Audit regulation in Germany

Quick, Reiner; Marten, Kai-Uwe; K√∂hler, Annette; Ruhnke, Klaus

doi:10.4324/9780203936016.ch6

Cited by 3 publications

(1 citation statement)

References 19 publications

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“…They are paramount to enhancing audit quality, refining the audit process and promoting a more comprehensive and precise understanding of the client's operations, each of which feeds into the other (Kerler and Killough, 2009). Trust, as an integral part of the audit process, is the embodiment of the audit client's confidence in the competence, integrity and dependability of the auditing firm (Quick et al ., 2008). A relationship steeped in trust can expedite the audit process and enhance the flow of information between auditor and client (Aschauer et al ., 2017).…”

Section: Background and Model Developmentmentioning

confidence: 99%

A deep learning-based SEM-ANN analysis of the impact of AI-based audit services on client trust

Rawashdeh

2023

JAAR

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PurposeThe advent of technology has propelled audit firms to incorporate AI-based audit services, bringing the relationship between audit clients and firms into sharper focus. Nonetheless, the understanding of how AI-based audit services affect this relationship remains sparse. This study strives to probe how an audit client's satisfaction with AI-based audit services influences their trust in audit firms. Identifying the variables affecting this trust, the research aspires to gain a deeper comprehension of the implications of AI-based audit services on the auditor-client relationship, ultimately aiming to boost client satisfaction and cultivate trust.Design/methodology/approachA conceptual framework has been devised, grounded in the client-company relationship model, to delineate the relationship between perceived quality, perceived value, attitude and satisfaction with AI-based audit services and their subsequent impact on trust in audit firms. The research entailed an empirical investigation employing Facebook ads, gathering 288 valid responses for evaluation. The structural equation method, utilized in conjunction with SPSS and Amos statistical applications, verified the reliability and overarching structure of the scales employed to measure these elements. A hybrid multi-analytical technique of structural equation modeling and artificial neural networks (SEM-ANN) was deployed to empirically validate the collated data.FindingsThe research unveiled a significant and positive relationship between perceived value and client satisfaction, trust and attitude towards AI-based audit services, along with the link between perceived quality and client satisfaction. The findings suggest that a favorable attitude and perceived quality of AI-based audit services could enhance satisfaction, subsequently augmenting perceived value and client trust. By focusing on the delivery of superior-quality services that fulfill clients' value expectations, firms may amplify client satisfaction and trust.Research limitations/implicationsFurther inquiries are required to appraise the influence of advanced technology adoption within audit firms on client trust-building mechanisms. Moreover, an understanding of why the impact of perceived quality on perceived value proves ineffectual in the context of audit client trust-building warrants further exploration. In interpreting the findings of this study, one should consider the inherent limitations of the empirical analysis, inclusive of the utilization of Facebook ads as a data-gathering tool.Practical implicationsThe research yielded insightful theoretical and practical implications that can bolster audit clients' trust in audit firms amid technological advancements within the audit landscape. The results imply that audit firms should contemplate implementing trust-building mechanisms by creating value and influencing clients' stance towards AI-based audit services to establish trust, particularly when vying with competing firms. As technological evolutions impinge on trustworthiness, audit firms must prioritize clients' perceived value and satisfaction.Originality/valueTo the researcher's best knowledge, no previous study has scrutinized the impact of satisfaction with AI-based audit services on cultivating audit client trust in audit firms, in contrast to past research that has focused on the auditors' trust in the audit client. To bridge these gaps, this study employs a comprehensive and integrative theoretical model.

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Section: Background and Model Developmentmentioning

confidence: 99%

A deep learning-based SEM-ANN analysis of the impact of AI-based audit services on client trust

Rawashdeh

2023

JAAR

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Agency conflicts and the demand for non‐audit services

Quick

Sattler²,

Wiemann³

2013

Managerial Auditing Journal

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Purpose -The aim of the present paper is to examine the impact of agency costs on the demand for non-audit services (NAS) in Germany. Design/methodology/approach -This study uses data from German listed companies to test whether audit clients vary their purchases of NAS according to agency costs over time. The paper used multiple regressions and included ownership composition, performance-based management compensation, and leverage as proxies for agency conflicts. Findings -Overall, the hypothesis that agency costs influence the demand for NAS was not confirmed. None of our proxies for agency conflicts were significantly associated with the purchase of NAS. These findings remain stable when alternative NAS fee measures were applied. Research limitations/implications -Findings cannot be generalised for smaller, private companies. Particularities of the German setting might have caused the insignificance of agency costs, but this cannot be tested statistically. The contrast between these insignificant results and the significant impact of agency costs on the demand for non-audit services revealed by many previous studies, in particular from the US and the UK, raises important questions for future research. Practical implications -This paper concerns management's perceptions on how stakeholders perceive the effect of NAS provision on auditor independence. Thus, its findings should be of interest to German, European and international regulators when evaluating the impact of the provision of NAS on independence in appearance. Originality/value -This study is the first to provide evidence on the relationship between agency conflicts and the demand for non-audit services from Germany and thus from a continental European country. Moreover, it provides evidence for periods after the introduction of stricter standards on the provision of non-audit services. In addition, it applies a new proxy for agency costs (i.e. performance-based management compensation).

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The impact of external and internal corporate governance mechanisms on agency costs

Schäuble

2019

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Purpose The purpose of this paper is to investigate the impact of external and internal corporate governance mechanisms on agency costs. Design/methodology/approach The author uses data from German firms that were listed in the regulated market of the Frankfurt Stock exchange during 2006-2011. Agency costs were measured using stochastic frontier analysis, a relatively new approach to estimate agency costs. The regression analysis is applied to test the model. Findings The results indicate that an industry specialized audit firm, the presence of a large audit firm, abnormal audit fees, management ownership and variable management compensation are significantly negatively associated with the level of a firms’ agency costs. In contrast, this seems not to be true for the existence of an audit committee for which the results of the paper document a non-significant association. Originality/value The paper contributes to the existing literature in several ways. First, the research design is to the best of the authors’ knowledge the first that investigates the influence of different corporate governance mechanisms on the level of agency costs. Second, previous studies are mainly focused on the US audit market. This focus on the US audit market leaves uncertainties regarding the direction and magnitude of the empirical relationship in the European and German environmental context. Finally, the paper provides initial empirical evidence for a sample of German IFRS listed companies (IFRS – International Financial Reporting Standards).

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Audit regulation in Germany

Cited by 3 publications

References 19 publications

A deep learning-based SEM-ANN analysis of the impact of AI-based audit services on client trust

A deep learning-based SEM-ANN analysis of the impact of AI-based audit services on client trust

Agency conflicts and the demand for non‐audit services

The impact of external and internal corporate governance mechanisms on agency costs

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