International Standard on Auditing No. 260 and Audit Quality: Evidence from Jordan

Abstract

This study aims to explore the extent of external auditors awareness of the requirements of the International Standard on Auditing No. 260 (Communications with those charged with governance) on audit quality and to shed light on the effectiveness of the communication process based on auditors actual experience. A mixed method approach was employed to achieve the study objectives. The analysis of 116 questionnaires concluded that the requirements of the ISA 260 enhance audit quality, but the two-way communication between Jordanian auditors and the audit committee is ineffective from external auditor’s perception. The study also found that audit committees do not support external auditor when disagreements arise between auditors and their client management on accounting treatments. The qualitative interviews confirmed the quantitative results and revealed several explanations among which: 1) lack of qualified directors, 2) lack of a clear policy in selecting board members, 3) meetings with auditors are routinely held, and 4) insufficient oversight by the securities commission. The interviews also revealed that the recent version of Jordanian corporate governance has two potential factors have been viewed to improve the effectiveness of the communication process that are, the appointment of a ‘governance liaison officer’ who, among other responsibilities, supervise and document audit committee meetings with the auditor, and the use of cumulative voting technique in selecting board members. The findings of the study could be beneficial for regulators by ensuring the best implementation of cumulative voting to increase the representation of qualified members so that the communication process will be greatly enhanced.

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

“…As mandated by article 193, paragraph (g) of the Jordanian Corporates Act No. 22 of 1997, 2017, an auditor must present a written statement to the shareholders and applicable parties [46,48]. The audit report must be made in conformity with standard auditing rules, auditing principles, scientific and technical standards [47].…”

“…Resulting this categorisation, according to the corporates Law 22/1997, 2017 /article (195/b), the auditor must give his final opinion on a company's financial statements (balance sheet and profit and loss account) in one of the following ways: 1) absolute approval (unmodified/unqualified opinion) of the annual sheet, profit, and loss account and cash flow, 2) (unmodified/unqualified opinion), approval with reserve, 3) modified/qualified opinion) of the balance sheet, profit and loss account and cash flow, provided that he states the reasons for such a reservation and its financial effect on the company. and 4) Non-approval (adverse or disclaimer opinion) of the balance sheet, profit, and loss account and cash flows and returning them to the board of directors, with the reasons justifying such a rejection of the balance sheet [48,57].…”

Impact of Public Sector Auditing in Promoting Accountability and Transparency in North Central Zone of Nigeria

“…Ironically the percentage of studies with corroborated documentations with the aforementioned observations but, with support to accountability and transparency provided through the instrument of audit far outweigh the opposite. For instance, Hanskamp-Sebregts, et al (2020), Shbeilat (2019), Ozuomba (2019), Ibironke (2019), Adedeji et al (2018), Ogundana et al (2017) are among authors with summation of the significant relationship subsisting between the importance of public sector audit and accountability and transparency.…”

The Influence of Audit Committee Characteristics on Modified Audit Opinion in Jordan

“…Moreover, there are additional researches examine the relationship between AC financial expertise and managerial reporting quality in Jordan. [27] discovered a negative relationship between the existence of financial experts on AC and the occurrence of financial restatements in Jordan. [29] and [31] further indicated that AC financial expertise is positively connected with earnings quality in Jordan.…”

“…The configuration of AC is less strict in Jordan compared to developed nations [26,27]. Furthermore, in 2004, instituting ACs became obligatory for corporates listed in the Jordan Securities Commission (JSC).…”