that following China’s adoption of the mandatory disclosure of CSR, audit report lags decreased by 6% on average, suggesting that audit efficiency improved greatly following mandatory CSR disclosure. Moreover, this association is stronger when firms have better CSR performance, higher CSR report preparation costs, more earnings management before disclosure regulations and better internal controls and when firms belong to high-profile industries and in Big 4 (Big 10) accounting firms. Moreover, neither audit quality nor audit fees decrease when shorter audit lags occur for firms with mandatory CSR disclosures. Overall, the evidence suggests that mandatory CSR disclosure has a positive effect on audit efficiency and that the improvement of audit efficiency does not come as a consequence of reducing audit fees or deteriorating audit quality.Research limitations/implicationsThe results reported in this study have practical and policy implications for policymakers, accounting firms and auditors to pay more attention to CSR information.Originality/valueThis study provides evidence of the causal relationship between mandatory CSR disclosure regulation and audit efficiency. It enriches the research on audit service production efficiency from the perspective of nonfinancial information disclosure.

An updated evaluation of the implementation of the sigmoid take-off landmark 1 year after the official introduction in the Netherlands

PurposeThe definition of rectal cancer based on the sigmoid take-off (STO) was incorporated into the Dutch guideline in 2019, and became mandatory in the national audit from December 2020. This study aimed to evaluate the use of the STO in clinical practice and the added value of online training, stratified for the period before (group A, historical cohort) and after (group B, current cohort) incorporation into the national audit.MethodsParticipants, including radiologists, surgeons, surgical and radiological residents, interns, PhD students, and physician assistants, were asked to complete an online training program, consisting of questionnaires, 20 MRI cases, and a training document. Outcomes were agreement with the expert reference, inter-rater variability, and accuracy before and after the training.ResultsGroup A consisted of 86 participants and group B consisted of 114 participants. Familiarity with the STO was higher in group B (76% vs 88%, p = 0.027). Its use in multidisciplinary meetings was not significantly higher (50% vs 67%, p = 0.237). Agreement with the expert reference was similar for both groups before (79% vs 80%, p = 0.423) and after the training (87% vs 87%, p = 0.848). Training resulted in significant improvement for both groups in classifying tumors located around the STO (group A, 69–79%; group B, 67–79%, p < 0.001).ConclusionsThe results of this study show that after the inclusion of the STO in the mandatory Dutch national audit, the STO was consequently used in only 67% of the represented hospitals. Online training has the potential to improve implementation and unambiguous assessment.

Pulmonary metastasectomy and repeat metastasectomy for colorectal pulmonary metastases: outcomes from the Dutch Lung Cancer Audit for Surgery

Surgical resection of recurrent pulmonary metastases in patients with colorectal cancer is an established treatment option; however, the evidence for repeat resection is limited. The aim of this study was to analyse long-term outcomes from the Dutch Lung Cancer Audit for Surgery. Data from the mandatory Dutch Lung Cancer Audit for Surgery were used to analyse all patients after metastasectomy or repeat metastasectomy for colorectal pulmonary metastases from January 2012 to December 2019 in the Netherlands. Kaplan-Meier survival analysis was performed to determine the difference in survival. Multivariable Cox regression analyses were performed to identify predictors of survival. A total of 1237 patients met the inclusion criteria, of which 127 patients underwent repeat metastasectomy. Five-year overall survival was 53 per cent after pulmonary metastasectomy for colorectal pulmonary metastases and 52 per cent after repeat metastasectomy (P = 0.852). The median follow-up was 42 (range 0-285) months. More patients experienced postoperative complications after repeat metastasectomy compared with the first metastasectomy (18.1 per cent versus 11.6 per cent respectively; P = 0.033). Eastern Cooperative Oncology Group performance status greater than or equal to 1 (HR 1.33, 95 per cent c.i. 1.08 to 1.65; P = 0.008), multiple metastases (HR 1.30, 95 per cent c.i. 1.01 to 1.67; P = 0.038), and bilateral metastases (HR 1.50, 95 per cent c.i. 1.01 to 2.22; P = 0.045) were prognostic factors on multivariable analysis for pulmonary metastasectomy. Diffusing capacity of the lungs for carbon monoxide less than 80 per cent (HR 1.04, 95 per cent c.i. 1.01 to 1.06; P = 0.004) was the only prognostic factor on multivariable analysis for repeat metastasectomy. This study demonstrates that patients with colorectal pulmonary metastases have comparable median and 5-year overall survival rates after primary or recurrent pulmonary metastasectomy. However, repeat metastasectomy has a higher risk of postoperative complications.

The Evolution of Energy Management Maturity in Organizations Subject to Mandatory Energy Audits: Findings from Italy

Promoting energy efficiency is a key element of the strategic commitment of the European Community. Prominent among the binding measures established by the 2012 Energy Efficiency Directive to further this vision is the requirement for large companies to conduct energy audits every four years. After receiving the second cycle of energy audit reports in December 2019, a new description of the energy situation of Italian companies was made available. This presented the previously inaccessible possibility of comparing the two situations reported in 2015 and 2019 to assess the development of energy efficiency practices in organizations subject to the legislative obligation of energy audits in the country. To this end, in collaboration with the Italian National Agency for New Technologies, Energy and Sustainable Economic Development (ENEA), a project was initiated with the aim of developing the tools and methodologies necessary to assess in more detail the evolution that has occurred in the four years since 2015. In this paper, the findings of the analysis conducted on a significant sample of companies in Italy are presented. Through the design of a maturity model to assess the degree of progress achieved in a company’s energy management, the results of the two situations were analyzed. The analysis was deepened by assessing the progress achieved in different aspects of Energy Management: “Strategic Approach”, “Awareness, Competence, and Knowledge”, “Methodological Approach”, “Organizational Structure”, “Energy Performance Management and Information System”, and “Best Practices”. Furthermore, the observed variations were statistically tested using a pairwise t-test to make statistical inferences about the maturity of the total population of Italian enterprises under legislative obligation. The results have shown an increase in overall energy management maturity in each maturity dimension.

Energy Efficiency Improvements in a Portuguese Ceramic Industry: Case Study

Taking into account the issues associated with climate change and reliance on external sources of energy, among others, the European Union and its commission have developed a strategy for transitioning to a climate-neutral economy by 2050. In this sense, a wide-ranging package was adopted to ensure the EU meets its climate and energy targets for the years 2020, 2030, and 2050. Hence, energy efficiency is a key principle of the European Union, as is energy saving and the development of new and renewable forms of energy. The most evident force is the European Efficiency Directive, adopted in 2012, which embraced a set of measures such as legal obligations to establish energy-saving schemes and/or alternative measures in the Member States. Concerning final energy consumption, the industrial sector is the second biggest consumer of final energy and one of the major contributors to greenhouse gas emissions. Some publications have studied the effectiveness of European policies, but they generally focus on a macro perspective. Few present case studies in specific industries, especially in intensive energy industries such as the ceramic industry. In this context, its higher consumption forces it to find solutions. From a challenge posed by the company, this paper presents a case study in the Portuguese ceramic industry. This study is motivated by the high energy consumption and associated costs. The main purposes of this study are to check the effectiveness of the applied measures resulting from the audit carried out in 2018, to improve energy efficiency, and to study the feasibility of implementing renewable energy sources. This work consisted of four phases: (i) studying the significant impacts of energy costs on the company; (ii) verifying if the energy indicator goals were achieved, using the 2018 energy audit as a reference; (iii) suggesting actions to improve energy efficiency and checking their effectiveness; and (iv) studying the feasibility of implementing renewable energy sources. The measures taken not only contributed to the achievement of the company’s goals established in the Portuguese National Energy and Climate Plan but also enabled them to meet the annual and end goals for 2024 outlined in their energy rationalization plan. This was a consequence of the mandatory energy audit conducted in 2018 under the Portuguese Intensive Energy Consumption Management System (IECMS). In this sense, this case study provides a practical demonstration of how mandatory European policies and regulations at the member state level can help enterprises improve their energy efficiency. It also highlights the importance of evaluating renewable energy constraints rather than adopting them directly as a panacea.

On the Energy Performance and Energy Saving Potential of the Pharmaceutical Industry: A Study Based on the Italian Energy Audits

The growing attention towards environmental sustainability in the pharmaceutical industry and increased awareness of the potential for improving energy performance are justified by the fact that the sector is energy intensive. However, the variety of the processes and the lack of data about production and energy consumption make it difficult to calculate Energy Performance Indicators (EnPIs) as much as to list Energy Performance Improvements Actions (EPIAs). This work elaborates data, such as final energy consumption and site characteristics, from 84 mandatory Italian Energy Audits (EAs) to calculate the mean and standard deviation of site-level EnPIs. Additionally, the suggested and implemented EPIAs are analyzed to describe achieved and potential savings. The results show what follows. In the typical pharmaceutical plant, around 70% of energy is used in auxiliary services, and its use is not related to production. For this reason, EnPIs calculated both with respect to mass production and plant surfaces have a mid-to-wide standard deviation; the mean primary energy EnPI calculated with respect to plant surface area is 0.38 ± 0.22 toe/m2. Most suggested EPIAs regard cold and hot energy production, as well as on-site energy production, from renewables and Combined Heat and Power (CHP) plants. The payback time is less than 4 years for many EPIAs, including both technical and managerial ones. According to the results, plant energy managers should calculate site EnPIs with respect to the site surface and increase monitoring of energy consumption at the process level. The last recommendation is also likely to be associated with more effective planning of EPIAs, allowing their introduction where the saving potential and economic indicators are more promising.

MANDATORY AUDIT FIRM ROTATION: EVIDENCE FROM TURKISH AUDITORS’ PERCEPTIONS

The purpose of this paper is to investigate auditors' perceptions of mandatory audit firm rotation (MAFR) in Turkey. Using the survey method, the opinions of 45 audit partners, directors, and managers from the audit firms were determined. To the best of our knowledge, this is the first MAFR survey study conducted in Turkey. The findings show that auditors both support and oppose MAFR. Majority of the respondents believe that MAFR will increase independent and objective, higher quality audit, fresh look will be provided, and the risk of audit failure will be decreased as a result of familiarity with client management. Furthermore, respondents stated that the benefits of MAFR cannot exceed the benefits of mandatory audit partner rotation (MAPR). They also highlights that the benefits of MAFR outweigh the costs of enforcing such a requirement. The vast majority of respondents believe that the risk of audit failure (audit risk) is higher in the early years of an audit tenure period. This is, in fact, a result against the MAFR. From the standpoint of IFAC, it is necessary to examine the activities from numerous perspectives. Therefore, it is critical that a country develops a rule based on its own circumstances rather than copying and applying a rule from another country. Regarding audit quality, the MAFR regime in Turkey is not deemed necessary, but the MAPR regime will probably be sufficient.