External auditor type, discretionary accruals and investors’ reactions

Abdallah, Sara

doi:10.1108/jaee-10-2017-0098

Cited by 31 publications

(29 citation statements)

References 70 publications

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“…Some of the information provided by the company proved to have received mixed reactions from investors. Company policies are like the burden of research on new products [8], advertising costs [9], Corporate Governance [10], tax policies [11] to information regarding audit quality in financial reporting [12,13].…”

Section: Investor Reactionmentioning

confidence: 99%

Financial Performance and Audit Quality: Comparative Study of Investor Reaction

Tarmidi¹,

Fitria²,

Ahmad³

2019

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The aim of the company to register its shares in the stock exchange is to get additional funds from investors so that the business continues to grow. The company's financial performance is a factor that is highly considered by investors, but what if the information is not quality based on the audit results from the auditor? This study aims to determine investor reactions to financial performance information and audit quality. The uniqueness of this research is the 2x2 method between financial performance and quality audit so that this study can produce information about how 1) investor reaction to high financial performance with high audit quality, 2) investor reaction to high financial performance but low audit quality, 3) investor reaction to low financial performance with high audit quality, 4) investor reaction to low financial performance with low audit quality. The results showed that investors only react to high financial performance but low audit quality with negative react, it shows that investors are concerned about audit procedures in assessing the company's financial performance. High company performance but has a low audit quality makes investors pay more attention to the company because the good value is actually considered to be detrimental to investors because of its doubtful quality.

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Section: Investor Reactionmentioning

confidence: 99%

Financial Performance and Audit Quality: Comparative Study of Investor Reaction

Tarmidi¹,

Fitria²,

Ahmad³

2019

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“…Prior research explored the association between auditor type and audit quality in Egypt is somehow limited and reported mixed results (Abdallah 2018;El-Dyasty, 2017;Khalil and Ozkan, 2016;Yasser and Soliman 2018). Accordingly, this study aims to inspect the effect of auditor type on audit quality.…”

Section: Introductionmentioning

confidence: 99%

The effect of auditor type on audit quality in emerging markets: evidence from Egypt

El-Dyasty

Elamer

2020

IJAIM

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Purpose Although a number of studies suggest that big audit firms provide higher audit quality in strict legal environments, empirical evidence remains inconclusive. As little is known about the effect of auditor type on audit quality in less strictly legal environments, this study aims to investigate the impact of auditor type on audit quality in the Egyptian market. Design/methodology/approach Data of Egyptian-listed companies during the period 2011–2018 are used. To examine the impact of auditor type on audit quality, ordinary least square regression and robust standard errors clustered at year and industry level are used. This study uses discretionary accruals as a proxy for audit quality. Several additional analyzes are conducted to assess the robustness of the main results, including alternative measures of audit quality and auditor type. Findings The results show that audit firms tend to provide higher audit quality when they are affiliated with a foreign audit firm. However, Big 4 auditors do not provide higher audit quality compare to their counterparts. Additionally, the governmental agency, accountability state authority, that monopolize audit function in state-owned companies do not appear to be associated with higher audit quality. Finally, local audit firms have a negative association with audit quality. This may be their strategy to secure future clients that seek low-quality audits. Research limitations/implications This study suggests that affiliation with foreign audit firms will help the Egyptian firms to develop their abilities by using advanced technology and techniques and transfer rare expertize to the Egyptian auditors. This study also shows that the strategy adopted by many Egyptian audit firms to affiliate with foreign auditors reflects the desire of these firms to be included in one tier alongside Big 4 audit firms to increase their market share under a claim of providing a higher audit quality. Originality/value This study adds to the rare but growing body of literature by investigating how auditor type affects audit quality in the context of less strictly legal environments. The results are important, as investors, standards-setters and regulators have growing concerns over audit quality since the Enron scandal. The findings suggest that audit quality depends on auditor type. These findings have important implications for investors, standards-setters and auditors interested in auditor oversight, audit quality and auditor choice.

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“…Such cooperation most likely enables external auditors to depend more on the work of a company's internal audit, which in turn facilitates the audit process. Most of previous studies, however, have investigated the direct association between either internal audit (Badolato, et al, 2014;Hameed et al, 2017;Ittonen et al, 2017) or external audit (Abdallah, 2018;Dimitras et al, 2015;Jordan et al, 2010) and financial reporting quality. Thus, very limited research has been done regarding the relationship between the two types of audit and the quality of companies' reports.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

A study on the relationship between internal and external audits on financial reporting quality ,

Azzam¹,

Alrabba²,

Alqudah³

et al. 2020

10.5267/j.msl

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Internal auditors are considered a valuable source of information since they are more familiar with the company and its environment. This study aimed to identify the relationship between internal and external audits affecting the quality of firms' reports. To achieve the objectives of the study, a 30-item questionnaire was developed and sent to 312 external auditors and managed to collect 276 (88.5%) properly filled questionnaires. Descriptive statistics and multiple regression were used to test the hypotheses of the study. The results show that Jordanian auditors perceived favorably the cooperation between internal and external auditors to enhance the quality of financial reporting. For instance, the results revealed positive and significant effect of objectivity in enhancing the level of cooperation between internal and external auditors in a way that increased the level of financial reporting quality. Moreover, the quality of financial reporting has been affected positively resulting in the positive effect of the technical competence of the internal audit's work and professional care. Finally, the cooperation between the two auditing teams was noticeable through the nature and scope dimension that, in turn, increased the quality of financial reporting. Based on these results, external auditors are highly recommended to rely on internal audit works which could lead to enhance financial reporting quality.

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External auditor type, discretionary accruals and investors’ reactions

Cited by 31 publications

References 70 publications

Financial Performance and Audit Quality: Comparative Study of Investor Reaction

Financial Performance and Audit Quality: Comparative Study of Investor Reaction

The effect of auditor type on audit quality in emerging markets: evidence from Egypt

A study on the relationship between internal and external audits on financial reporting quality ,

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