Audit Quality under Influences of Audit Firm and Auditee Characteristics: Evidence from the Romanian Regulated Market

Carp, Mihai; Istrate, Costel

doi:10.3390/su13126924

Cited by 12 publications

(12 citation statements)

References 58 publications

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“…With regards to the size of the auditee firms and audit quality, the extant literature finds size of the firm to have a positive influence on audit quality, with large and profitable companies having superior expertise in financial accounting activity and financial resources available for its organizations over small companies (Carp and Istrate, 2021) [4]. Mohapatra et al (2021) document that the larger the size of the firm, higher the audit quality.…”

Section: Methodsmentioning

confidence: 99%

Mandatory auditor rotation and audit quality

Dayanandan

Kuntluru

2023

IJAIM

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Purpose In the post-Enron era around the world, the role of auditor is widely debated. There is an increasing concern that an auditor’s continuous involvement with clients could impair audit quality – the negative view. There is also a positive view that a long auditor tenure leads to accumulation of client-specific knowledge over time, which could lead to high-quality audits. The empirical result with regards to impact of mandatory auditor rotation (MAR) is mixed world-wide. This study aims to examine whether MAR rules implemented in 2017 impact audit quality in India. Design/methodology/approach Using a unique setting in which MAR was required from 2017 to 2018 onwards in India, this study provides empirical evidence of the impact of MAR regulation on audit quality (modified audit opinion). The study uses data for 714 firms (4,284 firms) for six years (three years before MAR and three years after MAR regulation in India). Findings The study found that auditor tenure and MAR had significant negative impacts on audit quality, validating the “positive” view of audit tenure and audit quality. In addition, concentrated ownership had a negative impact on audit quality, implying the control and influence by concentrated ownership on auditors and audit opinion. The analysis shows that MAR regulation has not yielded the intended objective of improving audit quality in India. MAR is not a good template for improving audit quality. Research limitations/implications The findings of the study are useful to policymakers, regulators, managers, investors and users of financial reports. The study calls for public policy on auditor rotation based on objective scientific evidence. In light of the evidence in India that MAR does not lead to better audit quality, the study calls for reset of regulatory policy in India. Practical implications The study provides valuable insights to analysts, regulators and other users of financial accounts about the implications of MAR in India. Originality/value The study is one of the few to report on the impact of MAR, particularly in the context of an emerging market economy such as India.

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Section: Methodsmentioning

confidence: 99%

Mandatory auditor rotation and audit quality

Dayanandan

Kuntluru

2023

IJAIM

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“…, 2019). Audit quality is considered as a very important topic in the academic and professional research (Carp and Istrate, 2021; Athavale et al ., 2022; Samagaio and Felício, 2022). Audit quality means the identification and reporting of material misstatement by external auditors (DeAngelo, 1981).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Literature review 2.1 Audit quality The Importance of "quality" has increased in every aspect, especially in the field of auditing and accounting; since human recognized quality as a weapon for fighting in competitive world and gain advantages by improving quality (Beck et al, 2019). Audit quality is considered as a very important topic in the academic and professional research (Carp and Istrate, 2021;Athavale et al, 2022;Samagaio and Fel ıcio, 2022). Audit quality means the identification and reporting of material misstatement by external auditors (DeAngelo, 1981).…”

Section: Leadership Style and Audit Qualitymentioning

confidence: 99%

Leadership style, knowledge sharing and audit quality

Mohassel

Hesarzadeh

Velashani

2023

EJMBE

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PurposeThis paper aims to examine how leadership style in audit firms influences audit quality. The paper further explores the mediating role of knowledge sharing in the relationship between leadership style and audit quality.Design/methodology/approachThe present paper studies the effects of transformational and servant leadership styles on audit quality through knowledge sharing. Data are collected from 396 Iranian external auditors via a questionnaire.FindingsThe results show that both transformational and servant leadership style significantly influence audit quality through knowledge sharing. Moreover, the impact of transformational leadership style is stronger than the impact of servant leadership style.Originality/valueIn audit quality literature, little attention has been devoted to both leadership style and knowledge sharing. This paper develops a parsimonious model which shows how leadership style improves audit quality, and how knowledge sharing strengthens the impact of leadership style on audit quality. The results have important implications particularly for audit industry.

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“…The company's management has the primary responsibility of preparing and presenting the company's financial statements. Financial information disclosed by economic entities is subject to control by financial auditors who should assess the compliance of financial statements with accounting standards in force in a country [42]. The auditing profession guarantees the reliability of financial statements, and in this context, high value is placed on the application of bankruptcy prediction models.…”

Section: Predicting Bankruptcy Using Altman's Z-score Model and Determining The Possibility Of Fraudulent Financial Reporting Using The Bmentioning

confidence: 99%

Bankruptcy Risk Prediction in Ensuring the Sustainable Operation of Agriculture Companies

et al. 2021

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In recent decades, predicting company bankruptcies and financial troubles has become a major concern for various stakeholders. Furthermore, because financially sustainable businesses are affected by numerous highly complex factors, both internal and external, the situation is even more complex. This paper applies Altman’s Z-score models; more precisely, the paper applies the initial Z-score model (a model for manufacturing companies), the Z′-score model (for companies operating in emerging markets), and the Z-score bankruptcy probability calculation. Therefore, this paper offers the results of the application of different Z-score models and the calculation of bankruptcy probability on a sample of agricultural companies listed on the Belgrade Stock Exchange in the period 2015–2019. In addition, different Z-score models are used for the same sample so that the difference between their results and application can be determined. In addition, the validity of the data published in the financial statements of the respective companies was confirmed using the Beneish M-score model with five and eight variables. The results obtained by applying Altman’s Z-score model (initial and adapted to emerging markets) indicate that a certain number of companies had impaired financial stability during the observed period, i.e., that they were in danger of bankruptcy. In addition, based on the results obtained using the Beneish M-score model, it was identified that a number of companies showed signals that indicate possible fraudulent financial reporting. Further, it was found that less than half of the observed companies reported on environmental protection in their annual reports, and they did so by providing a modest amount of information. The originality and value of the paper lies in suggesting that policymakers in the Serbian emerging markets should pay more attention to the operations of companies from the observed sector, as well as to their financial and non-financial reporting. Future research should focus on comparisons with agricultural companies from the same sector whose securities are listed on stock exchanges in the region.

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Audit Quality under Influences of Audit Firm and Auditee Characteristics: Evidence from the Romanian Regulated Market

Cited by 12 publications

References 58 publications

Mandatory auditor rotation and audit quality

Mandatory auditor rotation and audit quality

Leadership style, knowledge sharing and audit quality

Bankruptcy Risk Prediction in Ensuring the Sustainable Operation of Agriculture Companies

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