Auditor Type Research Articles

The role of audit committee attributes in corporate sustainability reporting

PurposeThe purpose of this paper is to analyze the extent to which sustainability reporting by banks in the Gulf Cooperation Council (GCC) is affected by the attributes of audit committees.Design/methodology/approachThe research is positivist and quantitative, based on a cross-sectional and time series analysis of 59 banks from 2013 to 2017. A multivariate model is used to investigate the impact of selected audit committee attributes (financial expertise, size, members’ independence and meeting frequency) on sustainability reporting. The model is built on agency, legitimacy, resources and stakeholders theories.FindingsIn contrast to the hypothesis, the authors report a negative association between financial expertise and sustainability reporting. Members’ independence and meeting frequency play a positive role in determining the extent of disclosure. The control variables (bank size, age and auditor type) are positively associated with corporate sustainability reporting.Research limitations/implicationsThe main limitations of this study are related to the chosen attributes of audit committee and do not consider the board’s attributes. However, the authors believe these limitations do not affect the findings. Future research that includes more attributes when they became available will offer more insights into the role of audit committees on sustainability disclosure of financial institutions. Overcoming these limitations may make the results more generalizable.Practical implicationsThe results of this study have important implications for regulators, bank management, investors and creditors. For regulators, in the countries of the GCC and in countries like them, the findings reveal the importance of disclosure requirements. The development of disclosure requirements is likely to improve corporate sustainability reporting and reduce variations in the extent of disclosure among banks. Banks could use these results to improve their reporting to outsiders. For creditors and investors, the study improves their awareness of the importance of corporate social responsibility, corporate governance and environmental information on credit and investment decisions and encourages banks to improve their disclosures of non-financial information.Originality/valueThis research makes a contribution to the scarce literature on sustainability reporting by banks, especially in an environment where capital markets lack active institutional investors, where regulators play the dominant role in determining the extent of disclosure and where banks are the main source of external finance for the corporate sector.

Fool's gold or value for money? The link between abnormal audit fees, audit firm type, fair‐value disclosures, and market valuation

We analyze whether the audit firm type and abnormal audit fees are associated with the market valuation of banks' fair‐value assets. Our results indicate that different auditor types use different strategies when auditing fair values. First, we show that Big 4 auditors restrict the Level 3 valuations to the most illiquid assets. Thus, those banks audited by a Big 4 auditor have a lower proportion of Level 3 assets. Second, the market discount on the Level 3 assets is higher for the banks audited by a Big 4 auditor than for those audited by a non‐Big 4 auditor. Third, the discount on the Level 3 portfolios of banks with non‐Big 4 auditors is higher if the unexpected audit fees are high. Thus, non‐Big 4 auditors seem to allow more high‐uncertainty valuations but charge a risk premium. We find similar effects for industry‐specialist auditors.

Analisa Faktor-Faktor yang Mempengaruhi Ketepatan Waktu Pelaporan Keuangan Perusahaan yang Terdaftar di Bursa Efek Indonesia

This research investigates factors affecting timeliness of annual corporate financial reporting in Indonesia. The sample of the research is a company listed on Indonesia Stock Exchange (BEI) in 2012-2017. Company size, company profitability, company age, leverage, audit committee independence, member audit committee, audit committee experience, auditor type, audit report, auditor rotation and audit opinion used as variable independent. 
 The sample of this research includes 335 company on BEI with 1.675 data. Data obtained from financial statement year ended 2012 until 2017 and panel-regression test to examine the study hypotheses.
 This reaearch found the average time company needs 120 days for issuing financial report. Variable company age and audit report have significant positive impact on timeliness of financial. Audit committee independent and member audit committee have significant negative impact on timeliness. However variable company size, company profitability, audit committee experience, auditor type, auditor rotation and audit opinion had no effect significant toward timeliness financial report.

고품질의 감사에 기인한 이익의 질이 자기자본비용에 미치는 영향 : 공시수준의 매개(Mediating)효과를 중심으로

고품질의 감사에 기인한 이익의 질이 자기자본비용에 미치는 영향 : 공시수준의 매개(Mediating)효과를 중심으로

Determining factors that affect risk disclosure level in Egyptian banks

This study aims to measure the risk disclosure level in Egyptian banks and to investigate its determinants. The sample consisted of 28 banks during the period from 2010 to 2017. An unweighted risk disclosure index including six categories was used: credit risk, market risk, liquidity risk, capital structure and adequacy risk, operational risk, and other non-financial risks. Also, a content analysis approach was used to measure the actual level of risk disclosure. The findings demonstrated that there was an average level of total risk disclosure of all sample banks. The results showed that banks with a higher percentage of independent board membership, large board size, large audit committee size, duality, higher institutional ownership, and banks audited by one of big four audit firms were more motivated to increase risk disclosure. Also, the results showed that leverage, bad news, and bank social responsibility have a negative relationship with the level of risk disclosure. Overall, the results indicated that leverage, board size, audit committee size, auditor types, independence, duality, institutional ownership, bank social responsibility, and bad news are the main factors affecting the level of risk disclosure in Egyptian banks. The findings of this paper have a number of important implications. The risk disclosure in the banking sector is important for stakeholders such as investors and depositors. Also, risk disclosure index helps the regulatory bodies to evaluate the risk disclosure practice in Egyptian banks. This paper contributes to analyzing factors affecting banks managers’ decision to disclose risk information in emerging countries such as Egypt.

Pricing Strategies of Big4 and Non-Big4 Auditors in the Light of Audit Tendering

This study empirically investigates the effects of mandatory audit tendering on audit pricing. Specifically, we examine audit pricing strategies potentially applied by auditors when facing a tender for the upcoming period, also explicitly considering the type of auditor. Our study is motivated by the recent implementation of mandatory audit tendering in the European Union. Using a sample of 1,028 firm-year observations related to listed German companies, our results suggest that auditors facing a tender for the upcoming period charge higher audit fees than auditors not facing a tender for the upcoming period and that this fee effect is mainly attributable to Big4 auditors. In contrast, no significant difference in audit fees is observable for non-Big4 auditors that face a tender for the upcoming period compared to those that do not. In additional analyses, we do not find that auditors facing a tender for the upcoming period provide higher audit quality than auditors not facing a tender, irrespective of the type of auditor. Overall, our findings suggest that Big4 auditors apply strategies focusing on audit pricing, while non-Big4 auditors seem to use other approaches in order to be retained. Our study is, to the best of our knowledge, the first study that examines the effect of audit tenders for upcoming periods on audit pricing.

IAS-38 disclosure compliance and corporate governance: evidence from an emerging market

PurposeThis paper aims to investigate the possible corporate governance attributes that can influence companies in Ghana to disclose intangible assets in their annual reports to stakeholders.Design/methodology/approachA data set from 110 firms in Ghana for the year ending of 2016 was used. Each annual report was individually examined and coded to obtain the disclosure of intangible asset information index. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis, which forms the main data analysis method.FindingsA large proportion of companies disclosed that the useful lives of intangible assets (either acquired or internally generated) are finite and also disclosed their useful lives or the amortisation rates used. Auditor type, industry type and leverage were the factors influencing the compliance with IAS 38 disclosure requirements.Originality/valueThis is the first study in Ghana that considered the impact of corporate governance factors on IAS 38 information disclosures. This study contributes to the literature on the relationship between corporate governance and disclosure by showing that the disclosure of intangible asset information in Ghana is associated with Auditor type, industry type and leverage.

The Impact of Auditor Industry Specialization, Type of Auditor and Audit Opinion on ARL: The Case of Egypt

This paper aims to analyze the impact of auditor industry specialization, type of audit opinion, type of auditor (private versus state auditor), and number of remarks from one side and Audit report lag (hereafter ARL) on the other side using a sample of non-financial companies listed in the Egyptian Stock Exchange (hereafter EGX) in 2015 and 2016. The sample consists of 296 firm-year observations of non-financial companies listed in the EGX. The authors developed a multivariate regression model to examine the relationship between audit report lag and auditor specialization, type of audit opinion, type of auditor (private versus state auditor), and the number of remarks associated with the qualified audit opinion. We find a negative association between ARL and auditor industry specialization. Also, ARL is positively and significantly associated with non-state auditor. In addition, ARL shows to be longer when the number of remarks associated with the qualified audit opinion increases. This paper extends the audit report lag literature and adds an important party; the state auditor, which is the Accountability State Authority (ASA). The state auditor in Egypt (ASA) is being ignored in prior literature, although it plays an important role in auditing companies that are owned totally or partially (more than 25%) by the government or public figures.

Corporate governance and risk disclosure: evidence from Saudi Arabia

This study investigates the influence of corporate governance on risk disclosure level, in Saudi Arabia. We examine 408 annual reports of Saudi non-financial-listed firms during 2012-2015. The results show that CEO-Chairperson separation, audit committee effectiveness, state ownership, firm complexity, size and profitability positively affect risk disclosure, while we find no significant correlations for board independence, institutional ownership, auditor type, leverage, and firm age. The study is important because it fills gaps in the disclosure literature, especially in developing and Arab countries, and responds to calls in previous studies, such as Dobler et al. (2011), Ntim et al. (2013) and Moumen et al. (2015), that recommend investigating the corporate governance determinants of risk disclosure in these contexts. The results are of interest to accounting setters and governance regulators. The study also provides an evaluation of the Saudi governance code formally applied in 2007.

Determinantes da perda do prazo de divulgação dos relatórios financeiros das companhias brasileiras de capital aberto

Este artigo teve como objetivo verificar quais fatores determinam a perda do prazo de divulgação dos relatórios financeiros de companhias abertas no Brasil. Foram utilizadas 152 empresas no estudo, sendo 76 que perderam o prazo de divulgação dos seus relatórios financeiros em pelo menos um exercício no período de 2010 a 2016 e outras 76 que não perderam o prazo nesse mesmo período. Foram testados tamanho, tipo de auditor, endividamento e prejuízo no exercício como fatores determinantes da perda do prazo, por meio da aplicação de regressão logística, atribuindo-se 1 às empresas que perderam o prazo e 0 caso contrário, em cada ano. Os resultados apontam, em relação a probabilidade de perder o prazo de divulgação dos relatórios financeiros, que empresas auditadas por Big Four têm menor probabilidade; empresas endividadas têm maior probabilidade; e empresas com prejuízo no exercício têm maior probabilidade. A variável tamanho não teve resultado estatístico significativo.

The effect of financial performance, board of commissioners, blockholder ownership, auditor type and firm age on voluntary disclosure

Disclosure of information reflects the presentation of the company's annual report. One general purpose of disclosure is as a basis for decision making. This study aims to examine the effect of financial performance (ROA, DER, CR), board of commissioners (BS, BI), blockholder ownership, auditor type, and firm age on voluntary disclosure. The population of this study is mining companies listed on the Indonesian Stock Exchange period 2012-2016. The number of data is 196. Sampling is conducted using purposive sampling method. The data analysis technique used in this study is SEM-PLS with SmartPLS 3.0 program. The results of data analysis show that firm age has no effect on voluntary disclosure, while blockholder ownership has a significant negative effect on voluntary disclosure. Financial performance, board of commissioners and auditors type have a significant positive effect on voluntary disclosure. The impact of this research is that voluntary disclosure can be used to increase the completeness of company information for investors and creditors.

An Analysis of Auditors' Going-Concern Reporting Accuracy in Private Firms

The accuracy of audit reports is often viewed as a signal for audit quality. Prior research shows that in the context of going-concern reporting in audit markets dominated by public firms, some auditors are more accurate than others (e.g., Big N firms). This study is the first large-scale study that investigates going-concern reporting accuracy in an audit market dominated by private firms. The threat of reputation and litigation costs incentivizes auditors to report accurately in markets dominated by public firms, but such incentives are largely absent in markets dominated by private firms. Hence, reporting accuracy in such markets might not vary across auditors. Our main analysis is based on a sample of 1,375 Belgian firms that ceased to exist within one year from the financial statement date. Our results show that the frequency of Type II misclassifications does not vary across auditor types (Big 4 vs. non-Big 4, audit firm and partner industry specialists vs. non-specialists, more experienced vs. less experienced, and female vs. male auditors). Overall, these results cast doubt on the existence of quality differences among auditors in audit markets dominated by private firms.

The auditor’s opinion modifications around domestic and global financial crises

PurposeThe purpose of this study is to investigate the effect of company characteristics such as the level of financial distress, client size and type of auditor on the propensity to issue modified audit opinions and to assess comparative differences in audit opinions during two significant economic crises in Turkey.Design/methodology/approachLogistic regression model is used to test the incremental contribution of each company characteristic on issuing the type of audit opinion for crisis periods. Additionally, to understand the reasons for differences in audit opinions between two types of crisis periods, the authors adopt Francis and Krishnan’s (2002) approach in which an auditor’s propensity to issue modified opinion may be jointly based on changes in client characteristics and auditor reporting strategies in that period.FindingsThe results indicate that there is a positive relationship between financial distress and the likelihood of receiving modified opinions in both crisis periods. Additionally, client size affects audit opinions negatively in both periods significantly. Auditors show higher propensity to issue a modified opinion during the domestic than the global financial crisis period, which could be explained by the changes in client characteristics more than their reporting strategy.Practical implicationsThis study provides supportive evidence that the company characteristics including the financial distress can be very useful predictors for the auditors’ decisions while issuing their opinions.Originality/valueThe findings of different auditor behaviors during crises periods and possible reasons are the main contributions of this study for international and domestic regulators, investors, audit firms, academics and standard setters in emerging economies.

Underpinning the benefits of green banking: A comparative study between Islamic and conventional banks in Bangladesh

This study aims to compare environmental motives and performance of conventional and Islamic banks in Bangladesh. Green compliance index was developed based on the Bangladesh Bank (the central bank of Bangladesh) guidelines whereas information regarding governance variables is collected from the annual reports of 9 Islamic and 31 conventional banks. Results show Islamic banks are more environmentally friendly compared to their conventional counterparts. Board size is negatively related to green compliance whereas board independence and auditor's type do not have any significant influence on green compliance for both clusters of banks. Compliance with green banking policies enhances the reputation for Islamic banks and accountability and profitability for conventional banks. Results of this study provide useful information for regulatory authorities to formulate policies that are conducive to enhance bank's environmental performance.

An Analysis of Auditors' Going-Concern Reporting Accuracy in Private Firms

SYNOPSISThe accuracy of audit reports is often viewed as a signal for audit quality. Prior research shows that in the context of going-concern reporting in audit markets dominated by public firms, some auditors are more accurate than others (e.g., Big N firms). This study is the first large-scale study that investigates going-concern reporting accuracy in an audit market dominated by private firms. The threat of reputation and litigation costs incentivizes auditors to report accurately in markets dominated by public firms, but such incentives are largely absent in markets dominated by private firms. Hence, reporting accuracy in such markets might not vary across auditors. Our main analysis is based on a sample of 1,375 Belgian firms that ceased to exist within one year from the financial statement date. Our results show that the frequency of Type II misclassification does not vary across auditor types (Big 4 versus non-Big 4, audit firm and partner industry specialists versus non-specialists, more experienced versus less experienced, and female versus male auditors). Overall, these results cast doubt on the existence of quality differences among auditors in audit markets dominated by private firms.

The Effect of Corporate Governanceon Audit Report Timeliness in Indonesia

Financial Statements could be useful for the readers to make a decision. In order to rely on Financial Statements to make a decision, the Financial Statements should be relevant. To enhance the relevance of the Financial Statements, the Financial Statements should be published in a timely manner. This research utilizes the data of listed companies on the Indonesia Stock Exchange for period 2013 – 2016. The purpose of this research is to determine the effect of corporate (internal and external indicators) on audit report timeliness. The methodology used in this research is multiple linear regression. In conclusion, the result of this research suggested that board of commissionersindependence, audit committee size, audit committee meeting, firm performance, auditor type, and audit opinion have significant association with audit report timeliness. Meanwhile, audit committee qualification and audit tenure do not have significant association with audit report timeliness. In addition, the result suggested that audit tenure weaken the relationship between auditor type and audit report timeliness.

The impact of auditor brand name on auditor remuneration in a large private client segment

The purpose of this study is to investigate the impact of auditor reputation and nonaudit services on audit pricing in the context of large private audit clients. Focusing on German large private clients, we use a low litigious audit environment that allows us to investigate the role of auditor reputation as proxied by auditor type for three auditor tiers. We find evidence for a Big 4 audit fee premium, suggesting the pronounced role of auditor reputation even in a private client segment. However, this premium is subject to the Big 4 auditor's role in the national audit market. Audit pricing is also affected by nonaudit services, which add value to the audit engagement for the client. Nonaudit fees further incentivize pricing strategies for audits of private audit clients, particularly for Big 4 auditors, which indicates a joint effect of nonaudit fees and auditor type on audit fees.

English

This study examines the effect of audit quality on share prices of Nigerian oil and gas firms using the regression and covariance analyses. Findings from the regression anlysis suggests that the composition of the audit committee and auditor type has significant effect on the market prices of quoted firms. There is a positive and significant relationship between audit committee composition and share prices. The covariance analysis suggests that while auditor type (BIG4/NONBIG4), auditor independence, and composition of the audit committee have a positive and significant relationship with market price of shares, tenure of external auditors has a negative relationship with the market price of shares. The implication of the findings is that audit quality will enhance reported earnings and hence the share market prices. The study recommends that firms should strive to associate with the BIG4 external auditors in Nigeria as such an association could enhance the credibility of the audit process and by extension their share prices; regulatory authorities should discourage joint audit and non-audit services to firms because it could threaten the independence of external auditors. Regulatory agencies should also present distinct statements on the tenure of the external auditors to be clearly stated in annual reports. This is because a long attachment between the external auditors and a client may threaten the independence of the external auditors. Key words: Share-prices, audit-quality, auditor-independence, auditor-type.

Financial Risk Disclosure and Financial Attributes among Publicly Traded Manufacturing Companies: Evidence from Bangladesh

We explore the relationship between the degree of financial risk disclosure and a firm’s financial attributes. Financial risk disclosure indices (FRDIs) are calculated based on a set of 30 disclosure identifiers through content analysis of the annual reports of 48 manufacturing companies over a six-year period (2010–2015) in Bangladesh. We find no common practice among the companies in disclosing financial risk by integrating a customized financial risk disclosure into their financial reporting process. The results indicate that firm size, financial performance, and auditor type are positively and significantly associated with the level of financial risk disclosure.

Business Strategy, Corporate Governance, Firm Characteristics, and Risk Disclosure in the Indonesian Stock Exchange

Companies were required to disclose non-financial information other than financial statements, due to the rapid and changing business conditions. This study aimed to examine the impact of business strategy, corporate governance, and firm characteristics on the risk disclosure. More specifically, we examined the impact of barriers to entry, cost leadership, the board of commissioner size, ownership concentration, liquidity, industrial profile, and auditor type on risk disclosure. We used a sample consisted of 96 observations for the period of 2008-2015 listed in Indonesian Stock Exchange and PEFINDO 25. This research conducted using multiple regression analysis methods to examine the factors influenced risk disclosure. This research also used independent sample T-test to investigate the quality of risk disclosure before, and after the implementation of IFRS in Indonesia, We found that barriers to entry, the board of commissioner size, ownership concentration, industrial profile, and auditor type significantly affect the risk disclosure. However, cost leadership and liquidity did not have significant effects on the risk disclosure. Results of the study might provide a sound contribution for further research, government, management of the company, and investors regarding the risk disclosure practices. JEL Classifications : G32, G34 DOI: https://doi.org/10.26905/jkdp.v22i3.2167