The Role of the Audit Partner in the Auditor-client Economic Bond, Auditor Rotation and Auditor Workload PDF Download
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Author: Kwadwo Bonsu Boateng
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Kwadwo Bonsu Boateng
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Gary Kleinman
Publisher: Gary Kleinman
ISBN: 1558761802
Category : Business & Economics
Languages : en
Pages : 137
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This work is intended to assist researchers, regulators, and practitioners who are interested in the topic of auditor independence. It presents a comprehensive model of the individual, work place, organization, inter-organizational, and organizational field level determinants of the topic.
Author: Linda DeAngelo
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 152
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Author: Kris Hardies
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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In this study, I investigate whether the economic bond between an individual audit engagement partner and a client threatens auditor independence (and thus audit quality). As the propensity of the auditor to issue going-concern modified audit opinions (GCOs) is lower when there is auditor independence impairment, I examine to which extent fee dependency leads to a lower propensity to issue GCOs. Using archival data from Belgian private companies, I empirically examine a sample of 18,638 companies for the period 2008-2010 to test for the effect of the auditor-client bond on the audit opinion. None of my results support common concerns that client importance undermines auditors' GCO reporting decisions, neither at the firm level nor at the partner level. Specifically, I find no evidence for a negative association between the likelihood that an auditor issues a GCO and the economic importance of that client to the auditor (firm or partner). These results are supported by analyses on an additional sample of 5,934 companies for the period 2011-2013. Despite broad concerns among academics and regulators about auditor independence and economic bonding, this is one of the first studies to investigate this issue at the partner level and for private clients.
Author: Mary Dodgson
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Maintaining a positive auditor-client relationship is critical for audit firms, particularly during sensitive events. For instance, audit firms state in transparency reports that they take steps to minimize disruption during audit partner rotations, yet it is unclear what these actions entail or the potential effects of these actions on auditor independence and audit quality. I use multiple methods to provide insight into these practices and their related effects. First, I interview 20 audit partners to learn about the process by which audit firms manage the auditor-client relationship during sensitive partner rotation events. Interviewees describe how audit firms identify appropriate partner candidates and procedures followed to select and prepare the next lead partner. Respondents also elaborate on firms' ongoing relationship-managing activities, including the assignment of non-decision-making liaisons (often referred to as relationship partners or "RPs") to a subset of engagements to assist in navigating the auditor-client relationship during sensitive events (i.e., in preparation for upcoming partner rotations and when contentious auditor-client issues arise). Second, I conduct an experiment with financial executives to examine the influence that RPs may have on the resolution of contentious auditor-client issues. I also consider how RP influence may vary depending on the extent to which the audit partner and client manager have tried, albeit unsuccessfully, to resolve the issue (i.e., negotiation ripeness). I find that, in a traditional setting in which a RP is not involved, client managers concede less toward an audit partner's more appropriate position when the negotiation has reached a more ripe stage than when the negotiation stage is less ripe. However, I find it is at a more ripe stage that RP intervention is more effective in moving client managers toward a resolution, limiting the risk of seeking alternative methods of resolution that may impair the auditor-client relationship (e.g., issuing a qualified audit opinion). Collectively my findings inform regulators and researchers about the ongoing process by which audit firms manage the auditor-client relationship during sensitive events and how one common approach for managing the auditor-client relationship (i.e., assignment of RPs to a subset of engagements) influences the auditor-client relationship and audit quality.
Author: Aysa Dordzhieva
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
This study addresses the international debate over whether the rotation of audit firms should be mandatory. Mandatory rotation rules have been adopted by the European Union, but have not been established in the United States. Proponents of the policy believe that a long tenure auditor-client relationship leads to the auditor building an excessive economic bond with the client which erodes auditor independence. Motivated by this claim, I build a theoretical model that compares auditor incentives to issue independent reports under the regimes with and without mandatory rotation. The model demonstrates conditions under which mandatory rotation could actually impair auditor independence, contrary to the popular view.
Author: Mary Kate Dodgson
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Book Description
While current audit standards explicitly state engagement partner tenure requirements, firms have flexibility in managing the rotation process. We conduct semi-structured interviews with 20 U.S. audit firm partners who share their experiences on topics including how they identify appropriate candidate partners and what efforts they undertake to manage relationships with clients post-rotation. We investigate firms' motivation to manage the auditor-client relationship through the lens of Social Exchange Theory (SET), and we consider how likely outcomes of this rotation process map onto regulators' intent that a newly rotated partner provides a fresh perspective to the audit. Our study informs regulators and investors about the process by which engagement partners are selected for rotation, documenting that partner assignment is typically not random. Further, our finding that partner rotation is an extended process (rather than a single discrete event) has implications for audit researchers investigating the effects of partner rotation.
Author: Suhaib Aamir
Publisher: LAP Lambert Academic Publishing
ISBN: 9783845415666
Category :
Languages : en
Pages : 116
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Book Description
Different scandals around the globe during the past, in specific during the last decade, have intrigued the stakeholders to question the roles of both auditors and management. But most of the fingers since then have been raised on the role of auditors, because it is the auditors who are entrusted with the responsibility to detect any errors or frauds in the financial reports of the client-firm. Apart from this, the long-term auditor client relationship has been the center of attention in most of the discussions and debates as well. Numerous studies have been conducted by the academic researchers, financial and professional analysts, regulatory authorities and governing bodies, and in some cases by the auditors and the firms as well regarding the effects of long-term auditor-client relationship on audit quality, equity risk premium, financial reports quality, audit pricing etc. These studies provide us with different results, both with the positive and negative associations and effects of long-term auditor-client relationship on the basis of different factors and contexts. Therefore, we would be studying this relationship in between auditors and SME clients.
Author: Joost van Buuren
Publisher:
ISBN:
Category :
Languages : en
Pages :
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In this study we examine the effect of auditor economic bonding (financial dependency on a client) on audit quality. We consider financial dependency as either abnormally high fees in relation to expected hours or vice versa. We consider audits to have credence goods properties where the client has limited ways to assess audit quality that is (likely to be) delivered. This setting provides opportunities for different auditor business strategies. We base our results on a unique, proprietary dataset of audit fees, audit hours, materiality, risk assessments, error detection and auditor reporting decisions taken from the working papers of 681 audit engagements with 2,209 engagement-year observations over the period 2006 to 2011. First, we predict and find that high effort audit engagements (i.e., abnormal high audit hours) are associated with a higher probability of detecting audit differences than low effort audit engagements. Simultaneously, we predict and find that financial dependency on a client lowers the audit quality achieved by high effort as reflected by waiving proposed audit differences. Moreover, our results suggest that auditors facing high independence threats are more highly associated with overstated earnings than when independence threats are low. Consequently, the findings suggest that the negative effects of financial dependency, i.e. economic bonding threats, are a result of the auditors' business relationship with a given client and how the auditor responds to competitive markets.
Author: Michael Gibbins
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This paper contributes to the growing literature on the auditor-client management negotiation process by focusing on the dyadic relationship. Our audit partner-CFO dyads describe the process of resolving issues related to financial reporting using a combination of open ended and semi-structured questions. Our qualitative and quantitative analysis of the interviews suggests that relationships can be characterized as either proactive or reactive and nested within these relationships some are described as good and some as poor. From our analysis, it appears that the CFO determines implicitly, and sometimes explicitly, the type of relationship they want with their auditor (i.e. proactive or reactive). However, it also appears that the audit partner is responsible for relationship quality (i.e. good or poor). But if the relationship is not in a good state or there is a mismatch between the CFO and audit partner personalities, the audit partner will most likely be switched either by the audit firm or the CFO. Further, our informants described a negotiation process that is not linear, but rather one that can iterate backwards, skip forward and return to redefine the basic issue. We label this aspect of negotiation as fluidity. Finally, two major types of issues were discussed (i.e. regulatory type issues or transaction-based issues) with the type of issue influencing many aspects of the resolution process. Overall, this qualitative research substantially increases our understanding of the nature of the CFO-audit partner dyadic relationship and improves our understanding of the components of prior models of auditor-client management negotiation.
