The relationship between political relations with audit quality and auditor industry expertise

Khaksar, Jalil; Salehi, Mahdi; Dashtbayaz, Mahmoud Lari

doi:10.1002/pa.2780

Cited by 6 publications

(19 citation statements)

References 30 publications

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“…This result aligns with evidence from Iran, which was investigated by Khaksar et al. (2021b), confirming that countries with high political involvement in an industry experience more competition in auditing but the quality of audits is poorer (audit fee in the present study).…”

Section: Resultssupporting

confidence: 91%

“…Fee discounts boost audit company rivalry (Abdullatif and AlRahahleh, 2020). This is typical for most developing countries, as shown in the analysis conducted by Khaksar et al (2021b). By utilizing data from Iran, they demonstrated that businesses with tight political ties boost audit market competition but reduce quality and integrity.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 78%

“…However, in accordance with Ettredge and Greenberg (1990) and Hay and Jeter (2011), the second metric is the PS of the industry (ISP2), which incorporates cost savings associated with efficiency improvements. Additionally, this metric suggests that auditors cut their prices to expand their customer base (Khaksar et al, 2021b). We follow Almutairi et al (2009) to have variable ISP1 function as a dichotomous variable given a value of 1 if ISP1 surpasses the MS threshold of 10% of the industry's total audit fees, 0 otherwise.…”

Section: Research Data and Sample Selection 41 Data Selectionmentioning

confidence: 99%

“…Auditors who have specialized in a particular field are called specialist auditors, for instance, those usually offer clients higher-quality services at reduced expenses (Khaksar et al. , 2021b; Abdillah et al.…”

Section: Introductionmentioning

confidence: 99%

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Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

Alharasis

Alidarous

Jamaani

2022

AJAR

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PurposeThis study aims to examine the relationship between auditor industry specialization (IS) and audit fees.Design/methodology/approachThe authors utilize 2,100 firm-year data of Jordanian companies from 2005 to 2018. Two conflicting theoretical approaches of IS were employed: the product differentiation approach, as assessed by market share (MS); and the shared efficiency approach, as evaluated by portfolio share (PS).FindingsResults of the ordinary least squares (OLS) regression support product differentiation (shared efficiency) and show that employing experts' auditors exerts a very substantial and favorable direct impact on audit fees (negative).Originality/valueThis research contributes new empirical data to the auditing literature by examining if IS does influence Jordanian businesses' audit fees. The findings offer useful data for Jordanian officials to examine the auditing industry's difficulties while refining regulations and revising auditor pricing. Additionally, the results offer advice to Jordan's regulatory bodies who oversee the auditing industry. Arguably, results from Jordan may be extrapolated to other Middle Eastern nations.

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Section: Resultssupporting

confidence: 91%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 78%

Section: Research Data and Sample Selection 41 Data Selectionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

Alharasis

Alidarous

Jamaani

2022

AJAR

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“…Based on Audousset-Coulier et al's (2016) analysis on the validity of the measures of IS in empirical research, audit fee-based measures are rarely used in the auditing literature as a proxy to measure auditor expertise due to the lack of audit fees disclosures. Nonetheless, audit fee-based metrics are the favoured measure proxy for industry specialist measures than the other proxies used in previous literature because audit fees accurately reflect audit work; thus, audit fees are seen as a consequence of the customer's size, sophistication and risks (Khaksar et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

The moderating impact of auditor industry specialisation on the relationship between fair value disclosure and audit fees: empirical evidence from Jordan

Alharasis

Prokofieva

Clark

2022

ARA

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PurposeThis paper investigates the application of the product differentiation and shared efficiency approaches to understand the impact of the auditor industry specialisation (IS) on audit fees in relation to Fair Value Disclosures (FVD).Design/methodology/approachThe study uses 1,470 firm-year observations for the period 2005–2018 and is focused on Jordanian financial firms. Two competing theoretical approaches of IS proxied by audit fee-based measures were employed: firstly, the product differentiation approach measured using Market Share-based (MS) measure and secondly, the shared efficiency approach measured using Portfolio Share-based (PS) measure. The paper employs the Ordinary Least Squares regression to test the association between the proportion of fair-valued assets (using fair value hierarchy inputs) and audit fees.FindingsThe results suggest that the association between the proportion of fair-valued assets and audit fees is strengthened (weakened) when the client hires specialist auditors identified by MS (PS). This association varied across the fair value inputs. Level 1 assets were found to be only moderated by both scenarios positively (negatively) for MS (PS) experts. The results are robust after controlling the endogeneity of auditor self-selection.Practical implicationsThe results provide valuable insights for policymakers into challenges of auditing FVD. These insights present a valuable input for the development of FVD policies and practices as well as providing guidance for updating auditor prices. Additionally, the results provide a foundation for policymakers and regulators to introduce and update fair value auditing practices. The current findings are generalisable to other countries, including the Middle East and North Africa, and are particularly beneficial for those countries which have adopted the fair value model.Originality/valueThis study contributes to the theory by demonstrating the impact of the auditor industry expertise on post-implementation costs of FVD. The novelty of the study lies in introducing principle-based standards requirements of FVD to test the relationship. This approach is based on the IFRS disclosure requirements using data from the Jordanian financial sector to examine this relationship.

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Politically connected independent supervisory boards and corporate performance during COVID‐19: Evidence from Indonesia

Dharmawan,

Joni,

Setyawan

2024

Journal of Public Affairs

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This study aims to examine the relationship between the political connections of companies' independent supervisory boards (PC‐ISB) to these firms' performance during the COVID‐19 pandemic in Indonesia. This study used 1515 observations of companies listed on the Indonesian Stock Exchange (IDX) for the years 2018–2021. The test was carried out using moderated regression analysis. Additional tests were also conducted, such as market performance tests and endogeneity tests using the System Generalized Method of Moments (the System GMM) and the difference‐in‐difference (DID) regression analysis. Results confirm that PC‐ISB has a significant positive effect on company performance. Then, during the COVID‐19 pandemic, the company's performance got worse. However, we did not find that pandemic conditions moderated the relationship between PC‐ISB and company performance. Our results remained consistent after testing using the System GMM and the DID to address the issue of endogeneity.

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The relationship between political relations with audit quality and auditor industry expertise

Cited by 6 publications

References 30 publications

Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

The moderating impact of auditor industry specialisation on the relationship between fair value disclosure and audit fees: empirical evidence from Jordan

Politically connected independent supervisory boards and corporate performance during COVID‐19: Evidence from Indonesia

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