Browsing by Subject "Audit fees"

Now showing 1 - 4 of 4
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    Do Industry Specialist Audit Firms Influence Real Earnings Management? The Role of Auditor Independence
    (Universidad de Murcia, Servicio de Publicaciones, 2023) Al-Qadasi, Adel Ali; Baatwah, Saeed Rabea; Ghaleb, Belal Ali; Qasem, Ameen
    In this study, we provide empirical evidence on how the relationship between industry specialist auditors and real earnings management (REM) is moderated by the auditors’ independence. From a sample of Malaysian listed companies for the period 2009 to 2016, the results indicate that companies with specialist auditors are less likely to practise REM. However, this negative association is less pronounced when the independence of the specialist auditor is low, suggesting that the presence of economic bonding between the specialist auditor and the client may allow the auditor to become sufficiently lax to align with the interests of an economically important auditee. Our findings remain robust after controlling for endogeneity and self-selection bias and performing several further analyses. This study is the first to prove that auditor independence can moderate the effectiveness of industry specialist auditors in mitigating REM practices. The results have implications for policy makers to enhance the current regulation structure of auditing and accounting professions. The results also provide new insights into the association between audit quality, REM and auditor independence in an emerging economy.
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    Implementing mandatory audit firm rotation: Effects on audit and non-audit fees
    (Universidad de Murcia, Servicio de Publicaciones, 2024) Basioudis, Ilias G.; Cuellar-Fernández, Beatriz; Garcia-Lacalle, Javier
    The 2014 reform of the European Union (EU) regulation on auditing includes mandatory audit firm rotation and a significant limitation of the provision of non-audit services by the audit firm to their existing clients. This paper analyses the changes in audit fees, and non-audit fees, as well as in their proportion, when there is a switch of audit firms, before and after the new regulation. The analysis is carried out for the Spanish listed companies from 2011 to 2018 using two types of analyses, descriptive/comparative and multivariate, panel data, regressions. As expected, the new EU regulation has resulted in a significant increase in audit firm switches. The results show that, when there is a change of audit firm, the incoming firm offers a significant discount to the new client with the outgoing firm. This is the case before and after the reform, and for both voluntary and mandatory switches after the reform. In addition, the reform has led to a reduction of non-audit fees, which is especially evident after a voluntary audit firm switch. We conclude that audit firms seem to be willing to take on the additional cost of auditing a new company to gain clients.
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    ¿Influye la calidad de la auditoría en la gestión de resultados en los mercados emergentes? Evidencia de Jordania
    (2020) Almarayeh, Taha Suleiman; Aibar-Guzmán, Beatriz; Abdullatif, Modar
    Este estudio investiga si algunos atributos de la calidad de auditoría son capaces de restringir la manipu-lación de resultados en un país en desarrollo, Jordania, cuyo contexto cultural, económico e institucionales muy diferente del contexto de los países analizados anteriormente. Se usó la regresión de mínimoscuadrados generalizada (GLS) para estudiar la asociación entre dos atributos de la calidad de auditoría(tamaño del auditor y honorarios de auditoría) y los ajustes por devengos discrecionales, como proxy dela manipulación de resultados, para una muestra de empresas industriales que cotizan en la Bolsa devalores de Amman durante el período 2012 - 2016. Los resultados son consistentes con la expectativade que en los países emergentes la auditoría externa puede funcionar de manera diferente a la de lospaíses anglosajones y de Europa occidental con respecto a su papel en la restricción de la manipulación deresultados e indican que, dado el entorno institucional en Jordania, el tamaño del auditor y los honorariosde auditoría no tienen un efecto significativo en la manipulación de resultados. Este estudio proporciona alos lectores información sobre si y cómo el entorno institucional influye en la relación entre la calidad dela auditoría y la manipulación de resultados. Además, presenta nueva evidencia sobre el efecto moderadordel nivel de los honorarios de auditoría en su relación con la manipulación de resultados. Los resultadosde este estudio podrían proporcionar información valiosa a los reguladores, tanto en Jordania como enotros países con un entorno económico e institucional similar, para prevenir las prácticas de manipulaciónde resultados.
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    Is earnings management impacted by audit fees and auditor tenure? An analysis of the Big Four audit firms in the US market
    (2023) Martin De Almagro Vazquez, Gema; Valls Martínez, María del Carmen; Santos Jaén, José Manuel; Economía Financiera y Contabilidad
    Research background: Audits are intended to ensure the reliability of financial statements, as this is fundamental for different stakeholders. However, both auditor tenure and audit fees could affect the earnings management of companies. In 2014, the European Union established a mandatory audit firm rotation policy. In the United States, although there is still no manda-tory regulation in this regard, there has been a large public debate over the advisability of this policy. Another unresolved controversy is whether audit fees determine audit quality. Purpose of the article: The aim of this research is to study the effect of auditor tenure and audit fees on earnings management, i.e., to determine whether a longer-term relationship between the auditor and the audited company, as well as higher audit fees, reduce the audited company's earnings management, thereby making the financial statements more reliable for stakeholders and increasing the quality of the audit report. In addition, the Big Four auditing companies in the United States were analyzed in order to determine the influence of corporate culture. Methods: A sample of companies listed in the S&P 500 stock market index was employed for the analysis, covering the years 2012 to 2021, resulting in a dataset comprising 3,010 observations. To examine the research hypotheses while mitigating the potential bias from omitted variables, a linear regression analysis was conducted using panel data with fixed effects regression. To enhance the robustness of the results, winsorized variables were also employed. Findings & value added: Overall, the results confirm that the quality of financial statements improves as auditor tenure increases, and so implementing a mandatory auditor rotation may not be in a company’s best interests. The results also support the market segmentation theory, as higher audit fees are aligned with higher quality financial reporting. Furthermore, by analyzing the Big Four audit companies in the US, it is shown that the influence of audit fees and auditor tenure on earnings management also depends on the internal aspects of the particular audit firm, especially its ethical culture. In sum, US policymakers should neither set limits on audit fees nor enforce a mandatory audit firm rotation similar to that of the EU.