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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.)

Previous literature on the engagement quality (EQ) review argues that EQ reviewers should provide more efforts into the review process when fieldwork auditors' judgments and conclusions on the financial statements are potentially biased. Little empirical study has been done, however, partly due to the confidentiality of the detailed data on EQ reviewers' audit hours. The purpose of the article is to shed light on the existing literature by conducting an empirical investigation using a unique actual data set available in Korea. The results show that the EQ review hours are positively associated with CEO turnovers, a proxy for the audit risk, which supports the prediction of the theory on the EQ review. Additional analyses show that such results are stronger under (a) the upward earnings management and (b) the forced CEO turnover. The article extends the existing literature on the EQ review process and enhances the understanding of the engagement-level quality control in the volatile audit environment by providing empirical evidence to the analytic discussions on the EQ review. [ABSTRACT FROM AUTHOR]

Recently, deep learning technology has gradually penetrated various fields. Today, the field of healthcare is also closely linked to deep learning technology. Image processing technology based on deep learning can accurately segment medical images, which is convenient for medical research and pathological analysis. Accurate distribution of images can effectively save medical resources. Therefore, image processing techniques can contribute to the quantification and assessment of economic audit risks. In recent years, medical image segmentation has achieved many research results. However, with the improvement of accuracy, the segmentation standards of medical images are also becoming more and more stringent. For medical images, they tend to have rough and fuzzy boundaries and noise disturbances of different shapes. The above problems pose challenges for accurate localization and segmentation of lesion regions. On the other hand, in the field of medical images, there are also problems such as unbalanced number of samples and scarcity of large medical image datasets. In response to these problems, this paper conducts research work and proposes an Attention Mechanism and Multi‐Scale spatial Pooling‐based conditional Adversarial Network (AM‐MSP‐cGAN) model to achieve automatic segmentation of medical images. AM‐MSP‐cGAN can learn more detailed features from fuzzy boundaries, and effectively solve the problem of data lack, thereby promoting economic audit risk quantification and assessment in the healthcare field. [ABSTRACT FROM AUTHOR]

SYNOPSIS: We examine whether critical audit matter (CAM) disclosures contain information about material misstatement risks that is priced in audit fees. We find that textual features of auditors' risk descriptions and the types of risks identified capture fee-relevant information. Further, the results are incremental to other determinants of audit fees considered in prior research and to managements' disclosures in the related notes to the financial statements. Overall, we provide evidence that auditors' perceptions of audit risks revealed in the newly expanded audit opinion capture information relevant for understanding audit pricing decisions. Data Availability: All data are publicly available from the sources identified in the paper. JEL Classifications: M41; M42; M48. [ABSTRACT FROM AUTHOR]

Pandemic Covid 19 has impacted every business operation worldwide and increased business risk. Auditors' responsibility to provide audit quality has become more prevalent. This study aims to get empirical evidence of auditor experience, auditor industry specialisation, and audit risk on audit quality during the COVID-19 pandemic. The research methods used quantitative with a survey approach; data gathered by a survey of Auditor. The result finds that during turbulent economic situations, the need for auditor experience and auditor's industry specialists has increased to mitigate the audit risk. Auditor experience and auditor industry specialists were needed to promote audit quality with low audit risk. The study has proved that auditor experience, industry specialisation, and audit risk impact audit quality. Assessing the auditor and public accounting firm using quality control standards from risk-based perspectives is urgently required. Other studies may investigate the issues using qualitative methods to get a deeper understanding.

In the era of big data, audit risk assessment is facing increasing business volume. Hence, it is important to develop automatic audit risk assessment methods for enterprises with the assistance of intelligent algorithms. As a consequence, this paper proposes data-driven smart assessment for enterprise audit risks-based radial basis function (RBF) neural networks and grey correlation analysis (GCA). First, evaluation data are collected and analyzed to understand the characteristics and influencing factors of enterprise audit risks. Secondly, RBF interpolation is introduced to establish the network structure for RBF neural networks. Then, GCA is integrated with RBF Interpolation (RBFNN) to formulate the automatic audit risk evaluation method, and the proposal is named RBF and GCA. Such a combined methodology can improve audit risk assessment efficiency. Finally, we make some experiments to evaluate the proposed TBF-GCA on a real-world dataset, and some evaluation indicators are specified based on the actual audit risk situation of the enterprises. The obtained results reveal that RBF–GCA has high accuracy in identity precision and can effectively identify audit risks for enterprises. [ABSTRACT FROM AUTHOR]

This study investigated the predictors of audit quality according to registered external auditors in Indonesia. Even though there are improvements in audit reports and practices, there is still some fraud and audit risk that affects the credibility of financial reports. This research is based on a random sample technique where 304 registered external auditors in Indonesia answered self-constructed research instruments and their validity was ascertained with exploratory factor analysis, where they resulted as good. The first-party distributed data were analyzed with multiple regression to determine the predictors of audit quality. The study revealed that internal controls, governance, and audit culture were positively significant predictors of audit quality. Based on this outcome, the Indonesian registered external auditors affirm that the detection, prevention, and correction controls, the systematic rules, practices, and process of directing and controlling a firm, and the values, beliefs, behaviors, and norms of the auditor and the audit firm increase fraud detection, reduce audit risk, and increase the credibility of the audited financial reports. The study recommends further research into the 39.7% excluded predictors of audit quality. [ABSTRACT FROM AUTHOR]

Executive compensation contracts may influence financial reporting quality, and the CFO plays a key role in preparing the financial statements. This study examines whether the structure and components of CFO compensation are associated with audit risk as measured by audit fees for a sample of S&P 1500 companies during the period 2012–2022. We find that the percentage of total compensation composed of either stock or options is significant and positively related to audit fees, while non-equity incentive plan compensation is significant and negatively related to audit fees. We also find that the dollar amount of equity compensation is significant and positively related to audit fees, while the dollar amount of non-equity compensation is not related to audit fees. These results suggest that CFO compensation structure is an important factor in the assessment of audit risk, which is important for compensation committees as well as regulators. This is the first study, to our knowledge, that examines the relationship between the dollar amount and composition of CFO compensation and audit fees. [ABSTRACT FROM AUTHOR]

Internal audit is a function designed to assist companies in achieving their strategic goals. So far, internal audit is considered only as a fault finder so that its function is less acceptable in the work unit. Over time, internal audit has been accepted as a compliance tester in an organization. This compliance testing results in activities that are still a formality without any real action from the implementation of compliance procedures. In accordance with the times, especially in the field of technology, various kinds of risks threaten each organization such as cyber, market and other risks that affect the achievement of organizational goals. Risk-based audits are starting to be launched and implemented to be able to help management see which side of each work unit has potential risks and actions to mitigate risks. Internal audit designs each audit plan in each work unit to be able to sort out the work unit in each potential risk in each work unit. Internal audit findings are grouped into three parts of the risk group, namely, low, medium and high to be able to provide recommendations for urgent action with a high level of risk. Awareness of each work unit is also expected to be increased from the audit results so that in the future each work unit conducts self-assessment and supervision of any risks that arise or have the potential to arise in its work unit, and reports to Management so that the necessary follow-up can be carried out to prevent risks that will occur to a minimum. [ABSTRACT FROM AUTHOR]

Prior research suggests oversight inspections lead to unintended consequences by motivating auditors to manage inspection risk. The current study provides evidence of the impact of a misalignment between inspection and mis-statement risks at the account level, where planning decisions are made. We predict auditors feel pressures to address more immediate inspection risks at the expense of adequately responding to mis-statement risks as prescribed by auditing standards. Employing an experiment with 182 experienced auditors, we manipulate accountlevel inspection risk (low or high). As hypothesized, auditors plan more hours for an account with higher inspection risk and correspondingly assign fewer audit hours to other accounts with lower inspection risk, even if mis-statement risk is high for those accounts, suggesting an unwarranted shift in audit efforts. Our findings suggest inspection risks impair auditors' effort allocation decisions and thus may undermine the audit risk model as the normative benchmark for program planning. [ABSTRACT FROM AUTHOR]

We study off-the-clock indiscretion accusations against corporate officers and directors and examine the extent, effectiveness, and context of auditors' response. In the year that indiscretion allegations are first publicized, auditors charge higher fees and are more likely to resign. Auditors respond to allegations against both top executives and board members. Further, reactions are strongest when allegations demonstrate a lack of individual integrity and, separately, when the audit office has previously audited other similarly accused clients. Importantly, the resulting increase in auditors' effort partially negates the association between indiscretions and lower financial reporting quality. However, auditors are primarily reactive, rather than proactive, and their response is stronger when the accused client is less important economically. These results suggest that company leadership's off-the-clock indiscretions are signals to auditors of poor tone at the top, but the audit response is not uniform across all clients. [ABSTRACT FROM AUTHOR]

Purpose: Climate change has led to a rise in the frequency, intensity and scope of droughts, posing significant implications for businesses. This study examines the impact of local community drought levels on audit pricing. Additionally, it explores the moderating effects of high-tech industries, auditor busyness and the level of local community concern regarding the drought crisis. Design/methodology/approach: This study employs a mixed-methods approach to rigorously test the research hypotheses. The quantitative phase of the study utilizes a sample of 1,278 firm-year observations from Iran's capital market. For the analysis of the quantitative data, ordinary least squares regression with clustered robust standard errors is used. Additionally, this research supplements its quantitative findings with qualitative evidence obtained through semi-structured interviews with 19 Iranian audit partners. Findings: The results suggest that firms operating in provinces facing severe droughts experience notably higher audit fees. Furthermore, the positive relationship between drought and audit fees is weakened when auditors are busy, local community concern regarding the drought crisis is high or the firm operates within high-tech industries. These findings are supported by a range of robustness checks and qualitative evidence gathered from the field. Originality/value: This research contributes to the growing literature on climate change by examining the influence of local community drought levels on audit pricing within an Iranian context. Additionally, our study sheds light on how high-tech industries, auditor workload and the level of local community concern regarding the drought crisis moderate the relationship between drought and audit fees. Importantly, our study pioneers in providing mixed-methods evidence of the association between drought severity and audit fees. [ABSTRACT FROM AUTHOR]

In this study, we first investigate the impact of environmental, social and governance (ESG) practices on company's performance. Using samples of Chinese publicly listed (i.e. A-share companies only) from 2017 to 2021, we analyze the association between ESG practices and company's performance in terms of ROA and Tobin's Q. We argue that companies with better ESG practices tend to draw more attention from stakeholders, which in turn encourage management to improve the company ROA and Tobin's Q. Secondly, this study analyzed the effect of auditors as evidence by audit fees on the relationship between ESG practices and company performance. Our analyses show two main results. Our results show that ESG practices have a positive impact on company performance in our samples, which means that good ESG scores promote better company performance. Furthermore, the relationship between ESG practices and company performance is moderated by the audit fees of listed companies, which indicates that the higher the company audit fees, the higher the corresponding effect of ESG scores on company performance. The results imply that auditors consider ESG as part of their audit risk assessment, although the current assurance scope of the audit work does not include ESG practices. Hence, auditing does influence the nexus between ESG practices and company performance. [ABSTRACT FROM AUTHOR]

In this study, we investigate whether auditors consider their clients' climate change-related external risks when making audit pricing decisions. Using county-level proxies based on the number of declared natural disasters and the level of societal climate change awareness, we discover that clients with greater exposure to climate change risks pay significantly higher audit fees. After performing several additional tests, we conclude that auditors consider climate change risks and their potential consequences as a systematic business risk that is factored into the audit fees. For instance, we demonstrate that clients' climate risk exposure has become more strongly associated with audit pricing in recent years, as climate change has gained greater importance in public debate. Moreover, we discover that auditors place a greater emphasis on clients' climate risks when they themselves are located in regions with higher climate change awareness, indicating that auditors' climate change perception also matters. Given the growing interest in climate change-related risks in practice and research, as well as the significance expected to be placed on these risks in the future, our findings are timely and should appeal to a wide range of readers, including investors, regulators, and scholars. [ABSTRACT FROM AUTHOR]

We examine whether big baths (large and non‐recurring charges) affect auditors' risk assessments and therefore result in higher audit fees. Prior studies have found that there is an asymmetric reaction from auditors on firms' income‐increasing/decreasing accruals. We argue that auditors' response to big baths is distinguishable from other types of earnings management as big baths provide incremental information to auditors beyond other earnings manipulation indicators. Our findings show that audit fees are significantly higher for firms with big baths, compared to other firms. We also present evidence that the positive relation between big baths and audit fees is stronger for firms with weaker corporate governance and greater information asymmetry. Overall, our results suggest that auditors expand their audit effort to mitigate the greater audit risk attributable to big baths, which in turn lead to higher audit fees. [ABSTRACT FROM AUTHOR]

This case explores the subjective nature of professional judgment related to audit risk through the lens of a fictitious company, Sparked Intuition Power (SIP). SIP has just been accepted as a new audit client by an international accounting firm. Students play the role of associates on the audit engagement team. As part of their work on the audit, the students identify potential risks present at SIP as part of the initial risk assessment process. Once these risks have been identified, the students decide how to assess the potential severity of each risk and determine the resulting effect on the overall auditor workload. Through interaction and discussion with their instructors, the students should be better able to navigate the decision-making process related to risk evaluation in an audit engagement. [ABSTRACT FROM AUTHOR]

This study aimed to investigate whether the significant policies and new auditing standards have substantial effects on audit effort and audit risk, and if such effects are reflected in audit fees. The observations from 2008 to 2021 were divided into three periods including "filing deadline reduction", "implementation of new auditing standards", and "border controls due to Coronavirus disease 2019 (COVID-19 pandemic)". The empirical results indicate that both mandatory policies and the adoption of new auditing standards, as well as the significant changes brought about by the COVID-19 pandemic, have a substantial impact on auditors' audit work and audit risk. As a response to these varying audit risks, auditors adjust their audit fees accordingly. This study validated that even in countries where audit fees are generally at lower level, auditors still reflect audit risk in audit fees. Therefore, audit fees can indeed serve as one of the indicators for assessing audit risk and a firm's risk. [ABSTRACT FROM AUTHOR]

Declining audit fees represent a worldwide phenomenon which draws particular attention and concerns in the audit profession. The study explores the guiding reasons of public interest entities (PIEs) in Europe when electing a particular auditor, and investigates whether these reasons are reflected on audit fees. Further, it considers the impact of the prevailing macroeconomic conditions on these reasons, and accordingly on the cost of the audit. To this end the study intends to investigate whether these guiding reasons represent a declining factor on audit fees and under which macroeconomic conditions. To achieve the study objectives, a pragmatic mixed methods research approach is adopted, comprising surveys of respondents at audit firms and PIEs, and semi-structured interviews with participants at purposively selected PIEs, in Europe. The study finds that the guiding reasons are associated with the macroeconomic conditions, and reflect PIEs’ expectations from the external audit. Ultimately, these expectations impact the cost of the audit depending on the current trends in the economy. The study proposes that the audit regulatory authorities should take actions to regulate PIEs’ expectations from the external auditors and regulate the reporting requirements of auditors and audit firms, to achieve a proper balance between the scope of the audit procedures and the cost of the audit. In this view, the study recommends audit regulatory authorities adopt guidelines for determining the cost of the audit based on the assessed audit risk and scope of audit procedures.

This study examines auditor resignations around a client firm's stock price crash. Overall, the study suggests that a firm's crash risk is one of the key factors influencing auditors' client-retention decisions. A stock price crash increases the likelihood of lawsuits and financial restatements in the future. After controlling for risk factors that contribute to resignation decisions, I document a positive association between auditor resignations and stock price crashes. Further findings indicate that auditor size affects auditor–client relationship decisions before a crash occurs: Big auditors tend to resign more often from client firms with high crash risk compared with smaller auditors. However, auditor size becomes irrelevant once a crash occurs, as the client firms then become risky clients to both large and small auditors. This study therefore provides evidence that auditors of different sizes face different incentives to alter their relationship prior to a stock price crash and that these incentives change following a crash. [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.)

SUMMARY: This study investigates whether audit clients' blockchain activities (including crypto-related activities) affect audit risk by examining the association between blockchain disclosures in 10-K filings and audit fees. Focusing on U.S. firms between 2013 and 2020, we empirically show that audit fees are higher for companies disclosing blockchain activities in 10-K filings. We further find that this positive association is more pronounced for companies disclosing current blockchain implementation than for companies with plans for blockchain activities. The results indicate that clients' blockchain activities influence audit risk as assessed by external auditors. As blockchain technology and its applications are emerging, our findings have implications that should be considered by auditors, regulators, and top management. [ABSTRACT FROM AUTHOR]

Purpose: This study investigates the relationship between companies with military directors and audit fees in Indonesia. Design/methodology/approach: Using upper echelon and audit pricing theories, the authors examine military directors' roles in the demand for and supply of auditing services. The authors use Indonesia as their research setting as their military forces have a long history of involvement in business. The study sample includes 898 firm-year observations on the Indonesia Stock Exchange during 2014–2018. Findings: The authors find a negative relationship between military connections and audit fees. This is consistent with auditors assessing lower audit risk and charging lower audit fees to companies that have leaders with military experience. The study findings are strongest where there is military experience on the board of directors and where the military experience is from the Army. Originality/value: This study extends the literature on the benefits of military experience in company leadership, especially in the context of auditing research. The study findings also have implications for the selection of board candidates and auditor risk assessments. [ABSTRACT FROM AUTHOR]

Using the green finance policies (GFPs) in China as a shock to capital allocation, we find that the implementation of GFPs improves audit quality for green firms. Specifically, green firms are likely to receive favorable audit opinions, pay lower audit fees, and generate higher-quality financial reports after the implementation of GFPs. When examining the mechanisms through which GFPs affect audit risk for green firms, we find that green firms are likely to experience lower financial risks and have access to more bank loans at a lower cost after the implementation of GFPs. Further analysis shows that the main results are more pronounced when GFPs are better enforced, where auditors face more government intervention, and where firms are financially constrained. Overall, we document that GFPs decrease financial risk for green firms and have a positive spillover to auditors by mitigating audit risk. [ABSTRACT FROM AUTHOR]

If there are no auditing standards or auditing processes of big data, the audit risks of enterprises are increased. This paper first introduces the topic through the research background and literature review in order to ensure the integrity and accuracy of audit evidence to the maximum extent, and then analyses the causes of enterprise audit risk. When analysing the risk level of material misstatement, it is mainly the audit risk generated by the enterprise's unique business model, information system and financial management. Audit risk is mainly caused by the ability of auditors and audit process management. After quantitative analysis of the correctness of enterprise audit risk assessment indicators, this paper builds a multi-level comprehensive assessment model of enterprise audit risk on the basis of AHP analysis. At the same time, this paper puts forward specific measures to improve audit methods and audit processes and prevent audit risks in view of the actual problems encountered in the current audit risk of enterprises, so as to provide certain references for enterprise risk management and control. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine whether firms that appear to exhibit high sustainable outputs are more likely to pay higher audit fees than firms without such outputs. Design/methodology/approach: The sustainability outputs are measured using a sustainable product portfolio consisting of four products: clean energy products, eco-design products (EDP), environmental products (EP) and sustainable building projects (SBP). The audit fee variable is measured by the natural logarithm of the total amount of audit fees. The study tests two models of the association between these outputs and audit fees; Model 1 tests this association in the absence of the moderating variable (sustainability committee), and Model 2 tests the association in the presence of the moderating variable. Findings: An analysis of data on 261 European firms from the Refinitiv Eikon database from 2010 to 2019 shows that high sustainability outputs are significantly and positively associated with audit fees. More importantly, this association is moderated by the presence of a board-level sustainability committee, suggesting that this type of committee reflects a factor considered by auditors in their audit risk assessment practices. The findings indicate that in Model 1, one (EP) out of four variables has a significant and positive association with audit fees, while in Model 2 and in the presence of sustainability committee, two variables (EP and EDP) have a significant and negative association with audit fees. However, the robust analysis shows that three variables (EP, EDP and SBP) have significant and negative associations with audit fees. Practical implications: The study findings have important implications for policymakers, auditors and firms' managers. For policymakers, the findings provide support for the argument that sustainable attitudes incentivise firms to manage sustainable product profiles more effectively. As such, policymakers should incentivise firms to establish a sustainability committee and regulate its role and responsibilities. Auditors should coordinate with the sustainability committee to facilitate audit efforts and reduce audit fees. Social implications: Understanding the relationship between sustainable products and audit fees will allow firms to improve their portfolio of sustainable products. In addition, other social implications of this study relate to improving relationships with society by establishing a sustainability committee that is responsible to communicate with that society. Originality/value: The results support the argument that firms should manage sustainable product portfolios more effectively. In addition, the results of the study highlight the importance of a new variable as a moderator, the sustainability committee, which has not been examined before. [ABSTRACT FROM AUTHOR]

We examine whether corporate political donations (CPDs) are associated with audit fees in the Australian setting. Our baseline results based on observations of Australian top 500 non‐financial companies show that, on average, firms with CPDs are associated with about 9% lower audit fees than firms without CPDs consistent with the strategic investment or resource dependency view. Using path analysis, we next show that high earnings quality resulting from strategic benefits of CPDs explains the association. Overall, these results confirm that firms use CPDs as strategic investments that are associated with lower earnings management, which leads to lower audit risk and hence reduced audit fees. [ABSTRACT FROM AUTHOR]

This study investigates whether accounting comparability, income smoothing and engagement partners affect audit risk perceived by auditors. We find that both accounting comparability and income smoothing reduce perceived audit risk and that the interaction of these two variables incrementally reduces perceived audit risk. We also find that the interaction of accounting comparability and income smoothing incrementally reduces perceived audit risk when engagement partners exert more effort in auditing. The results imply that when clients exhibit both cross‐sectional and the time‐series informativeness of financial statements, auditors lower their perceived audit risk and reduce risk premium, which decreases deadweight cost to these clients. This is especially the case when engagement partners exert more effort in auditing. To the best of our knowledge, this is the first empirical study to test the interaction effect of accounting comparability, income smoothing and engagement partners on perceived audit risk. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial information disclosure potentially helps auditors make better assessments. Design/methodology/approach: Using a sample of China's listed firms from 2007 to 2021, the authors aim to find the relationship between customers' financial restatements and their suppliers' audit opinions. Heckman selection model, placebo tests and other robustness checks are used as well. Findings: The findings reveal that customers' financial restatements have a significant effect on the likelihood of suppliers receiving modified audit opinions. This relationship is pronounced when suppliers face a higher level of financial constraints, exhibit poorer accounting conservatism or receive more negative media coverage. Additionally, this effect occurs through increased business risk and information risk, which heightens auditors' perceived audit risk. Moreover, the study highlights the influence of switching costs, auditor expertise and restatement severity on this relationship. Practical implications: Risks originating from customers can spread along the supply chain, emphasizing the necessity for auditors to give heightened attention to both the audited firms and their customer information. Moreover, regulators should carefully consider the important impact of customer information disclosures to maximize the protection of the interests of external information users. Originality/value: This study not only confirms the crucial role of customer information disclosures in annual reports for stakeholders and auditors but also contributes to the existing literature on customer–supplier relationships. [ABSTRACT FROM AUTHOR]

This paper addresses the effects of clients' carbon risk on audit pricing. Using data from 438 EU companies for the period 2013–2019, we find a positive relationship between carbon risk (measured by the level of carbon emissions) and audit fees. Furthermore, we find that participation in the European Union's Emission Trading System, a limited market and regulation scheme to mitigate special industries' Greenhouse Gas emissions, strengthens the positive relationship between carbon risk and audit fees. Insights from additional tests indicate that auditors price carbon risk particularly for large clients that are under greater public scrutiny and that the increase in fees rather stems from a risk premium charged by the auditor than higher audit effort. With interest in climate change developing rapidly across society, practice and research combined with the increasing importance of reducing carbon risk, our findings are timely and should thus appeal to a wide variety of recipients. [ABSTRACT FROM AUTHOR]

This research examines what proportion of Big Four auditors underperform in integrated audit settings and why. Incorporating the inverse relation between detection risk and assessed risk of material misstatement (RMM) per the classic audit risk model, we create an RMM coverage ratio to measure how many times the total audit effort expended covers pre-existing RMM—the higher the ratio, the larger the margin for errors. We then partition the RMM coverage ratios in each industry into Deciles (0–9). Empirical analyses corroborate that, given the risk-based audit approach strictly executed, only the Big Four auditors of higher Deciles (2–9) increase the likelihood of integrated audit effectiveness. This evidence indicates that due to a small margin for errors (e.g., RMM coverage ratios ≤ 2.31), 20% of Big Four auditors are less likely to adequately assess or address risks to deliver an engagement, breaking the Big Four brand's halo effect precisely. [ABSTRACT FROM AUTHOR]

Copyright of Accounting & Financial Studies Journal is the property of Republic of Iraq Ministry of Higher Education & Scientific Research (MOHESR) 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 Environmental & Social Management Journal / Revista de Gestão Social e Ambiental is the property of Environmental & Social Management Journal 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.)

Driven by innovation strategy, Chinese enterprises' innovation investment, and research and development capability have been continuously improved, and the audit risk caused by this has attracted widespread attention from the academic community. This study takes China's A-share listed companies from 2013 to 2021 as samples to empirically test the relationship between innovation input and audit pricing of Chinese enterprises. Research shows that the higher the innovation investment, the higher the audit cost. High-quality corporate governance, sufficient research and development personnel, research and development subsidies, and operating cash flow can all play a negative moderating role. A good innovation environment will weaken the positive influence between innovation input and audit fees. This study theoretically confirms the risk-oriented audit pricing mechanism, which is of great significance for optimizing enterprise innovation risk management and improving audit service levels. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to analyze audit planning decisions of small and medium-sized Spanish audit firms and the resulting impact on audit risk and effort. Prior research examining audit risk overwhelmingly focuses on Big 4 audit firms, and little is known about how audit planning decisions influence audit risk in smaller firms, a significant part of the audit profession. Thus, it is important to examine the planning judgments in small and medium sized audit firms and the link between planning risk assessments and the extent of audit effort put forth to achieve an acceptable level of audit risk. Using audit engagement specific data derived from publicly available databases and survey data, this study investigates the factors assessment of their client’s risk of material misstatement and whether the effort applied in performance of the audit engagement effectively responds to that risk. We find a significant statistical relationship between audit risk and audit effort, which provides empirical evidence that auditors modify the extent of audit effort based on perceived audit risk and brings into debate the work of the small firms. Additional analysis shows that audit effort (i.e., hours) is significantly influenced by the tenure and the timing of the audit engagement (i.e., peak audit season). However, audit engagements with longer tenure do not adjust their audit effort in response related to low management integrity or weak internal controls, which suggests familiarity, that is, auditors may not be as skeptical of management incentives. This paper contributes to debate about audit quality and whether the size of audit firms serves as an observable characteristic associated with higher audit quality.

This study explores the variables of workload, level of audit fees and audit risk on audit quality by testing the three research hypotheses using SPSS with multiple linear regression methods. The study was conducted at a Public Accounting Firm in East Java, Indonesia, with a population of 48 officially registered auditors. A questionnaire instrument was used to collect research data, containing questions/statements related to research variables tested for validity and reliability. The collected data were analyzed using multiple linear regression methods. The research results show that workload variables, audit fees, and risk levels significantly positively affect audit quality. The main research contribution of this study is aimed at practitioners and authorities or associations that, in the preparation and implementation of audit standards, must consider the auditor's internal and external factors and the client's real condition. The association needs to bridge the mistakes of the auditor or KAP when dealing with different client conditions. In addition, based on the results of this study, it is necessary to consider work overload and working time for auditors because they affect audit quality.

The research carried out through this article was structured starting from the clarification of some key concepts of external public audit, continuing with revealing the role of the supreme institutions of external public audit (such as the Romanian Court of Auditors) in this action of great importance and complexity and concluding with the practical aspects related to the conclusions drawn by the Court of Auditors in the audit missions of the financial statements performed in recent years in army entities. Thus, the approach was structured on the following chapters:

Starting from the premise that the great economic crises of the last decades were based on the great financial scandals that shook the world economy, I found that auditing in general, and the process of auditing financial statements, has started to be questioned. Thus, I believe that it is necessary and obligatory to analyze whether financial audit, as it is now, is still suitable for modern society, i.e. whether its construction and methodology still meets the requirements of a constantly evolving market economy. Because of this, I considered it appropriate to carry out an analysis, aimed to identify new perspectives for the development of financial auditing in line with the requirements of a constantly changing market economy.

Prior research indicates that the CEO has a significant impact on financial reporting decisions. However, there is limited research on the implications of CEO succession origin (hiring a CEO from the inside as opposed to from the outside) for auditors. We find that on average, audit fees are greater by about 8% when a CEO is hired from the outside than when a CEO is promoted from within. We also find that the CEO's in-house experience (the number of years the CEO has worked in the firm before becoming the CEO) is negatively associated with audit fees, suggesting that the CEO's in-house experience enhances the CEO's competence in understanding how the firm's performance should map into the financial statements, resulting in lower audit risk. Finally, our findings suggest that the CEO's in-house experience plays an important role in mitigating audit risk in firms with poor corporate governance quality. [ABSTRACT FROM AUTHOR]

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SUMMARY: This study draws on human capital theory to measure the quality of accounting personnel based on their education level and investigate whether the education level of the client firm's accounting personnel affects auditors' assessment of audit risk by examining audit outcomes. It shows that auditors charge higher fees and are more likely to make audit adjustments for companies whose accounting personnel have a lower level of education. The relationship between the education level of accounting personnel and audit fees (audit adjustments) is robust to an instrumental variable model, an entropy balancing approach, and a difference-in-differences analysis. Audit firms strategically assign more experienced partners to audit companies whose accounting personnel's average education levels are relatively low. Taken together, these findings suggest that the education level of clients' accounting personnel affects auditors' assessment of audit risk and audit outcomes. JEL Classifications: M40; M42; J01; J24. [ABSTRACT FROM AUTHOR]

Declining audit fees represent a worldwide phenomenon which draws particular attention and concerns in the audit profession. The study explores the guiding reasons of public interest entities (PIEs) in Europe when electing a particular auditor, and investigates whether these reasons are reflected on audit fees. Further, it considers the impact of the prevailing macroeconomic conditions on these reasons, and accordingly on the cost of the audit. To this end the study intends to investigate whether these guiding reasons represent a declining factor on audit fees and under which macroeconomic conditions. To achieve the study objectives, a pragmatic mixed methods research approach is adopted, comprising surveys of respondents at audit firms and PIEs, and semi-structured interviews with participants at purposively selected PIEs, in Europe. The study finds that the guiding reasons are associated with the macroeconomic conditions, and reflect PIEs' expectations from the external audit. Ultimately, these expectations impact the cost of the audit depending on the current trends in the economy. The study proposes that the audit regulatory authorities should take actions to regulate PIEs' expectations from the external auditors and regulate the reporting requirements of auditors and audit firms, to achieve a proper balance between the scope of the audit procedures and the cost of the audit. In this view, the study recommends audit regulatory authorities adopt guidelines for determining the cost of the audit based on the assessed audit risk and scope of audit procedures. [ABSTRACT FROM AUTHOR]