Auditor industry specialization and cost of equity on earnings management: the moderating role of institutional ownership

Arianpoor, Arash; Farzaneh, Najmeh

doi:10.1108/ijlma-04-2022-0087

Cited by 5 publications

(5 citation statements)

References 75 publications

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“…The analysis supports Albitar et al ’s (2021) assertion that auditing during the COVID-19 pandemic differs significantly from normal economic conditions and necessitates costly mechanisms, procedures and sophisticated technology, skills and expertise in working from home. To satisfy stakeholder expectations, auditors in this situation must fulfill a number of roles required by the ISA, including generating supplementary reports attesting to the effect of the pandemic on enterprises’ financial information (Castka et al , 2020; Arianpoor and Farzaneh, 2023). A significant auditing risk related to preserving reputation, lawsuit risk and client retention may emerge from conducting audits under uncertain economic situations.…”

Section: Resultsmentioning

confidence: 99%

Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Alharasis,

Alkhwaldi,

Hussainey

2024

IJLMA

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Purpose This study aims to investigate the moderating effect of the COVID-19 epidemic on the relationship between key audit matter (KAM) and auditing quality. Design/methodology/approach The authors use the ordinary least squares regression on data from 942 firm-year observations of Jordanian non-financial institutions across the period (2017–2022) to test the hypotheses. The authors use content analysis method to measure levels of KAM disclosure. Findings The investigation’s findings highlight the importance of KAM disclosure in achieving audit quality in line with international standard on auditing no. 701 (ISA-701) requirements. COVID-19 is also found to have a positive relationship with audit quality, further confirming the crisis’s devastating impact on audit complexity and risks and providing evidence for the need for supplementary, high-quality audit services. Due to the correlation between KAM disclosure and increased auditor workload and responsibility, the analysis reveals that the COVID-19 factor strengthens the link between KAM disclosure and audit quality. Practical implications This study has the potential to be used as a basis for the creation of a new regulation or standard regarding the reporting of unfavourable events in financial filings. This study’s findings provide standard-setters, regulators and policymakers with current empirical data on the effects of implementing ISA-701’s mandate for external auditors to provide more information on KAM. The COVID-19 crisis offers a suitable setting in which to examine the value of precautionary disclosures in times of economic uncertainty, as well as the significance of confidence interval disclosures and the role of external auditing in calming investor fears. This analysis is helpful for stakeholders, regulatory agencies, standard-setters and readers of audit reports who are curious about the current state of KAM disclosures and the implementation of ISA-701. The results may have ramifications for academia in the form of a call for more evidence expanding this data to other burgeoning fields to have a clear explanation of the real impact of reporting KAM on audit practices. Originality/value To the authors’ awareness, this research is one of the few empirical studies on the effect of the COVID-19 crisis on auditing procedures, and more specifically, the effect of disclosures on KAM by external auditors on audit quality. This study’s findings represent preliminary scientific evidence linking the pandemic to business performance. Minimal research has been done on how auditors in developing nations react to pandemic investor protection and how auditors’ enlarged reporting responsibilities affect them. The vast majority of auditing studies have been conducted in a highly regulated system, so this research contributes by examining audit behaviour in a weak legal context.

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Section: Resultsmentioning

confidence: 99%

Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Alharasis,

Alkhwaldi,

Hussainey

2024

IJLMA

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“…Lastly, it would be beneficial to validate or expand our findings using different data sources, such as sustainability reports (e.g. Arianpoor et al , 2023) that provides further details on a company’s sustainability practices or audit reports (Arianpoor and Farzaneh, 2023), which avoid risk of greenwashing from self-reported information.…”

Section: Discussionmentioning

confidence: 99%

Sustainability drivers and national culture in buyer-supplier environmental practices: an institutional perspective

Ahmadi-Gh,

Bello-Pintado,

Bortolotti

et al. 2024

EBR

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Purpose This study aims to explore how sustainability drivers interact with national culture to explain the adoption of buyer–supplier environmental sustainability practices. Design/methodology/approach Drawing on Institutional Theory, this study proposes three sets of hypotheses focused on the role of key cultural dimensions: uncertainty avoidance, power distance and institutional collectivism. It uses a sample of 284 manufacturing plants across three industries and 14 countries to test these hypotheses, using regression analysis. Findings Findings suggest that national culture matters in the adoption of buyer–supplier environmental practices; however, its effect is contingent upon the particular combination of cultural dimensions and drivers analyzed. Originality/value This study enhances the understanding of the drivers behind buyer–supplier environmental practices by offering a novel examination of their interaction with national culture. This helps explain the heterogeneity in environmental sustainability adoption across countries.

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“…Independent directors have a regulatory duty over the financial information of listed companies, which in practice manifests as supervision over the company's operating condition, significant related party relationships and transactions, loans or other financial transactions between shareholders, actual controllers and their affiliated enterprises and the listed company, external guarantees, changes in accounting policies, accounting estimates, or major accounting error corrections not due to changes in accounting standards, internal controls, and significant asset restructurings, among others [11,12]. Auditors, when auditing the financial statements of listed companies, focus their examination and professional judgment on the financial data resulting from these issues [13][14][15]. Therefore, following the first-instance judgment in the Kangmei case, the resignation of independent directors could likely be due to their failure to effectively exercise their supervisory functions during their tenure.…”

Section: (I) the Influence Of Independent Directors' Abnormal Resigna...mentioning

confidence: 99%

Do the unusual resignations of independent directors affect auditors’ professional judgment?

Zhang,

2024

PLoS ONE

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In Kangmei’s first trial judgment, where the independent directors faced significant joint and several liabilities, it triggered a "wave" of resignations among independent directors of listed companies. Auditors auditing financial reports of these companies might consider this a significant signal, raising the question: does this signal influence their professional judgment? The study examines the relationship between the resignation of independent directors and auditors’ professional judgment in A-share listed companies, following Kangmei’s initial trial. This examination is conducted across three dimensions: audit pricing, audit input, and audit opinion.The findings indicate that the unusual resignations of independent directors prompt uditors to pay increased attention to the risk of material misstatements by clients, primarily reflected in audit pricing. However, these resignations do not significantly impact audit input or the judgment of audit opinions. Furthermore, this research enriches the existing literature on audit pricing and the role of independent directors, while also unveiling the specific pathways through which the departure of independent directors impacts auditors’ professional judgment.

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Auditor industry specialization and cost of equity on earnings management: the moderating role of institutional ownership

Cited by 5 publications

References 75 publications

Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Sustainability drivers and national culture in buyer-supplier environmental practices: an institutional perspective

Do the unusual resignations of independent directors affect auditors’ professional judgment?

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