Group audits and earnings informativeness

Impink, Johannes; Lyubimov, Alexey; Prasad, Ashna

doi:10.1111/ijau.12191

Cited by 9 publications

(6 citation statements)

References 41 publications

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“…The majority of audit firms (80.9%) and individuals (75.9%) are from the USA, consistent with the PCAOB being responsible for oversight of US public companies’ audits. Nonetheless, non-US firms do participate in these audits, either as a group or component auditor (Impink et al 2020 ). Of the audit firms domiciled in countries outside the USA, Hong Kong ( n = 7, 3.4%), India ( n = 4, 1.9%), and Spain ( n = 4, 1.9%) have the highest frequency of SDOs.…”

Section: Methodsmentioning

confidence: 99%

Consequences of Ethical and Audit Violations: Evidence from the PCAOB Settled Disciplinary Orders

et al. 2021

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We investigate the justifications provided by the Public Company Accounting Oversight Board (PCAOB) when sanctioning audit firms and individual auditors, as disclosed in the publicly released Settled Disciplinary Orders (SDOs). Employing responsive regulation theory, we seek to gain an understanding of violating behaviors by audit firms and individual auditors that attract regulatory responses ranging in nature from persuasive to punitive sanctions. Using 298 SDOs issued by the PCAOB from 2005 to 2020, we find that the frequency and severity of PCAOB sanctions at the firm level are positively associated with auditing standards violations, independence issues, and reckless behavior. At the individual auditor level, integrity violations and reckless behavior are positively associated with the frequency and severity of PCAOB sanctions. Our findings indicate that significantly higher financial penalties for individual auditors (audit firms) arise from manipulation of audit evidence (quality control criticisms). Further, the PCAOB financially penalizes Big 4-affiliated auditors and firms significantly more than their non-Big 4 counterparts. Other factors such as multiple individuals being implicated in an SDO and whether a firm and individual(s) are both implicated in the SDO are important considerations in sanction(s) imposed by the PCAOB. Overall, our findings suggest that the PCAOB adopts a responsive enforcement strategy when monitoring the auditors in their ethical and audit compliance efforts.

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Section: Methodsmentioning

confidence: 99%

Consequences of Ethical and Audit Violations: Evidence from the PCAOB Settled Disciplinary Orders

et al. 2021

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“…The study acknowledges the limited generalizability of these findings, as the sample of 149 audits is limited to U.S. audits conducted by small audit firms that do not act as principal auditors for any other SEC issuer. Building on the work of Dee et al [2015], Impink et al [2020] find, based on PCAOB Form 2 data, that earnings informativeness is lower for group audits when the component and group auditor are from the same network, at least for SEC issuers with headquarters outside the United States. Sun et al [2020] also document lower audit quality for Chinese group-affiliated firms sharing the same network auditor.…”

Section: Prior Researchmentioning

confidence: 97%

“…[2015], Impink et al. [2020] find, based on PCAOB Form 2 data, that earnings informativeness is lower for group audits when the component and group auditor are from the same network, at least for SEC issuers with headquarters outside the United States. Sun et al.…”

Section: Background Informationmentioning

confidence: 99%

Involvement of Component Auditors in Multinational Group Audits: Determinants, Audit Quality, and Audit Fees

Carson

Simnett

Thürheimer

et al. 2022

J of Accounting Research

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“…Moreover, Rahmansyah and Fitriany (2020), found that there was a tendency of increasing market share of Big Four on audit services industry after the implementation of SA 600 and audit quality increase. Impink, Lyubimov, and Prasad (2020) examines whether there are differences in investors' perceptions of earnings quality if the company uses component auditors in addition to group auditors. The results of his research found that informative earnings were lower for group audits conducted by audit firms associated with global networks.…”

Section: 3mentioning

confidence: 99%

Does The Implementation Of SA 600 Cause Shifting Of Audit Clients And Reducing Audit Quality? Evidence From Indonesia

Fitriany¹,

Darmawan

Wibowo³

et al. 2020

JRAK

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This research was conducted to investigate the impact of implementation of SA 600 on shifting of audit clients and reducing of audit quality in Indonesia. SA 600 was issued in 2013 in order to mitigate the problem of audit failure in group entities where the group auditor is responsible for the entire audit process, particularly the audit quality in component entities or subsidiaries. In its implementation, SA 600 has received several complaints related to audit quality and shifting of audit clients. The research method is using primary data from questionnaires that was distributed to auditors and focus group discussions with auditors and users. The respondents of this research are 367 auditors of which 63% were audit partners. This research found that SA 600 can improve audit quality when its implementation is carried out according to audit standards. However, the implementation of SA 600 has an impact on the shifting of component or subsidiary company clients which move to the group or parent company auditors.

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Group audits and earnings informativeness

Cited by 9 publications

References 41 publications

Consequences of Ethical and Audit Violations: Evidence from the PCAOB Settled Disciplinary Orders

Consequences of Ethical and Audit Violations: Evidence from the PCAOB Settled Disciplinary Orders

Involvement of Component Auditors in Multinational Group Audits: Determinants, Audit Quality, and Audit Fees

Does The Implementation Of SA 600 Cause Shifting Of Audit Clients And Reducing Audit Quality? Evidence From Indonesia

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