Earnings Quality of Foreign versus U.S. Reverse Mergers: Geographical Location or Firm-Level Incentives?

Chen, Chu; Gotti, Giorgio; Herrmann, Don; Schumann, Kathryn M.

doi:10.2308/jiar-51160

Cited by 12 publications

(8 citation statements)

References 35 publications

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“…This implies that the company audited by the auditor of an Accountant Office affiliated with Big-4 in Indonesia is quite safe from fraud. The existence of Big-4 Accounting Firm has a guarantee of audit quality and has a greater survival expectancy than not Big-4 Accounting Firm (Chen et al, 2016). Our test results are presented in Tables 11 and 12 which show that, although the ability to find fraud is related to the experience of an auditor, the relationship is still weak.…”

Section: Resultsmentioning

confidence: 88%

Explores the Specific Context of Financial Statement Fraud Based on Empirical from Indonesia

Ikbal

Irwansyah²,

Paminto

et al. 2020

ujaf

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We explored the specific context of financial statements of fraud in Indonesia based on empirical evidence. We also explored the lineament of fraudulent financial reporting in Indonesia. This research is important because it will greatly assist the auditor in understanding the pattern and form of fraud, to be able to detect and report these illegal actions. We used a mixed-method of surveying and observation to collect data. Our finding is that the financial statement of fraud is a case throughout the world. The most dominant fraud in Indonesia is the problem of recognition of inappropriate income and secondly related to the improper valuation of assets. We also found something else, that the higher the auditor's experience, the easier it was to find and detect fraud on financial statements and that auditors who hold CFE certificates found more cases of financial reporting fraud during the audit process compared to auditors without CFE certificates. This research contributes to the development of literature by broadening the understanding of academics and practitioners of various fraud profiles that are generally carried out in Indonesia.

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Section: Resultsmentioning

confidence: 88%

Explores the Specific Context of Financial Statement Fraud Based on Empirical from Indonesia

Ikbal

Irwansyah²,

Paminto

et al. 2020

ujaf

View full text Add to dashboard Cite

show abstract

“…Four interviews were conducted with audit partners, 11 with audit managers and nine with senior auditors. Big 4 auditors were chosen as research participants because auditors in Big 4 audit firms are considered highly knowledgeable and experienced compared to other audit firms (Fuerman, 2004; Eshleman and Guo, 2014; Chen et al ., 2016; Jiang et al ., 2018) despite the criticism that auditors currently face.…”

Section: Methodsmentioning

confidence: 99%

Investigating the black box of external audit practice: the paradox of auditors' failure in detecting and reporting fraud

Kassem

2023

JAL

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PurposeThe study aims to explore the reasons behind external auditors' failure to detect and report fraud.Design/methodology/approachSemi-structured interviews were conducted with twenty-four experienced Big 4 auditors.FindingsThe present study reveals power issues within audit firms and how some dishonest audit partners deal with auditors' concerns at the higher echelons. It also shows how auditors are pressured and intimidated by audit clients when fraud-related issues are raised. Further, it sheds light on ethical, governance and regulatory issues inhibiting auditors’ ability to detect or report fraud.Research limitations/implicationsThis study advances the audit literature by adding practice-based evidence on why external auditors fail to discover fraud.Practical implicationsThe results draw policymakers' attention to the issues that inhibit external auditors' ability to discover fraud in practice which could help policymakers develop effective interventions. Additionally, it provides several recommendations which could aid policymakers and audit firms in designing effective audit reforms to resolve the fraud detection deficit.Originality/valueThis is the first study exploring external auditors' views on their failure to detect and report fraud and how the conflict of interests operates in the audit practice.

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“…Therefore, the participants have significant audit practice experience in different contexts, which could provide meaningful insights. Big 4 auditors were chosen for their knowledge and audit quality compared to non-Big 4 audit firms, as noted in prior studies (see Fuerman, 2004;Chen et al, 2016;Jiang et al, 2019).…”

Section: Methodsmentioning

confidence: 99%

Effective methods for detecting fraudulent financial reporting: practical insights from Big 4 auditors

Kassem,

Omoteso

2023

JAL

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PurposeUsing a qualitative grounded theory approach, this study explores the methods experienced external auditors use to detect fraudulent financial reporting (FFR) during standard audits.Design/methodology/approachSemi-structured interviews were conducted with 24 experienced external auditors to explore the methods they used to detect FFR successfully during standard external audits.FindingsThe authors find 58 methods used for FFR detection, out of which the following methods are frequently used and help in detecting more than one type of FFR: (1) specific analytical procedures, (2) positive confirmation, (3) understanding of the client's business and industry, (4) the inspection of specific documents, (5) a detailed analysis of the audit client's anti-fraud controls and (6) investigating tip-offs from suppliers, employees and customers.Research limitations/implicationsBased on the grounded theory approach, the authors theorise that auditors must return to the basics and focus on specific audit procedures highlighted in this study for effective fraud detection.Practical implicationsThe study provides practical guidance, including 58 methods used in audit practice to detect FFR. This knowledge can improve auditors' skills in detecting material misstatements due to fraud. Besides, analytical procedures and positive confirmation helped external auditors in this study detect all forms of FFR, yet they are overlooked in the external audit practice. Therefore, audit firms should emphasise the significance of these audit procedures in their professional audit training programmes. Audit regulators should advise auditors to consider positive confirmation instead of negative confirmation in financial audits to increase the likelihood of FFR detection. Moreover, audit standards (ISA 240 and SAS 99) should explicitly require auditors to conduct a detailed analysis of the client's anti-fraud controls.Originality/valueThis is the first study to identify actual, effective methods used by external auditors in detecting FFR during the ordinary course of an audit.

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Earnings Quality of Foreign versus U.S. Reverse Mergers: Geographical Location or Firm-Level Incentives?

Cited by 12 publications

References 35 publications

Explores the Specific Context of Financial Statement Fraud Based on Empirical from Indonesia

Explores the Specific Context of Financial Statement Fraud Based on Empirical from Indonesia

Investigating the black box of external audit practice: the paradox of auditors' failure in detecting and reporting fraud

Effective methods for detecting fraudulent financial reporting: practical insights from Big 4 auditors

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