Effect of Audit Quality on Non-Professional Investors Decisions: Experimental Evidence from Egypt

Abstract

Purpose of this paper: The purpose of this paper is to investigate non-professional investors' perceptions of audit quality proxied by audit firm size on their desirability to invest and their estimates of firm value. Design/methodology/approach: Two within-subjects experiments were designed to test non-professional investors' perception regarding the impact of audit quality on their desirability to invest and their estimates of firm value in a single audit scenario and a joint audit scenario. Non-parametric statistical tests were used to test the research hypotheses. Findings: In a single audit scenario, investors perceive a superior quality for the audit services provided by a big 4 versus a non-big 4. In the case of a joint audit, the Accountability State Authority does not have the same superiority of audit quality versus a big 4 firm when it comes to Egyptian non-professional investors' perception for the audit quality provided. Research limitations/implications: This paper uses postgraduate students that are registered in the financial accounting and auditing diploma in the faculty of commerce-Alexandria University as a proxy for non-professional investors. Real investors were difficult to recruit as subjects for the experiment conducted. Social and practical implications: The results of the study imply a lower non-professional investors' perception for the quality of the audit services provided by the governmental body in Egypt, which is responsible for auditing all financial matters for governmental units. This result is alarming and needs immediate attention from the governmental bodies in Egypt. What is original/value of paper? This paper is the first to examine the impact of audit quality on nonprofessional investors' desirability to invest and their estimates of firm value in Egypt. The paper focuses on the audit quality of the Accountability State Authority in comparison with that of the Big 4 firms, which was not examined before in Egypt. The paper contributes to the existing literature examining audit quality services in emerging markets.

Pengaruh Kualitas Audit Terhadap Biaya Modal Perusahaan: Kasus Perusahaan Di Bursa Efek Indonesia

“…Perusahaan yang diaudit oleh akuntan publik yang berwenang memiliki risiko pemalsuan laporan keuangan yang lebih rendah (Ibrahim & Badawy, 2019). Laporan finansial yang didukung oleh audit yang berkualitas dianggap meminimalkan risiko, sehingga menghasilkan proyeksi pengembalian yang lebih rendah dari investor (Saraswati et al, 2020).…”

“…Auditor berkualitas tinggi berfungsi sebagai alat pemantauan yang efektif, mengirimkan sinyal yang menguntungkan ke pasar. Perusahaan yang berkinerja baik secara sukarela melibatkan auditor berkualitas lebih tinggi untuk mempertahankan citra dan menunjukkan bahwa mereka memiliki sifat transparan (Ibrahim & Badawy, 2019).…”