Role Of Audit Research Articles

Integrity and Ethics in Indian Corporate Governance : Role of the Internal Auditor

This article examines the Indian corporate governance and how it conforms with several laws. It discusses the relationship between corporate governance and the internal auditor, as well as the role of the internal auditor and aims to contribute to the consequences of corporate frauds in India, arguing that the internal auditor plays an important role in fraud prevention.

DENETÇİ NİTELİKLERİNİN BAĞIMSIZ DENETİM KALİTESİ ÜZERİNDEKİ ROLÜ: HATAY İLİNDE BİR UYGULAMA

Yakın tarihte meydana gelen denetim skandalları, denetim mesleğinin ve denetçilerin ülkelerin ekonomisi üzerindeki sahip oldukları niteliklerini öne çıkarmıştır. Yaşanan ekonomik krizlerin arkasında denetim faaliyetlerinden kaynaklanan zafiyetlerin olması denetçilerin önemini göstermiş ve denetim faaliyetlerinin kalitesi merak uyandırmıştır. Özellikle bağımsız denetçilerin gerçekleştirilen denetim faaliyetlerine ilişkin sağladıkları güvence vazgeçilmez bir nitelik kazanmıştır. Denetim tekniklerinin uygulanma biçimlerinde de değişim meydana gelmiş ve teknolojiye bağlı olarak yeni riskler ortaya çıkmıştır. Denetim faaliyetlerinin doğasında meydana gelen değişim karşısında denetçilerin sahip oldukları nitelikler sorgulanmaya başlanmıştır. Bu çalışmada, Türkiye’de 2020 yılında Hatay ilinde faaliyette bulunan bağımsız denetçilerin niteliklerinin, denetim faaliyetlerinin kalitesi üzerinde ki etkisinin tespit edilmesi amaçlanmıştır. Çalışmada, anket yardımı ile ulaşılan veriler, “Statistical Package for the Social Sciences (SPSS) 22.0” programı aracılığı ile analiz edilmiştir. Çalışma sonucunda; denetçilerin özellikle etik anlayış, mesleki yeterlilik ve deneyim sürelerinin denetim kalitesi üzerinde, istatistiksel olarak anlamlı bir etki oluşturduğu tespit edilmiştir.

Urgensi Judgment Auditor dalam Otomatisasi Proses Audit

Audit automation helps various stages in the audit process to provide convenience and speed in completing work, including the stages that are usually carried out using judgment. Currently, there have been several studies examining the use of information systems to replace the role of auditors in the audit process. Therefore, this study explores the impact of automation system on the auditor's judgment on the audit process. This study uses a qualitative descriptive method with in-depth interviews with senior auditors in public accounting firms. The results showed that the audit automation process has partially shifted the role of the judgment auditor, but there are still parts in the audit process that cannot be replaced by the system. Some judgments that are required by the auditor and cannot be replaced by the system are sample selections, fieldwork, and opinion determination. At these stages, the auditor needs flexibility to take actions that are in accordance with the audit conditions encountered and cannot be standardized in a standard carried out by the system. Auditors can focus on sharpening judgment skills in the sample selection process, fieldwork, and opinion determination so that it is expected to improve audit quality in the future.

Ethical Leadership and Auditor’s Underreporting of Audit Time: Mediating Role of Work Engagement

Considering the subsiding credibility of audit profession by recurring accounting scandals, this study investigates the impact of audit team leaders’ ethical leadership on staff auditors’ propensity to accept underreporting of audit time through mediating effect of staff auditors’ work engagement. This study collects primary data from 397 staff auditors working for the registered audit firms conducting audit of limited liability companies of Pakistan. The results provide that audit team leaders’ ethical leadership significantly reduces staff auditors’ engagement into underreporting of audit time through partial mediating role of staff auditors’ work engagement. Findings of current study are expected to uphold public confidence in the audit profession by indicating the mechanism of improving audit quality through decreasing dysfunctional audit behaviors.

The Audit Expectation Gap: How Can Auditing Teaching Mitigate It?

This study aims to determine the perceptions of accounting students who have not and who have received auditing teaching on the Audit Expectation Gap. There are several issues in the expectation gap, namely the issue of auditors and the audit process, issues of the role of auditors and issues of competence and auditor independence. This research is a survey to a 115 students of the Accounting Department in State Polytechnic of Banjarmasin, Lambung Mangkurat University, STIENAS and STIEPAN. Based on the independent sample t-test through SPSS 25, the following results were obtained: (1) There are differences in perceptions between students who have not and who have received auditing teaching on the expectation gap in auditor’s issues and the audit process; (2) There is no difference in perception between students who have not and who have received auditing teaching on the expectation gap in the issue of the role of the auditor. (3) There are differences in perceptions between students who have not and who have received Auditing teaching on the expectation gap in issues of competence and auditor independence

PERANAN AUDIT INTERNAL TERHADAP KINERJA PERUSAHAAN PT. PERKEBUNAN NUSANTARA III KEBUN RAMBUTAN

Internal auditors have an important role in a company, because the role of internal auditors has an effect on increasing company performance. The formulation of the problem in this study is how the role of internal audit on the company's performance at PT. Nusantara III Plantation Rambutan Plantation. The purpose of this study was to determine the role of internal audit on company performance at PT. Nusantara III Plantation Rambutan Plantation.The type of data in this study is qualitative data in the form of documents, explanations, and information. This study uses primary and secondary data sources. Primary data is in the form of interviews with the System and Certification Document Officer (DSS) and observation activities which will then be processed by the author, secondary data for example company organizational structure, company audit reports, company history. The data collection technique in this study is to conduct field research, namely visiting directly to the research site and by conducting library research, namely by reading sources such as books or literature related to research. The data analysis method used is the Descriptive Analysis Method. From the results of this study it can be concluded that the Role of Internal Audit on Company Performance at PT. Perkebunan Nusantara III Kebun Rambutan is to examine and assess efficiency and effectiveness in finance, operations, human resources, information technology with the aim of strengthening the governance system. To ensure the reliability of information, the implementation of internal audit is also in accordance with company standards, where the internal audit function is to provide follow-up advice to achieve company goals efficiently, effectively on audit findings.

FUNGSI INTERNAL AUDIT DAN MANAJEMEN RISIKO PERUSAHAAN: SEBUAH TINJAUAN LITERATUR

In this qualitative study, it became clear that an evolution towards a higher level of risk-based auditing is absolutely necessary, if internal auditors are to play an important role in risk management. The implementation of effective risk management is the key to the success of a company. This article aims to provide a literature review related to the role of the internal auditor function in carrying out effective and efficient risk management. The explanation of this article can add to the literature related to the role of internal auditors in implementing corporate risk management and can assist company management in selecting internal auditors so that company goals can be achieved. Thus, the company can have an optimal level of risk according to the company's risk appetite. Internal auditors are also required to uphold the professional standards of internal audit in carrying out their duties so as to provide the best guarantee for the company.

Fraud in startups: what stakeholders need to know

PurposeThis paper aims to explain the fundraising and valuation processes of startups and discuss the conflicts of interest between entrepreneurs, venture capital (VC) firms and stakeholders in the context of startup corporate governance. Further, this paper uses the examples of WeWork and Zenefits to explain how a failure of stakeholders to demand an external audit from an independent accounting firm in early stages of funding led to an opportunity for fraud.Design/methodology/approachThe methodology used is a literature review and analysis of startup valuation combined with the Fraud Triangle Theory. This paper also provides a discussion of WeWork and Zenefits, both highly visible examples of startup fraud, and explores an increased role for independent external auditors in fraud risk mitigation on behalf of stakeholders prior to an initial public offering (IPO).FindingsThis paper documents a number of fraud risks posed by the “fake it till you make it” ethos and investor behavior and pricing in the world of entrepreneurial finance and VC, which could be mitigated by a greater awareness of startup stakeholders of the value of an external audit performed by an independent accounting firm prior to an IPO.Research limitations/implicationsAn implication of this paper is that regulators should consider greater oversight of the startup financing process and potentially take steps to facilitate greater independence of participants in the IPO process.Practical implicationsGiven the potential conflicts of interest between VC firms, investment banks and startup founders, the investors at the time of an IPO may be exposed to the risk that the shares of the IPO firms are overvalued at offering.Social implicationsThis study demonstrates how startup practices can be extended to the Fraud Triangle and issue a call to action for the accounting profession to take a greater role in protecting the public from startup fraud. This study then offers recommendations for regulators and standards entities.Originality/valueThere are few academic papers in the financial crime literature that link the valuation and culture of startup firms with fraud risk. This study provides a concise explanation of the process of valuation for startups and highlights the considerations for stakeholders in assessing fraud risk. In addition, this study documents an emerging role for auditors as stewards of proper valuation for pre-IPO firms.

The Role of Internal Audit in Analyzing and Auditing Big Data and its Impact on the Quality Financial Reports

The research aims to develop and raise the efficiency of audit programs for the internal audit function, which helps in auditing big data and reducing the company's challenges and measuring the efficiency and effectiveness of internal auditing in light of big data to produce high-quality financial reports. To achieve these goals, 93 questionnaires were distributed to the internal auditors in 38 banks in Iraq and included two axes and several questions ( 24 ) to know the role of the internal auditor in auditing and analyzing massive data and the extent of the impact of this role on the quality of the financial reports of banks. Used spss program to analyze the data and the research found.

Audit quality and seasoned equity offerings methods

Using a sample of U.S. seasoned equity offering (SEO) during the period 2002–2017, we document that audit quality is associated with SEO issuance method choice. Specifically, firms with higher quality auditors are more likely to adopt the accelerated offerings issue method instead of using other seasoned equity offering methods. We also identify that audit tenure and industry audit specialization influence the relation between audit quality and the likelihood of undertaking accelerated SEO offerings, and that the relationship is more pronounced in the presence of weaker firm-level information and governance environments. Extending from the conclusion that accelerated offerings serve as a quality certification mechanism, we also find that firms completing accelerated offerings enjoy lower audit fees in subsequent years. These firms also exhibit superior post-SEO-issue long-term abnormal stock performance. Overall, our study shows that the certifying and monitoring role of auditors is valuable to clients, underwriters, and investors in SEO transactions.

The Role And Competence Of Sharia Auditors In Supporting The Performance Of Sharia Banking

This article aims to provide an overview of the role of shariah halal auditors in the guarantee system in sharia banking in Indonesia. Sharia banking is a financial institution that must be examined and tested with smart products, and it is operated by an independent institution which is a "sharia auditor" and must be considered by sharia auditors, namely sharia bank financial statements, SOP (System Operating Procedures), Sharia Human Resources (HR), Sharia supervisory board, and sharia product structure. Monitoring shari'ah banks and monitored by internal or external shari'ah auditors, while guarantees in Islamic law are divided into two namely: personal guarantees and property guarantees and are known as “kafalah or rahn”. The institution controls or monitors that internal or external shariah auditors must carry out internal shariah reviews conducted by shariah compliance officers, who control or monitor shariah compliance and "fatwa" decisions, instructions, guidelines, issued by the Shariah Oversight Board of the financial institution. .Sharia review, sharia internal review and sharia audit are important processes to ensure a halal assurance system for the operational activities of sharia financial institutions and their sharia products. Reports and recommendations from the Sharia Monitoring Board will be submitted to the National Sharia Monitoring Board for consideration.

Potential Threats to Audit Firm Independence: Evidence from Italy on Audit Quality

Purpose – This study aims to investigate the potential threats to the independence of an auditor who provides both auditing and non-audit services (NAS), in terms of credibility of and confidence in audit quality.
 
 Design/methodology/approach – In this study, we first replicate the results of Campa and Donnelly (2016) using hand-collected publicly available data for a sample of 91 Italian manufacturing public companies audited by a Big 4 and non-Big 4 audit firm over a longer time horizon (2015˗2019) using the panel data approach, based on three interconnected regression models.
 
 Findings – Previous studies in this area did not find a unique interpretation of the association between auditor independence and provision of NAS. Our findings reveal that auditor independence, as measured by the magnitude of discretionary accruals, is compromised by the provision of NAS, especially when unexpected audit fees are lower than expected. Enhanced credibility can lead to greater confidence in audit value. This study’s results should be of interest to European and U.S. legislators, to improve financial reporting quality.
 
 Originality/value – In the wake of the global financial crisis and loss of confidence in the role of auditors, this study investigates the supposed threats, to to aim to enhance the credibility of and confidence in audit quality, especially in settings outside the Anglosphere. This study would contribute to the literature to support the more binding approach for audit firms.

Competence of Internal Auditors in Higher Education

The purpose of this study is to analyze the independence and competence of internal auditors in improving audit quality results. In the quality management cycle, the role of both external and internal auditors cannot be separated. The Auditor Activity Report provides various feedback for improvement. Because auditors must have the required competencies. There are 45 minimum competencies that auditors at Institut Agama Islam Negeri Curup must possess. From the research findings, there are several competencies that have not been mastered optimally, namely the ability to explain concepts or ideas orally or in writing clearly and fluently, have not attended training at least once a semester, managing audit management, innovative, professional, systematic nature, understanding of definition and terms of quality requirements and understanding of measurement, analysis and improvement.

The role of corporate board and auditors in tax planning: evidence from Italy

PurposeThe purpose of this paper is to investigate the effects of corporate governance mechanisms, namely, board of directors and auditors, on tax aggressiveness in Italian companies listed on the Milan Stock Exchange.Design/methodology/approachThis study used a population of 168 Italian non-financial firms listed on the Milan Stock Exchange, holding shares in at least one foreign subsidiary in countries other than Italy in fiscal year 2018. Data on corporate boards and auditors were collected through the evaluation of companies’ annual reports over the period 2011–2018. Five panel data analyses with fixed effects were performed for each tax aggressiveness index, yielding 1,176 observations to test the research hypothesis.FindingsThis paper finds that corporate board characteristics, such as size, gender diversity and CEO duality, and auditors’ features, such as external audit quality, increase corporate tax aggressiveness.Practical implicationsThis study provides investors with an understanding of corporate boards’ and auditors’ roles in preventing agency conflicts and evaluating a company’s tax approach. Furthermore, the findings are useful for international political bodies in regulating corporate board composition and managerial monitoring.Originality/valueAlmost all studies focusing primarily on corporate governance mechanisms’ effects on tax aggressiveness are within the US context. Empirical evidence on the topic in the European contexts is limited. The legislative discrepancy between countries is reflected in the computation of indices measuring tax aggressiveness, affecting US studies' generalizability across nations. This paper extends the literature on the topic by investigating other unexplored corporate governance mechanisms. Five indices were used to measure corporate tax aggressiveness and to assess analysis reliability and data robustness. Moreover, to the best of the authors’ knowledge, this study is the first attempt to investigate the link between corporate governance mechanisms and tax aggressiveness in Italy.

Early Warnings of SOX 404 Material Weaknesses in Internal Control

SUMMARYSOX Section 404(b) continues to be of interest to legislators and regulators. Prior studies show that in the initial implementation years of SOX 404, the majority of material weakness (MW) disclosures were “surprise” MWs—i.e., disclosed at year-end, but not in prior quarterly filings (Hermanson and Ye 2009; Munsif, Raghunandan, and Rama 2013). We show that during the years 2010–2019, 74 (72) percent of MW disclosures by accelerated (non-accelerated) filers were surprise disclosures. Additionally, surprise MWs are more likely to be associated with internal control issues that involve year-end adjustments and/or documentation, procedure, or policy issues. “Early-warning” MWs are more likely due to systemic internal control problems, like segregation of duties. Our findings suggest a role for auditors and substantive audit tests in the disclosure of certain types of MWs. Increased auditor emphasis on interim substantive tests may reduce the likelihood of surprise MWs.

Auditors’ self-assessment of engagement quality and the role of stakeholder priority

This study investigates auditors’ assessment of the quality of their own audit engagements, utilising survey data gathered from a Big Four audit firm in Sweden. We first examine to what extent auditors’ self-reported audit quality threatening behaviours (AQTBs) in the audit process are reflected in their assessment of overall audit quality (OAQ). The results indicate that AQTBs overall and all individual AQTBs are associated with quality assessment, though with variations in their significances. Second, we examine whether AQTBs and OAQ are associated with an auditor’s stakeholder priority, i.e. which stakeholder the auditor considers as her highest priority in the audit work. We find that auditors who consider the employer as the highest priority report more AQTBs. However, priorities are not related to OAQ. Furthermore, auditors prioritising the client or employer tend to assess the overall audit quality as being higher than what the AQTBs would suggest (i.e. they over-assess the quality). Interestingly, the findings regarding priorities are only evident among partners. In sum, the findings of this study provide important insights on how auditors themselves assess their audit quality, and on the role of auditors’ stakeholder priorities.

PERFORMANCE AUDIT’S PERCEIVED CONCEPT AND ROLE EXPECTATION: IS IT CONFORMITY OR CONFLICT?

Extant accounting literature has broadly investigated expectation gap in audit context. Previous research reveals the existence of conflict which refer to role concept whether in the expectation of auditor role, response to audit output, or understanding of auditee’s business process. Meanwhile, observation from internal organization’s point of view is still limited whereas the urgency of evaluating performance and maintaining organizational excellence are escalating. Examining performance audit in service organization, this study qualitatively observed perception and expectation of stakeholders on performance audit concept using role theory framework. Role theory posits some propositions in relation to patterns of behavior to which individuals can be in conformity or can be in conflict in terms of compatibility to expectation of others. Semi structured interview with participant’s observer is performed in this study to investigate key stakeholders in the organization. Interesting result emerges which shows the existence of practicality concept instead of conformity. In addition, expectation of such impact from performance evaluation is equally the same among different stakeholders except on the perceived quantity measure. Important implication of this study result is further discussed.

PENGARUH AUDIT QUALITY DAN INDEPENDENSI AUDITOR TERHADAP MANAJEMEN LABA RIIL MELALUI FINANCIAL DISTRESS

This research investigates the effect of audit firm size and auditor industry specialization that proxies audit quality, and auditor independence on real earning management through financial distress as an intervening variable. This study used 96 samples of manufacturing companies listed on the Indonesia Stock Exchange in the 2017-2019 research period with a purposive sampling method. By using the Structural Equation Model, the results show that auditor industry specialization and auditor independence have a positive effect on real earnings management through financial distress. Conclusions from the the results of the study explain that financial distress can be a motivation for management to did real earnings management so that it can be an indication for auditor to detect real earnings management. Financial distress can motivate management to use their flexibility to modifiy company profit, so that it requires high quality of audit and independence of auditor. The result of this research are related to role and performance of auditor for understanding client’s condition and detecting irregularities, so this research contributes to examine audit quality and independence of auditor to detect real earning management through financial distress condition

The Role of Internal Auditors in Supporting the Implementation of the Principles of Transparency and Accountability (Study at PT. Bank Mega Syariah KC. MEDAN)

Internal Audit is an independent assessment function made within an organization or company with the aim of testing and evaluating the number of varios activities carried out by the organization or company. With the aim of assisting the management of the organization in providing accountability in an effective form. Internal Audt activities are to provide recommendations and sses in order to improve the governance process of a company (Good Corporate Governance), in order to be able to achieve the goals and targets that have been previously set by te company. In the current era of globalization which has entered the 4.0 era, the developing business world has developed very rapidly. Therefore, in dealing with this, companies/business entities need to improve the implementation of Good Corporate Governance especially on the principles of transparency and accountability. The implementation of this matter is also influenced by the role of the internal auditor. The more the role of the Internal Auditor’s performance in the company, the more application of these two principles will be. This research was conducted at PT. Bank Mega Syariah KC MEDAN. This company is company in a banking service. This research was conducted by taking data from the OJK and the website which focused on the application of the principle of accountability, and the role of internal auditors in supporting the implementation of these two principles. The research indicate that the implementation of the principles of transparency and accountability has beeb going well, and the role of Internal Auditors has supported implementation of these two principles.

The Coverage of Investor-paid Rating Agency and Audit Pricing

ABSTRACT This paper examines how credit rating agencies affect audit fee. We find robust evidence that the coverage of investor-paid rating agency increases audit fee. The coverage of investor-paid rating agency increases bad news disclosure and makes the tone of media reports on the firm more negative. Auditors get informed and more aware of the firm’s risk, resulting in higher audit fee. Our findings suggest that the monitoring roles of auditors and credit rating agencies are complementary to each other. The cross-sectional analyses suggest that the effect of investor-paid rating agency on audit fee is more prominent for firms with high risk and poor corporate governance. To sum up, the coverage of investor-paid rating agency has a spillover effect on other participants in capital markets.