Perceptions Of Auditors Research Articles

Who Is to Blame for Fraud? Lawyer Perspectives on Auditor Liability

This study examines how disclosures impact lawyers’ perceptions of independent auditors being sued for failure to detect fraud; specifically whether the auditor’s opinion and disclosures required by the Sarbanes-Oxley Act of 2002 may be deemed to be red flags and deter litigation. A 3x1 between-subjects experiment was conducted using 100 lawyers specializing in securities or business law. The lawyers reviewed a case in which the auditor had issued an unqualified audit opinion on financial statements of a company that ended up declaring bankruptcy. The lawyers reviewed the auditor’s opinion on internal controls which was manipulated as unqualified, unqualified with description of significant deficiencies, or adverse with description of material weakness. Results of this study indicate that the auditor’s report on controls has the potential to decrease the litigation exposure of auditors, as auditors providing an adverse opinion on internal controls were assessed most favorably by lawyers. However, voluntary disclosures of significant deficiencies in internal controls did not significantly influence auditor litigation exposure, indicating that the stronger message provided by an adverse Section 404 opinion is necessary to decrease litigation exposure. Overall, results of this study provide valuable insights on how audit disclosures influence potential litigators’ decisions and recommendations concerning auditor negligence lawsuits.

The Effect of Internal Auditors’ Engagement in Risk Management Consulting on External Auditors’ Reliance Decision

We examine external auditors’ decisions to use the evidence or direct assistance of internal auditors when those auditors engage in consulting on enterprise risk management. Although such consulting provides value to an organization, it can also put the objectivity and independence of internal auditors at risk. We hypothesize that external auditors’ reliance on the internal audit function depends on the effectiveness of the audit committee monitoring the internal auditors’ activities. We also hypothesize that external auditors’ perception of the objectivity and independence of internal auditors mediates the reliance decision. We analyze these hypotheses using a 2 × 2 between-subjects design with 92 certified external auditors. Confirming the hypotheses, we find that external auditors’ reliance on the internal audit function is highest when the latter provides risk management consulting under the supervision of a strong audit committee. It is lower if the internal audit function provides only assurance (under either a weak or strong audit committee) and lowest if it provides consulting under a weak audit committee. The mediation analysis shows that the effect of audit committee effectiveness on the reliance decision is mediated by external auditors’ perception of internal auditors’ objectivity.

Investigation of the Effect of Accounting Student's Personality Characteristics on Career Interests in Auditing and their perceptions of the ideal auditor

Investigation of the Effect of Accounting Student's Personality Characteristics on Career Interests in Auditing and their perceptions of the ideal auditor

Challenges in auditing fair value measurement and accounting estimates

Purpose Following the issuance of International Financial Reporting Standard 13 on fair value measurement (which became operational from January 2013), this study aims to investigate post-implementation challenges in the audit of fair value measurement and accounting estimates in the Nigerian context. Design/methodology/approach Data-collection was through a structured-questionnaire administered on 400 auditors from diverse backgrounds in terms of audit firm size, international affiliation and global presence. Findings Empirical data obtained from 277 auditors were analysed using descriptive statistics, factor analysis, one-way ANOVA, cluster analysis, independent sample t-test and one-way multivariate analysis of co-variance. It was observed that the two highest-ranking and most-prevalent challenges of auditing fair value measurement and accounting estimates are the tendency for managers to manipulate earnings owing to the inability of auditor to effectively test fair value estimates; and the difficulty in testing unobservable inputs due to the application of assumptions and judgement in arriving at estimates by preparers of financial reports. Originality/value While there is no significant difference in the perception of auditors on the audit challenges associated with fair value measurement and accounting estimates, there is a significant difference in the magnitude of audit challenges faced in verifying fair value measurements and accounting estimates across industry sectors. Concerned stakeholders (including but not limited to accounting regulators, auditing standard setters, audit firms, researchers) are importuned to come up with robust and pragmatic measures to curtain these challenges, as the inability of auditors to rigorously verify fair value estimates may jeopardize the very essence of fair value measurement which is to elevate financial reporting quality.

The Effect of Internal Auditors’ Engagement in Risk Management Consulting on External Auditors’ Reliance Decision

We examine external auditors’ decisions to use the evidence or direct assistance of internal auditors when those auditors engage in consulting on enterprise risk management. Although such consulting provides value to an organization, it can also put the objectivity and independence of internal auditors at risk. We hypothesize that external auditors’ reliance on the internal audit function depends on the effectiveness of the audit committee monitoring the internal auditors’ activities. We also hypothesize that external auditors’ perception of the objectivity and independence of internal auditors mediates the reliance decision. We analyze these hypotheses using a 2x2 between-subjects design with 92 certified external auditors. Confirming the hypotheses, we find that external auditors’ reliance on the internal audit function is highest when the latter provides risk management consulting under the supervision of a strong audit committee. It is lower if the internal audit function provides only assurance (under either a weak or strong audit committee) and lowest if it provides consulting under a weak audit committee. The mediation analysis shows that the effect of audit committee effectiveness on the reliance decision is mediated by external auditors’ perception of internal auditors’ objectivity.

A Multi-Method Study of the Effects of Eliminating Time Entry on Audit Timeliness and Related Auditor and Client Perceptions

A Multi-Method Study of the Effects of Eliminating Time Entry on Audit Timeliness and Related Auditor and Client Perceptions

Internal auditor perceptions of corporate governance in Greece after the crisis

PurposeThis paper aims to present the views of internal auditors in Greece on the relation between the internal audit function (IAF) and corporate governance (CG) after several years of European market integration and in the aftermath of the sovereign debt crisis.Design/methodology/approachData are collected using semi-structured interviews with 15 internal auditors working in firms with different size and in different sectors of activity. Interviewees have diverse experience and hold various positions in the firm.FindingsRespondents perceive a strong relation between the IAF and CG. They view the IAF as a preventive tool that provides monitoring and advisory services to firms. They stress the inadequate monitoring role of the board in the IAF, and they support a proactive intervention in the strategic audit planning process. They see a small role for shareholders in CG. They stress the need to focus more on the efficiency and effectiveness considerations in carrying out the IAF. They perceive CG-related information as important for meeting formal compliance needs rather than contributing to decision-making or audit process planning. They believe that audit committees (AC) are weak in implementing effective monitoring, due to inadequate knowledge and expertise of their members. They would like to see a two-way interaction between auditors, AC and management. They would like to enjoy more independence through the implementation of international standards of auditing and statutory regulation.Research limitations/implicationsThe sample covers 15 auditors from an equivalent number of firms and few sectors of activity. Accessing potential interviewees was difficult due to the perceived conflict between their work requirements and public statement of their views.Practical implicationsThe proposed method adds to the qualitative analysis literature with regard to measuring and evaluating the personal views of auditors on CG. The study provides empirical evidence of the need to use extensive qualitative research to assess the auditors’ views on the role of CG for their work.Originality/valueThe role of internal audit in CG effectiveness is a key policy concern, especially in countries with diverse market environments. Greece is such an environment for it has undergone a major institutional change within a short period and suffered greatly from its sovereign debt crisis. Further, few studies have sought and evaluated the views of internal auditors by using semi-structured interviews. The latter provide details, which other methods cannot capture. The results of this study are especially useful to the competent regulators, for they reflect market perceptions on the importance and effectiveness of CG practices. They are also useful to practitioners to identify potential root causes of audit deficiencies.

Investors' Perception and Audit Expectation-Performance Gap (AEG) in the Context of Listed Firms in Sri Lanka

Corporate failures around the globe in recent times have placed the auditing profession in the spotlight. The profession is beset by confusion and crises caused by the differences in the beliefs held by auditors and the public concerning the auditor’s duties, which have even led to lawsuits against auditors. This situation is the result of what is known as the ‘Audit Expectation–Performance Gap’ (AEG). In the light of the contemporary importance of the subject, lack of theoretical underpinnings of the causes of AEG and the dearth of studies on it in Sri Lanka, the present study attempts to ascertain the status of AEG and to examine the factors contributing to AEG, in the Sri Lankan context. A positivist approach was adopted and a structured questionnaire survey done involving professional auditors and investors of listed firms. The results of independent sample t-test indicated a statistically significant difference between the perceptions of professional auditors and investors regarding the duties of auditors in the context of listed firms in Sri Lanka. The relative contribution to the overall AEG was that much of the gap (50 per cent) in AEG was attributable to deficient standards, 16 per cent to unreasonable expectations of society about auditors’ duties, and 34 per cent was due to the perceived sub-standard performance of auditors. On the other hand, in terms of the contributory factors, the mean ranking with one sample t-test results found that 12 factors contributed significantly to AEG. The main contributory factors highlighted by respondents were the lack of auditing education and lack of auditing experience among users. Thus, as regards policy implications, it was noted that policymakers and regulators need to increase community awareness through audit education to reduce AEG in Sri Lanka as one of the main measures.

Determinants of audit fees: The perception of external auditors

This paper examines the perception of external auditors on the dominant factors that influence audit fees determination. By means of a survey, the study explored from the perspective of external auditors the level of importance audit firms attach to some identified factors in the determination of audit fees. A self-administered questionnaire was used to gather data from professional auditors working with practicing auditing firms certified and approved by the Institute of Chartered Accountants, Ghana (ICAG). Using a total of 339 valid responses, the study explored the dimensionality of the factors that influence audit fees by employing the Exploratory Factor Analysis (EFA) procedure. Based on the factor structure identified from the EFA, we subsequently evaluated the level of importance auditors perceive these factors to be in the determination of audit fees. The EFA results suggest that audit fees determinants can be grouped into five distinct factors (Audit firm reputation, experience & expertise; Nature and scope of the audit; Market-wide factor; Client size; Client risk). The factor ‘Client risk’ was rated to be the most important determinant of audit fees distantly followed by the ‘Nature and scope of the audit’ factor. The ‘Market-wide factor’ was rated to be the least important factor in the determination of audit fees. The findings of this study provide some useful insights from the perspective of external auditors on the factors that influence audit fees from a developing country context.

Professionalizing the assurance of sustainability reports: the auditors’ perspective

PurposeThe purpose of this paper is to examine the professionalism and professionalization of sustainability assurance providers based on the experiences and perceptions of auditors involved in this activity.Design/methodology/approachThe empirical study was based on 38 semi-directed interviews conducted with assurance providers from accounting and consulting firms.FindingsThe findings highlight the division of this professional activity between accounting and consulting firms, each of which question the professionalism of the other. The main standards in this area tend to be used as legitimizing tools to enhance the credibility of the assurance process rather than effective guidelines to improve the quality of the verification process. Finally, the complex and multifaceted skills required to conduct sound sustainability assurance and the virtual absence of recognized and substantial training programs in this area undermine the professionalization of assurance providers.Research limitations/implicationsThis work has important practical implications for standardization bodies, assurance providers and stakeholders concerned by the quality and the reliability of sustainability disclosure.Originality/valueThis study shows how practitioners in this area construct and legitimize their professional activity in terms of identity, standardization and competences. The work contributes to the literatures on the assurance of sustainability reports, self-regulation through standardization and professionalization.

The impact of communication style on psychological comfort and trust in audit services

PurposeThis study aims to examine the extent to which clients’ perceptions of a financial auditor’s communication style affect their psychological comfort and trust when considering whether to retain the incumbent firm for future financial audits.Design/methodology/approachA multistage method was used comprising integrated results from a literature review and findings from five in-depth interviews with chief financial officers of listed firms. A cross-sectional survey then yielded valid responses from 190 incorporated firms listed on The Stock Exchange of Thailand or Market for Alternative Investment.FindingsThe results reveal that, consistent with social interaction theory, an affiliation communication style positively influenced client’s psychological comfort and trust in an auditor. On the other hand, a dominant communications style negatively impacted psychological comfort. Cognitive social capital was found to moderate the links between dominant communication–psychological comfort, psychological comfort–trust and trust–relationship commitment.Practical implicationsFrom a managerial perspective, an affiliation communication style is fundamental for building client comfort and trust, especially for professional service firms, but especially in Eastern collectivist cultures that are relationship rich, where people seek to avoid conflict and prefer indirect communication styles over more direct styles.Originality/valueThis research highlights the central role that interpersonal communication style plays in developing psychological comfort and trust with a professional service firm. In addition, this study introduces the role of client psychological comfort as a key mediator between communications and trust.

Impact of ICT Usage In Detection and Prevention of Bank Frauds

The present study aims to demonstrate and evaluate the impact of ICT usage for detection and prevention of frauds in banks. Further, this study also aims to explore whether there is any significant difference in the perception of sample auditors on the usage of ICT on the basis of select demographic variables. The findings of the study can be used by banks to improve the efficiency and effectiveness of the internal audit department through ICT usage.

Audit data analytics of unregulated voluntary disclosures and auditing expectations gap

The study is concerned with the usefulness of using audit data analytics of unregulated voluntary disclosures in reducing the auditing expectations gap. It argues that the lack of credibility and assurance of the unstructured voluntary disclosures and other big data will impact the level of public users’ expectations towards the quality of these unregulated voluntary disclosures. Therefore, we argue that non-financial, as well as financial data require assurance by an independent auditor. Consequently, this would expand the auditors’ role and responsibilities which will lead to raising the degree of stakeholders’ satisfaction and approaching their expectations potentially reducing the auditing expectations gap. Auditors will need to rely more heavily on big data analytics and technological techniques to perform this new role efficiently and effectively. Therefore, we provide empirical evidence that the perceptions of auditors, bankers, investors and academics, support the use of audit data analytics when providing assurance of unregulated voluntary disclosures in reducing auditing expectations gap. To do so, we categorized unregulated voluntary into eight different categories that auditing data analytics is required to capture from various sources and analyse in an informative and useful fashion.

The impact of key audit matter (KAM) disclosure in audit reports on stakeholders’ reactions: a literature review

This article presents a literature review of 49 empirical studies on key audit matter (KAM) disclosure in audit reports. The study involves a structured literature review on KAM disclosure based on the reactions of stakeholders. The limitations of former studies and useful recommendations for research are stressed. Five major streams of empirical research that analyze the impact of KAM disclosure on stakeholders’ reactions are focused: (1) shareholders (e.g. investors’ perceptions of auditors’ responsibility and litigation, value relevance and investors’ decisions); (2) debtholders (e.g. loan contracting terms); (3) external auditors (e.g. audit processes and audit fees); (4) boards of directors (e.g. earnings management); and (5) other stakeholders (e.g. informational value for suppliers and customers). The authors stress that most of the included studies use experimental or archival data and analyze the impact of KAM disclosure on investor reactions in a US-American setting. As the international standard setters assume a positive impact of KAM on stakeholder reactions, mixed empirical results are found. Although there are some indications of decreased earnings management behavior, most studies find no significant changes in auditor behavior. Furthermore, there are many insignificant results with regard to shareholders’ reaction in line with our stakeholder and behavioral agency framework. The literature review is especially useful for management decisions, because firm reputation may be positively or negatively influenced by KAM regulations.

PERSEPSI AUDITOR TENTANG MOTIVASI AUDITEE MELAKUKAN AKUNTANSI KREATIF (CREATIVE ACCOUNTING)

This research objective is to know how the perception of senior and junior auditors, whether there are differences between them, regarding of creative accounting practices conducted by the auditee. This research sample are consist of auditor at public accounting firms in the area of Tangerang and Jakarta with 86 respondents. Data were obtained from questionnaires which distributed to the research place. Tests on this research using validity test, reliability test and hypotheses test through independent sample t test. The results of this research stated that the whole auditors (senior or junior) agree with the creative accounting practice done by auditee and there were no difference in perception between senior and junior auditors on the creative accounting practice that assessed by three components of assessment, that are business ethics, quality of financial statements and manager motivation

PERSEPSI AUDITOR PEMERINTAH TERHADAP EFEKTIVITAS RED FLAGS DALAM MENDETEKSI PENIPUAN

This study aims to examine differences in perceptions between government external auditors and government internal auditors about the effectiveness of red flags in detecting fraud on procurement of government goods and services and get the most effective red flags by external and internal government auditors in detecting fraud on procurement of goods and services government. The research design is quantitative research with a sampling technique using a purposive sampling method. Respondents in this study are BPK auditors as external auditors and BPKP auditors as internal auditors. Data collection techniques by distributing questionnaires. The results of this study indicate that there are different perceptions between internal and external auditors on the effectiveness of red flags in the procurement of goods and services. This study does not provide evidence that the auditor's experience has a significant effect on the auditor's perception of the effectiveness of red flags.

Auditor Perceptions of Audit Workloads, Audit Quality, and Job Satisfaction

SYNOPSIS We survey over 700 auditors about audit workloads and the relationship between audit workloads, perceived audit quality, and job satisfaction. Our findings indicate that auditors are working, on average, five hours per week above the threshold at which they believe audit quality begins to deteriorate and often 20 hours above this threshold at the peak of busy season. Survey respondents cite deadlines and staffing shortages as two of the primary reasons for high workloads and further believe that high workloads result in decreased audit quality. We also find that auditors' job satisfaction is negatively impacted by high audit workloads, particularly when the workloads exceed a threshold that is perceived to impair audit quality. Overall, our findings provide support for the PCAOB's concern that heavy workloads are continuing to threaten audit quality, and suggest that the primary drivers of workloads might be the actual “root cause” of workload-related audit deficiencies. JEL Classifications: M42; M12.

PERSEPSI AKUNTAN DAN MAHASISWA AKUNTANSI TERHADAP KEMAMPUAN YANG HARUS DIMILIKI OLEH SEORANG FORENSIC ACCOUNTANT

This study aims to analyze differences in perceptions of Government Auditors, Public Accountants, Corporate Internal Auditors, Corporate Accountants, Accounting Lecturers and Senior Accounting Students for the capabilities that must be possessed by Forensic Accountants. The object of this research is the professional group of Government Auditors, internal government Auditors, Public Accountants, Corporate Internal Auditors, Corporate Accountants, Accounting Lecturers and Senior Accounting Students in the Jakarta and Central Java regions. This study uses a purposive sampling technique in data collection. Data was obtained by distributing questionnaires to each group. A total of 156 questionnaires were collected. Government auditor samples were distributed to Central BPK employees and inspectors in Central Java, Public Accountants, Internal Auditors, Corporate Accountants in several large companies in Jakarta and Central Java. While the questionnaire for lecturers and senior students was distributed to PTN and PTS in Jakarta and Central Java. Data analysis was carried out with One Way Analysis of Variance (Annova). The results showed that there is no difference in perception between government auditors and internal government, public accountants, corporate accountants, company internal auditors, accounting lecturers and accounting students about the capabilities that must be possessed by forensic accountants. There are differences in perceptions between government internal auditors, public accountants, corporate internal audits and accounting lecturers with senior accounting students about the capabilities that must be possessed by forensic accountants. There is no difference in perception between government auditors and company accountants with senior accounting students about the capabilities that must be possessed by forensic accountants. In addition, overall respondents gave a high assessment of the knowledge, traits, skills and abilities that Forensic Accountants must possess. This shows that the respondent agrees that a forensic accountant needs to have high abilities according to the AICPA FVS Section criteria.

Internal auditor communications: an experimental investigation of managerial perceptions

PurposeThe purpose of this paper is to examine potential determinants of management’s agreement with internal auditor recommendations of an interim assurance engagement.Design/methodology/approachThe experiment involved a 2 × 2 × 2 design with internal auditor gender, mode of communication and root cause variables randomly assigned to 228 experienced managers.FindingsWhen the internal auditor includes a root cause for an identified deficiency in an internal audit report, management perceptions of the quality of that report improve. The gender of the internal auditor who communicates the audit finding with management does not significantly impact management’s perceptions. Additionally, communicating the internal audit report via e-mail instead of videoconference results in improved managerial perceptions of the quality of the internal auditor. While improvements in perceptions of internal auditor quality lead to greater agreement with internal auditor recommendations, improvements in perceptions of report quality lead to greater implementation of internal-auditor-recommended remediation strategies.Research limitations/implicationsThe operationalization of the manipulated variables of interest (communication mode, gender and root cause) may limit the generalizability of the study’s results.Practical implicationsThe paper includes managerial implications for internal auditors’ choice of communication mode and inclusion of a root cause in interim internal audit reports.Originality/valueThis study provides evidence on the factors that could improve management’s perceptions of internal auditors’ work. The findings can help organizations, such as the Institute of Internal Auditors, to better understand how to address the needs of those who communicate with internal auditors.

An analysis of the possible impact of mandatory audit firm rotation on the transformation and market concentration of the South African audit industry

Orientation: Consistent with global concerns regarding the quality of audits and regulatory changes in Europe, South African audit regulations will require audit firms to rotate clients periodically, in an attempt to safeguard auditor independence and audit quality. In 2017 the South African audit regulator issued a ruling requiring mandatory audit firm rotation (MAFR) every 10 years, effective April 2023, primarily intended to improve audit quality. In addition to audit quality improvement, the regulator also believes that MAFR will stimulate transformation in the audit profession by building capacity of black-owned audit firms and allowing opportunities for small- and medium-tier audit firms to compete for the audits of listed companies. Research purpose: This study explores the perceptions of auditors and audit committee chairs of Johannesburg Stock Exchange-listed companies with regard to the direct and indirect financial effects of the implementation of MAFR in South Africa with respect to black economic empowerment and market concentration. Motivation for the study: No studies have explored this controversial additional objective of MAFR in South Africa. Research approach, design and method: An exploratory mixed-methods design is employed, using questionnaires derived from a review of the academic research and professional debate concerning MAFR. Main findings: Contrary to the intentions of the regulator, MAFR may not result in improved transformation of the audit profession and could in fact reduce the capacity of audit firms to pursue transformation initiatives. In addition, MAFR may not decrease the current degree of audit domination of the Big 4 firms of the JSE, possibly even further concentrating the industry, as audit committees and shareholders may be reluctant to appoint mid-tier firms as auditors of the large listed companies. Practical/managerial implications: Industry stakeholders and the regulator should consider targeted interventions to mitigate the potential for impaired transformation and further concentration of the industry which may result from implementation of MAFR in 2023. Contribution/value-add: The findings and conclusions will contribute to addressing concerns regarding the rate of black participation in the industry, as well as mitigating the potential unintended consequences of MAFR.