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Author: Kannan Raghunandan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the market for audit services when the incumbent auditor of an SEC registrant has resigned from the engagement. While many previous studies of auditor changes have examined auditor dismissals by the client, only a few studies have specifically focused on auditor resignations. Auditor resignations constitute a unique setting because they may indicate increased likelihood of possible future losses to the new auditor, and provide an opportunity to test the demand-and-supply side incentives in the market for audit services.Results from analyses of 156 auditor resignations and a control sample of 375 auditor dismissals indicate that Big 6 firms were less likely to serve as the successor auditor when the predecessor has resigned, after controlling for three other factors identified as proxies for litigation risk to the auditor (client?s financial stress, industry membership and proportion of total assets in receivables and inventory). The effects were especially pronounced for the subset of resignees in financial stress. These results support suggestions that the implications of auditor resignations are different from auditor dismissals, and provide supporting evidence for the suggestions that supply-side incentives should be considered in examining the market for audit services.
Author: Kannan Raghunandan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the market for audit services when the incumbent auditor of an SEC registrant has resigned from the engagement. While many previous studies of auditor changes have examined auditor dismissals by the client, only a few studies have specifically focused on auditor resignations. Auditor resignations constitute a unique setting because they may indicate increased likelihood of possible future losses to the new auditor, and provide an opportunity to test the demand-and-supply side incentives in the market for audit services.Results from analyses of 156 auditor resignations and a control sample of 375 auditor dismissals indicate that Big 6 firms were less likely to serve as the successor auditor when the predecessor has resigned, after controlling for three other factors identified as proxies for litigation risk to the auditor (client?s financial stress, industry membership and proportion of total assets in receivables and inventory). The effects were especially pronounced for the subset of resignees in financial stress. These results support suggestions that the implications of auditor resignations are different from auditor dismissals, and provide supporting evidence for the suggestions that supply-side incentives should be considered in examining the market for audit services.
Author: Donald Wayne Wells
Publisher:
ISBN:
Category :
Languages : en
Pages : 150
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Book Description
Author: Krish Bhaskar
Publisher: Routledge
ISBN: 1000007863
Category : Business & Economics
Languages : en
Pages : 144
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Book Description
Focussing on the dominance of the Big Four auditing firms – PwC, EY, Deloitte and KPMG – this concise volume provides an authoritative critical assessment of the state and future of the audit market, currently the subject of much debate and the focus of significant government enquiries. Drawing on extensive research and a vast collection of evidence from interviews with insiders, experts and users, it explores the key issues of audit quality, independence, choice and the growing expectation gap. Just as disruptive technologies are overturning other established sectors, this book explores their impact on accounting, financial reporting and auditing. It questions whether the Big Four-dominated audit market is prepared not only for the inevitable disruption of new technologies, but also the challenges of negative public perceptions, cynicism about regulation and demands for greater transparency. In the context of increasing high-profile corporate failures, this book provides a compelling scrutiny of the industry’s failings and present difficulties, and the impact of future disruption. At this crucial time, it will be of great interest to students, researchers and professionals in accounting and auditing, as well as policy makers and regulators.
Author: Jayanthi Krishnan
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Litigation against auditors has increased dramatically in recent years. Auditors can offset litigation risk in a number of ways, including improved audit quality and planning, increases in audit fees and increases in the issuance of modified opinions. Auditors can also adjust their client portfolios by becoming more selective in their choice of new clients and by withdrawing from high-risk engagements. We test the hypothesis that litigation risk motivates auditor resignations by comparing resignation companies with two groups of client companies that dismissed their auditors: one matched with the resignation companies on industry and year, and the other matched on year alone. We find resignation companies differ from dismissal companies along dimensions that capture the probability of litigation: financial distress, variance of abnormal returns, auditor independence, tenure and a modified (particularly going-concern) opinion. We also construct a litigation proxy based on a prior litigation-prediction model and find that the proxy is positively associated with the probability that the auditor will resign rather than be dismissed from the engagement. Our analysis is consistent with concerns expressed by the accounting profession that litigation pressures lead to the withdrawal of audit services for a segment of the market.
Author: Marshall A. Geiger
Publisher: Routledge
ISBN: 1000392031
Category : Business & Economics
Languages : en
Pages : 160
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Book Description
Auditor reporting on going-concern-related uncertainties remains one of the most challenging issues faced by external auditors. Business owners, market participants and audit regulators want an early warning of impending business failure. However, companies typically do not welcome audit opinions indicating uncertainty regarding their future viability. Thus, the auditor’s decision to issue a "going concern opinion" (GCO) is a complex and multi-layered one, facing a great deal of tension. Given such a rich context, academic researchers have examined many facets related to an auditor’s decision to issue a GCO. This monograph reviews and synthesizes 182 recent GCO studies that have appeared since the last significant review published in 2013 through the end of 2019. The authors categorize studies into the three broad areas of GCO: (1) determinants, (2) accuracy and (3) consequences. As an integral part of their synthesis, they summarize the details of each study in several user-friendly tables. After discussing and synthesizing the research, they present a discussion of opportunities for future research, including issues created or exacerbated as a result of the global COVID-19 pandemic. This monograph will be of assistance to researchers interested in exploring this area of auditor responsibility. It will also be of interest to auditing firms and individual practitioners wanting to learn what academic research has examined and found regarding this challenging aspect of audit practice. Auditing standard-setters and regulators will find it of interest as the authors review numerous studies examining issues related to audit policy and regulation, and their effects on GCO decisions. The examination of GCO research is extremely timely given the financial and business disruption caused by the worldwide COVID-19 pandemic. This unprecedented global event has caused companies, auditors and professional bodies to revisit and reassess their approach to going concern, and to think even more deeply about this fundamental business imperative.
Author: Keith A. Houghton
Publisher: ANU E Press
ISBN: 192166651X
Category : Business & Economics
Languages : en
Pages : 773
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Book Description
At a time when increased independence requirements for auditors, legal backing for auditing standards, and increased audit documentation requirements have occurred, this book examines key issues in the market for audit services in Australia. It investigates issues including: the understandability of audit and the state of the audit expectations gap; auditors' business acumen and industry expertise; the auditors' use of materiality; whether or not the increasingly prescriptive nature of auditing is creating a distraction from the 'real' audit task and stifling auditors' judgement; whether or not CLERP 9 reforms involving audit partner rotation and restrictions on non-audit service provision are efficient and effective and reactions to the increasing scrutiny of auditors and audit firms by regulators. With its thorough coverage of contemporary issues, this book intersperses the authors' summaries, interpretations and recommendations with the perceptions, expressed in their own words in order to faithfully convey their candid assessments, of users of audit reports, purchasers and suppliers of the audit product, auditing standard setters and regulators of the audit market.
Author: Benito Arrunada
Publisher: Springer Science & Business Media
ISBN: 1475767285
Category : Business & Economics
Languages : en
Pages : 203
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Book Description
This book focuses on market mechanisms which protect quality in the provision of audit services. The role of public regulation is thus situated in the context defmed by the presence of these safeguard mechanisms. The book aims to contribute to a better understanding of these market mechanisms, which helps in defining the con tent of rules and the function of regulatory bodies in facilitating and strengthening the protective operation of the market. An analysis at a more general level is provided in the three chapters making up Part 1. In the four chapters of Part 2, on the other hand, this analysis is applied to a particular problem to determine how those non-audit services often provided by auditors to their audit clients should be regulated. Finally, Chapter 8 contains a summary of the analysis and conclusions of the work. The conclusion with regard to non-audit services is that their provision generates beneficial effects in terms of costs, technical competence, professional judgment and competition and, moreover, need not prejudice auditor independence or the quality of these services. This as sessment leads, in the normative sphere, to recommending a legislative policy aimed at facilitating the development and use of safeguards provided by the free action of market forces. Regulation should thus aim to enable the parties-audit firms, self-regulatory bodies and audit clients-to discover through competitive market interaction both the most efficient mix of services and the corresponding quality safeguards, adjusting for the costs and benefits of each possibility.
Author: Messod D. Beneish
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
The paper investigates how auditor resignations affect capital market participants' perception of firms from which the auditors resign (quot;former clientsquot;) and of firms that continue as clients of the resigning auditor (quot;continuing clientsquot;). We find that resignation announcements result in significant negative abnormal returns for former clients and in significant positive abnormal returns for a sample of continuing clients (matched on industry, time period, and recent stock-price performance). As in prior work on auditors' actions, these effects are most pronounced when the news media reports the resignation. We investigate continuing clients because in recent years auditors have adopted a portfolio approach to risk management that includes centralized risk-based screening. We propose that the absence of resignation signals that, despite its poor performance, the continuing client has satisfied the auditor's unobservable risk-screening process. Therefore, the positive abnormal returns observed for the continuing clients suggest that despite their poor recent performance, the auditor believes the continuing clients' accounting methods and financial reporting choices are not misleading. We rule out a competition-based intra-industry information transfer as an alternative explanation for the positive abnormal returns.
Author: Ismail Adelopo
Publisher: Routledge
ISBN: 1317177428
Category : Business & Economics
Languages : en
Pages : 368
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Book Description
In Auditor Independence, Ismail Adelopo argues that the importance of auditors' independence cannot be over-emphasised. Not only do auditors provide certification of the truth and fairness of the information prepared by managers, they also have a duty to express opinions on the degree of compliance with laws and regulations guiding a firm's operations. Theirs is a socially important responsibility. In all that has been proposed to mitigate the governance crisis and restore confidence in the market system, relatively little attention has been paid to auditor independence. Examining the historical role of auditing in corporate governance and the regulatory context, this book sets the function within a theoretical framework and then provides empirical analysis of the problem issues such as the relationship between audit committees and external auditors and the probity of providing non-auditing services to audit clients. The focus on matters that are damaging to market confidence and threatening to the reputation of the auditing profession, means the conclusions and recommendations in this book are important for key stakeholders, including policy makers, regulators, those running companies, and their investors and customers. This is also a book for those responsible for training in the auditing profession and for others with a research or academic interest in the matters addressed.
Author: David Hay
Publisher: Routledge
ISBN: 1136210342
Category : Business & Economics
Languages : en
Pages : 504
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Book Description
Auditing has been a subject of some controversy, and there have been repeated attempts at reforming its practice globally. This comprehensive companion surveys the state of the discipline, including emerging and cutting-edge trends. It covers the most important and controversial issues, including auditing ethics, auditor independence, social and environmental accounting as well as the future of the field. This handbook is vital reading for legislators, regulators, professionals, commentators, students and researchers involved with auditing and accounting. The collection will also prove an ideal starting place for researchers from other fields looking to break into this vital subject.
