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Synopsis The research problem Prior empirical research on constituents' participation in setting international accounting standards has focused on their decision whether or not to participate directly in the standard setter's due process. However, because that focus neglects constituents' choice between direct participation and indirect participation via an intermediary, we investigated the determinants of using an indirect method of participation as a substitute for, or in complement to, direct participation. Institutional setting We exploited the European institutional setting, where the European Financial Reporting Advisory Group (EFRAG) serves as an intermediary for indirect participation in the due process of the International Accounting Standards Board (IASB). The test hypotheses Based on rational choice theory, we hypothesized that constituents from EFRAG's inner circle and from countries with smaller capital markets, lower English-language proficiency, and/or an accounting value profile more different from that embodied in International Financial Reporting Standards (IFRS) have a higher probability of choosing to use indirect participation. Adopted methodology Using a sample of 7,766 comment letters (CLs) from 2005–2017, we focused on individual constituents and traced their use of indirect participation (i.e., sending CLs to EFRAG) versus direct participation (i.e., sending CLs to the IASB). We employed logistic regression models using the methods of participation as dependent variable to test our hypotheses. Controlling for factors used in prior research on direct participation, we estimated a primary model for the full sample of constituents and a secondary model with firm-specific variables for the subsample of constituents classified as corporate preparers. Findings and implications We found strong evidence that the constituents' membership in EFRAG's inner circle is positively related, and capital market size in the constituents' home countries is negatively related, to choosing to use indirect participation. Country-level English-language proficiency and differences in the accounting value profile in relation to IFRS also determine the choice of participation method. Our findings suggest that a preference for indirect participation relates to the barriers to using direct participation. We provide initial evidence of a neglected aspect of Sutton's (1984) rational choice model and implications for EFRAG's role as an intermediary. [ABSTRACT FROM AUTHOR]

Using Public Company Accounting Oversight Board (PCAOB) inspection data from 2006 to 2018, we examine the use of auditor‐employed specialists in audit engagements. First, we find that the use of specialists is increasingly prevalent and related to clients' size and complex accounting estimates. Second, the use of specialists is positively associated with the incidence of audit process deficiencies (identified by PCAOB inspections) but is not associated with output‐based audit‐quality proxies (restatements or absolute discretionary accruals). Hence, although process deficiencies are more likely to occur in engagements with higher use of specialists, financial reporting quality is not negatively impacted. Third, the use of specialists is positively associated with the likelihood of goodwill impairments and negatively associated with engagement profitability. Finally, cross‐sectional tests suggest that board accounting expertise is a salient condition for more effective use of specialists. Collectively, our findings align with concerns noted by the PCAOB and prior experimental and survey studies. Although specialists assist auditors with the audit of complex estimates, engagements with comparatively high specialist use entail an incremental risk of audit process deficiencies. [ABSTRACT FROM AUTHOR]

Policy makers in France have considered joint audits as a solution to mitigate the audit market concentration and the ''systemic'' risk associated with Big 4 auditors. We implement a Markovian analysis where audit clients chose between different types of combinations across Big 4 and smaller auditors. Our main findings support the view that the French joint audit system is effective in maintaining market openness and in mitigating the Big 4 domination in the long run. An investigation of the determinants driving changes in joint audit combinations suggests little economic support in favor of two Big 4 combinations, whereas changes in audit clients' agency costs (e.g., higher ownership concentration) tend to explain the performance of mixed and two non-Big 4 combinations. Overall, this study supports the European Commission's position on the potential benefits of joint audits in mitigating the market concentration; it also suggests that it might not be necessary to impose mixed joint audits to achieve that objective. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The importance of fostering more accurate audits has been heightened by a series of high-profile accounting scandals at the beginning of the millennium. These scandals prompted more stringent regulations over corporate governance and financial reporting and the creation of audit oversight bodies as the Public Company Accounting Oversight Board (PCAOB) in the United States and the Public Oversight Board (POB) in the United Kingdom. In parallel, the growing globalization of business has brought forth calls for adherence to a common set of International Financial Reporting Standards (IFRS). Even if a common standard is promulgated, it will not lead to similar results if implementation differs across countries. Therefore, it is important to investigate the auditing regulatory regimes in different nations and the status of cross-border audit inspections. Accordingly, we begin by describing the cross-national institutions (e.g., the International Federation of Accountants [IFAC]) that impact national regulatory choices. Then we survey the audit regulatory practices of public company auditors of a select group of major economic powers and based on this analysis, we discuss the challenges and obstacles to engaging in intra-national audit, cross-national audit/inspections, and the challenges posed by differences in auditing standards used in various linked (e.g., by joint ventures, etc.) nations. We include in this discussion the effects of national culture, investor legal protection, economic development, and differing financial standard sources. [ABSTRACT FROM PUBLISHER]

The Sarbanes-Oxley Act significantly expanded the responsibilities of auditors, management, and corporate governance actors such as the audit committee and the board. This interview-based research extends an earlier study conducted in 1999–2000 by examining auditors’ experiences in working with corporate governance actors in the post-Sarbanes-Oxley era. Thirty audit managers and partners from three of the Big 4 firms participated in the study. In line with regulatory reforms and a monitoring perspective, auditors indicate that the corporate governance environment has significantly improved in recent years with audit committees that are substantially more active and diligent and possessing greater expertise and power to fulfill their responsibilities. In turn, auditors report relying to a greater extent on corporate governance information in planning and performing the engagement. However, results also suggest that at least some changes in governance may have been more form than substance. For example, of some concern, many auditors indicate that management is still seen as a key driver in determining auditor appointments and terminations. Further, management continues to be seen as a major actor in the corporate governance mosaic. Our results indicate that in many instances audit committees play a passive role in helping to resolve contentious financial reporting issues with management, with respondents indicating that the auditor and management often try to resolve issues before they come to the attention of the audit committee. Further, the requirements for CEO and CFO certification are reported by auditors to have a positive effect on the integrity of financial reporting. Our results are largely congruent, except that auditors indicate management has a major influence over the hiring and termination decisions of the external auditors. [ABSTRACT FROM AUTHOR]

Dye (1991) suggests that when audit fees are disclosed, auditor independence will be improved because there are no quasi-rents to influence audit opinion and the public could assess the independence of the auditors. According to DeAngelo (1981a), however, disclosure of audit fees is irrelevant to the issuance of audit opinion because transaction costs, which give rise to quasi-rents, could not be affected by disclosure of audit fees. This paper examines this controversy by investigating the issuance of a going concern modified audit opinion before and after the disclosure requirement of the Securities and Exchange Commission (2000). The results show that financial statements issued after the disclosure requirement are more likely to be associated with a going concern opinion than those issued before the disclosure requirement. These results are robust to various sensitivity tests, including the control for the effect of economic factors, auditor reporting conservatism, and auditor reporting accuracy. In addition, it is found that firms before (after) the disclosure requirement are more (less) likely to receive a going concern opinion if audit fees were (were not) disclosed. Hence, this paper provides evidence to suggest that disclosure of audit fees is associated with enhanced auditor independence, and thus supports Dye's (1991) theory. [ABSTRACT FROM AUTHOR]

The accounting literature has documented that the public believes that auditors are not doing enough to protect investors, and such beliefs have resulted in excessive liabilities to auditors. To reduce the "audit expectations gap," the accounting profession has been trying to improve auditors' performance through setting standards and to lower the public's expectations of auditors through education. Using a model characterized by pretrial negotiation, this paper concludes that high public expectations of auditors can improve auditors' compliance with auditing standards if the expectations play a significant role in the legal system. Auditors consistently comply with standards if (a) the public's expectations relative to the auditing standards are high and (b) the legal system is sufficiently stringent so that auditors who have compiled with the standards are still potentially liable for audit failures with significant frequency. The results of this paper imply that high public expectations and a tough legal system can help the accounting profession and regulators enforce auditing standards. [ABSTRACT FROM AUTHOR]

We evaluate and summarize the large body of audit fee research and use meta-analysis to test the combined effect of the most commonly used independent variables. The perspective provided by the meta analysis allows us to reconsider the anomalies, mixed results, and gaps in audit fee research. We find that, although many independent variables have consistent results, several show no clear pattern to the results and others only show significant results in certain periods or particular countries. These variables include a loss by the client and leverage, which have become significant in comparatively recent studies; internal auditing and governance, both of which have mixed results; auditor specialization, regarding which there is still some uncertainty; and the audit opinion, which was a significant variable before 1990 but not in more recent studies. [ABSTRACT FROM AUTHOR]

This paper uses a strategic tax compliance model to examine taxpayer reporting and tax authority audit strategies in an international setting with two tax authorities. The setting features both information asymmetry between the taxpayer and the tax authorities and inconsistent tax transfer-pricing rules. The latter creates the possibility of each country trying to tax the same income. We study the effect of the probability of transfer-price rule inconsistency on the strategies and payoffs of the taxpayer and the tax authorities. We find that an increase in the probability of transfer-price rule inconsistency induces more aggressive auditing by governments. It therefore deters taxpayers from shifting income to the country with the lower tax rate in situations in which the transfer-pricing rules are consistent, and can either increase or decrease the income reported to the low-tax-rate country in cases in which the transfer-pricing rules are inconsistent. We find that an increase in transfer-price rule inconsistency could either increase or decrease the taxpayer's expected tax liability and could either increase or decrease the deadweight loss from auditing. Our results call into question the conventional wisdom that the prospect of double taxation due to transfer-price rule inconsistency increases a firm's expected tax liability and governments' expected audit costs. [ABSTRACT FROM AUTHOR]

We emphasize the role of accounting policies, and their audit, in an earnings management setting. We use a two-period agency in which three frictions interact: the agent privately observes action (or effort) supply and output, and the initial contract is subject to renegotiation. This creates a setting in which both players' behavior is of concern, and, importantly, information rationing is efficient. Moreover, this information rationing is directly interpretable as being produced by an accounting policy whose application is ensured by an auditor. [ABSTRACT FROM AUTHOR]

This paper studies a model of "classifications manipulation" in which accounting reports consist of one of two binary classifications, preparers of accounting reports prefer one classification over the other, an accounting standard designates the official requirements that have to be met to receive the preferred classification, and preparers may engage in "classifications manipulation" in order to receive their preferred accounting classification. The possibility of classifications manipulation creates a distinction between the official classification described in the statement of the accounting standard and the de facto classification, determined by the "shadow standard" actually adopted by preparers. The paper studies the selection and evolution of accounting standards in this context. Among other things, the paper evaluates "efficient" accounting standards, it determines when there will be "standards creep," it introduces and analyzes the notion of a Nash accounting standard, and it compares the standards set by sophisticated standard-setters to those set with less knowledge of firms' financial reporting environments. [ABSTRACT FROM AUTHOR]

The article describes and critiques the audit procedures applied to a set of material transactions from the Lincoln Savings and Loan (LSL) audit failure. The authors of this article propose alternative procedures, based on information available to the auditors at the time of the audit. The article presents a detailed analysis of LSL suggests potential reasons for audit failures, particularly in cases involving management fraud. The main conclusion of their analysis is that the most significant shortcoming in the LSL audit was the auditor's failure to obtain and use knowledge of LSL's business, the industry in which it operated, and the economic forces that influenced this industry/business.

The article focuses on effects of mandated versus voluntary auditing policy on the quality of auditing. The paper addresses the question whether the mandatory auditing policy set forth by the Securities Acts of 1933 and 1934 increased the quality of information on which investors in the securities market rely. The choice of the quality level in auditing is seen as the first step taken by the auditing firms. Quality is assumed to be fixed for the period and firms choose its level by perfectly anticipating what they can get in terms of higher price or fee in the competitive second stage. The main consideration this study makes is in is consideration of quality decision that affects the competitive position of the firm. The study predicts the economic consequences of the Securities Act. The effects of regulation on the quality of auditing are spelled out. One of the assumption is that a given auditor must charge all his clients the same fee. This means that the audit firms can discriminate on fees.

Paradoxically, the new accounting policies of SFAS No. 52, designed to cure problems relating to wildly gyrating exchange rates, do not apply to those economics where inflation and devaluation rage. Can the paradox be explained? The answer is yes. The evidence produced by this study shows that the differentiation of translation procedures promulgated by SFAS No. 52 is based on a sound theoretical footing. [ABSTRACT FROM AUTHOR]

The article examines the problems and pitfalls involved in organic and mechanistic auditing in the United States and its implications for the auditing environment in which they operate. The design of accounting programs for consistently attaining high levels of quality in auditing tends to substitute judgment with structure. Other key issues discussed include mandated peer reviews, an analysis of the competitive auditing environment, a study of audit staff turnover, mandatory audit engagement partner rotation and the issue's implications for accounting, auditing and finance.

The article presents an analytic review method for accountants base on bivariate analysis that may offer more effective reviews than those produced by simple company ratio or industry ratio methods. The review may indicate the need for additional procedures, or it may indicate that the extent of other auditing procedures may be reduced. Industry statistics were simulated thereby limiting conclusions that may be drawn from the results. Consideration of such industry-specific refinements as change in quartile rankings of ratio and bivariate contours by industry may allow improved results for those industries for which such statistics are available.

The article presents a comparison of the standards that govern the three principal classes of auditors in the U.S. namely, the internal auditor, the governmental auditor and the external or independent auditor. The American Institute of Certified Public Accountants (AICPA) in 1939 released the document entitled "Extensions of Auditing Procedure," the first official pronouncement in a series known today as generally accepted auditing standards for external auditors. The Comptroller General of the U.S. broke the AICPA monopoly on written auditing standards with the publication in 1972 of the General Accounting Office "Standards for Audit of Governmental Organizations, Programs, Activities and Functions," more popularly known as the yellow book. In 1978, internal auditors released the third set of professional auditing standards entitled "Standards for the Professional Practice of Internal Auditing."

This article develops conditions under which audit qualifications arise in equilibrium and study the relation between litigation exposure and audit-qualifications. The authors use a model of audit qualifications to re-examine the documented market's reaction to a qualified opinion and the appropriate empirical specification to test for such reaction. Examples of qualified audit opinions that are ex pos avoidable are asset realization, timing of revenue recognition, amount of reserves for future losses and GAAP compliance. The authors present and analyze an equilibrium model in which a manager rationally accepts a qualified audit report because doing so enables him to convey credibly favorable private information that will increase the market value of the firm.

The article refers to the study "Auditing: Incentives and Truthful Reporting," by David S. Ng and Jan Stoeckenius and discusses auditing theory. The auditing process includes analyzing a company's relationships such as its Pareto-optimal employment contract, the information supplied for financial reports, and the firm's audit technology. Variables in the mathematical models include the company's real income realization or state realization and manager's action choice, which are known to the manager but can be made known to the owner via an audit. An analysis is made by comparing the effects of the financial reporting system, physical production, employment contract, and allocation of resources.

The article presents two models for monitoring management audit quality control and uniformity within Certified Public Accountant firms. The strong presence of calls for quality control mechanisms within the accounting discipline is noted but challenges relating to consistency and cost for application are outlined. The study presents a surrogate measure for the audit process through the two aspects of the audit report: the percentage of qualified opinions to total issued and an analysis of variance across firms. Rationales and case data for the use of these audit variables are provided.

The article describes the areas an auditor should examine when performing a sales force management audit. Elements of the sales force management audit are presented, including sales territories and routing, sales forecasting and compensation. Factors affecting sales management policies and practices are discussed and the qualities a sales force management auditor ought to possess are described. Suitable amounts of time which ought to be allocated for conducting such an audit are noted and the importance of using the results to drive improvement is addressed.

The article presents comments of the author on the paper "Income Smoothing," by Ronald M. Copeland that was published in a previous issue of the periodical "Journal of Accounting Research." The author states that Copeland also presented the attributes of a perfect smoothing device and released other additional empirical findings. The article also discusses a study of the effects of changes in accounting policy on the reported earnings of a large number of companies. The author explains that emphasis was on the income smoothing effects of such changes but the direction of the changes and their materiality were also analyzed.

Copyright of Annals of the Faculty of Law in Belgrade is the property of University of Belgrade, Faculty of Law and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

SUMMARY: Prior research examining enterprise risk management (ERM) focuses mainly on entity-level measures, relying heavily on the link between ERM and internal controls. We argue that auditors leverage the client's ERM system at the application level to create audit efficiencies beyond those created by strong internal controls. Using a Heckman two-stage analysis for our sample of insurance/reinsurance firms rated on ERM quality by Standard & Poor's, we find results consistent with our expectations that higher-quality ERM systems incrementally reduce audit fees, audit delay, and the likelihood of late filing. However, we find that this association is nonlinear and that much of the assurance benefit from ERM systems is captured when firms improve their ratings from Weak to Adequate. JEL Classifications: G22; M41. Data Availability: The Standard & Poor's data on ERM quality is available at: http://www.standardandpoors.com/ratingsdirect/. [ABSTRACT FROM AUTHOR]

AS 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion (PCAOB, 2017) represents the most significant change to American audit reports in more than 70 years. The new standard form unqualified report, which is required for audits of fiscal years ending on or after December 15, 2017, moves the auditor's opinion to the first paragraph, uses section titles to identify important information, clarifies that the financial statement notes are included within the scope of the audit, and requires auditors to disclose the year they began serving consecutively as the company's auditors. For large accelerated filers in 2019 and smaller PCAOB clients in 2020, auditors must begin identifying and discussing critical audit matters. These are the issues that arose during the audit that involved “especially challenging, subjective or complex auditor judgment.” When AS 3101's reporting requirements are completely implemented, American audit reports will change from three or four paragraphs of standardized boilerplate language to a longer, much more flexible report describing the specific judgments and procedures unique to each client. [ABSTRACT FROM AUTHOR]

The article offers information on the approval of new auditing standard AS 3101 by the Securities and Exchange Commission (SEC) as of October 2017. Topics discussed include role of Public Company Auditing Oversight Board (PCAOB) in bringing the standards; evaluation of the company's ability to continue as a going concern; and the assessment of various reports by auditors such as the risks of material misstatement.

This paper examines how auditors' judgments about accounting policies may differ when experiencing different levels of affinity for client management and facing different levels of pressure from client management. The theory of motivated reasoning is employed to analyze the effects of these two factors that should lead individual auditors to adopt as a directional goal the acceptance of client management's aggressive accounting. Accordingly, we predict and find that auditors experiencing greater client affinity and facing explicit client pressure suggest lower adjustments to clients' aggressive accounting, consistent with motivated reasoning's goal-related predictions. But our study goes further and investigates also how auditors react when motivated reasoning theory's "reasonableness constraint" is potentially violated by auditors who perceive excessive client pressure. We predict and find, consistent with the individual auditor's "reasonable constraint" being triggered in at least some auditors, that perception of client pressure intensity leads those auditors to propose larger adjustments to client accounting. To support our findings, we re-analyze the data from a prior motivated reasoning audit experiment, replicate that study's reported directional goal results employing methods used in this study and, in addition, find similar results to those found in this study for increased client pressure intensity on auditor judgment. [ABSTRACT FROM AUTHOR]

This article presents a commentary on two previously published articles by authors Yuji Ijiri and Robert S. Kaplan that discussed a model for the integration of some possible sampling objectives of external auditors. According to Ijiri and Kaplan the auditor's objectives in sampling seem to be much broader than those aimed at in representative sampling. They refer to three additional objectives: corrective sampling, protective sampling, and preventive sampling. The commentators conducted a survey to assess the support of auditors and the objectives suggested by Ijiri and Kaplan. The survey indicated that auditors are not always fully conscious of the diverse objectives that might be achieved by the use of an audit sampling plan.

This article presents comments in response to the article "An Experiment on Nonsampling Errors," by Eugene H. Sauls. The author broke his comments up into three sections, including how the sampling plan was designed, the conclusions that were drawn and how general recommendations fail to summarize the specific results of the experiments. The author claims that the sampling pool used was too small and homogenous in nature, which gave skewed results during the study. It is due to these flaws with the way in which the study was conducted that has led the author to refute the results that Sauls presents.

Copyright of Accounting Analysis Journal (AAJ) is the property of Jurusan Akuntansi, Fakultas Ekonomi, Universitas Negeri Semarang and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The people faces audit problems particularly the selected saving and credit cooperatives and other external users. Number of recommendation are given for the the auditors to know their weaknesses and strength in order to take improvements for their future careers like Signal to their audit teams that providing high quality audit services is a top audit priority and that the office does not view such services as a commodity; the office can do this by emphasizing the importance of audit quality in training programs and annual performance re-views, Encourage all personnel to maintain an attitude of professional skepticism that focuses on the importance of the auditor's role in protecting the public interest and maintaining strong capital markets. Beside to this the number of auditors with sufficient training in each sub Woreda should increases in order to balance the number of co-operatives so that there are graduated students those who have taken the course cooperative accounting along with its legal system, therefore, the government has to train this manpower collaborate with cooperatives to solve the challenges. Cooperatives have to prepare their financial statement on time through cooperative accounting system that focus on transactions. It should provide a complete audit or transaction trial for each transaction. [ABSTRACT FROM AUTHOR]

An introduction to the periodical is presented in which the editor discussed various topics within the issue which includes accounting and auditing procedures, philanthropies and charities and different approach to accountability in charitable organization.

The author reflects on the usage and effects of accounting technologies encompassing Industry 4.0 during the audit process prior to their business implementation. Topics discussed include an overview of Industry 4.0, the evolution of auditing, the elements of Audit 4.0, and the principles of Industry 4.0 such as interoperability and virtualization.

The article presents the authors' comments of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the Public Company Accounting Oversight Board (PCAOB) concept release on Audit Quality Indicators, No. 2015-005, July 1, 2015.

On June 30, 2015 the Public Company Accounting Oversight Board (PCAOB) issued a supplemental request for comment on its 2013 reproposal to require auditors to disclose in the auditor's report the name of the engagement partner and information about certain other participants in the audit. The supplemental request solicited public comments on an alternative to disclosure of this information in the auditor's report, namely that audit firms report (1) the name of the engagement partner, and (2) the names, locations, and extent of participation of other audit participants in a new form (Form AP) to be filed with the PCAOB within 30 days of the date the auditor's report is first included in a document filed with the SEC. The comment period ended on August 31, 2015. This commentary summarizes the participating committee members' views on the alternatives presented in the supplemental request for comment. [ABSTRACT FROM AUTHOR]

In order to develop commercial relations, the harmonization of the tax system with the accountancy of the company is oriented towards the elaboration of accounting policies pursuing he interest of the management to enforce the development strategies and sending the necessary information to the shareholders in order to underlie the economic decisions. The purpose of this paper is to highlight the relation accounting - taxation and the tendency in the approach of this relation showed by the managers of the companies from the point of view of income tax. The research methods took into consideration qualitative methods. The reading and systematization of the specialty literature enabled an overview of the accounting - taxation and shaped an action direction for the harmonization process intensification at the company's level. [ABSTRACT FROM AUTHOR]

The audit market's unique combination of features-its role in capital market transparency, mandated demand, and concentrated supply-means it receives considerable attention from policy makers. We explore the effects of two market scenarios that have been the focus of policy discussions: mandatory audit firm rotation and further supply concentration due to the exit of a 'Big 4' audit firm. To do so, we first estimate publicly traded firms' demand for auditing services, allowing the services provided by each of the Big 4 to be differentiated products. We then use those estimates to calculate how each scenario would affect client firms' consumer surplus. We estimate that, for U.S. publicly trade firms, mandatory audit firm rotation would induce consumer surplus losses of approximately $2.7 billion if rotation were required after 10 years and $4.7-5.0 billion if after only four years. We find similarly that exit by one of the Big 4 would reduce client firms' surplus by $1.4-1.8 billion. These estimates reflect only the value of firms' lost options to hire the exiting audit firm; they do not include likely fee increases resulting from less competition among audit firms. The latter could result in audit fee increases between $0.75-1.3 billion per year for mandatory rotation and $0.47-0.58 billion per year for the disappearance of a Big 4 audit firm. Such losses are substantial; by comparison, total audit fees for public firms were $11 billion in 2010. [ABSTRACT FROM AUTHOR]

In Romania, internal audit is governed by Law no. 672/2002[3], there is a normative and procedural framework for continuous development, and auditing standards have become a practice in the vast majority of entities[1]. This paper analyzes the stage of the internal audit activity to public entities in the Central Administration and Local Administration in the period 2004-2012. [ABSTRACT FROM AUTHOR]