• The Journal of the Korea Contents Association
• /
• v.15 no.7
• /
• pp.477-488
• /
• 2015

This study investigates the association between non-audit services and audit quality, using a sample of firms in which audit services and non-audit services are provided by a same audit firm. This study extends previous studies by separating auditors into Big4 and Non-Big4 audit firms as each group may have different incentives to impair their independence. According to the empirical results, audit quality, proxied by absolute value of discretionary accruals has significant negative association with non-audit service fee for Non-Big4 audit firms, but not for Big4 audit firms, suggesting that Non-Big4 audit firms may impair their independence with increased non-audit service fees. Non-Big4 audit firms are known to be relatively small and local firms that might be highly economically dependent upon a specific client firm whereas Big4 audit firms are not. This results may be of interest to regulators and capital market investors and standard setters who concern a recent trend of increasing non-audit services that are provided by an audit firm which also provides audit service at the same time.

• The Journal of Asian Finance, Economics and Business
• /
• v.7 no.4
• /
• pp.41-50
• /
• 2020

The paper aims to investigate auditors, auditing firms and other external factors that affect quality of information technology audit in Vietnam. We conducted 2 types of data collections including direct and on survey. For direct survey, we sent directly to auditors at the training classes organized by State Securities Exchanges Commission. An online survey was established and Google doc link was provided to the Big4 and non-Big4 auditors. We received 138 survey responses in that 90 auditors came from Big4 and 48 auditors from non-Big4 firms. The data are analyzed using a factor analysis and compare means approaches to illustrate the potential IT audit quality factors and identify differences between two groups of auditors. The results show that independence and accounting knowledge and audit skills are the most important factors. And since external auditors perform many assurance services, the independence is critical. The result also shows that the auditors need to have enough competent and professional skills when conducting an audit, especially within an IT environment that requires high quality. The findings suggest a similar pattern of two groups in the context of Vietnam and some factors of auditors and auditing firms appear to have a statistically significant impact on quality of IT audit.

• The Journal of Asian Finance, Economics and Business
• /
• v.7 no.2
• /
• pp.89-97
• /
• 2020

This study was conducted to examine how independent audit firms in Vietnam understand and use risk based audit approach (RBAA) in audit practice. To answer the research questions, the researchers used primary and secondary data collected from 2018 to 2019. The results from the interview survey showed that audit firms were aware of the advantages of adopting RBAA. However, RBAA is practiced to a moderate extent by audit firms in Vietnam. Big 4 audit firms use RBAA more popularly than Non-Big 4 audit firms. The causes of the difference are the disadvantages of adopting RBAA and client's characteristics such as relevant guideline, audit fees, auditors' knowledge and experience. Besides, the study investigated factors impacting on the RBAA adoption by distributing a questionnaire to 246 auditors of 126 audit firms in Vietnam. A set of statistical appropriate methods where used through SPSS software version 22.0. The results indicated that there were six factors influencing RBAA adoption including: Auditor's ability, Technological development, Audit fees, auditors' motivation, Audit time and client's risk. Of which, auditor's ability and technological development are factors that have the most significant and positive impacts on the adoption of RBAA. Additional implications were argued in the final section of this study.

• Journal of the Korea Convergence Society
• /
• v.10 no.1
• /
• pp.227-238
• /
• 2019

In this study, we investigate the effects of disclosure and high-quality audit on donations to charitable organizations in Korea. We find that the mandatory disclosure of financial information and high-quality audit is significantly and positively related to donations to charitable organizations. We also find that charitable organizations audited by Big 4 audit firms have greater likelihood to receive more donations, compared to those audited by non-Big 4 audit firms. Furthermore, we find that those positive associations are more pronounced for smaller charitable organizations. Collectively, those results imply that, as in the profit-making sector, disclosure and high-quality audit play a critical role in enhancing accountability and transparency of financial reporting and revenue for charitable organizations.

• The Journal of Industrial Distribution & Business
• /
• v.12 no.8
• /
• pp.7-19
• /
• 2021

Purpose: This paper aims to investigate (1) whether the interviewed auditors conduct higher quality audit than the non-interviewed auditors and (2) whether the frequency of audit engagement interviews has an impact on audit quality. Research design, data, and methodology: Using a sample of Chinese A-share listed firms between 2011 and 2019, this paper empirically tests the effect of audit engagement interviews on auditor's behavior. We collect the data of audit engagement interviews on the CICPA's website. We use OLS regression, fixed-effect model and random-effect model to examine the association between audit engagement interviews and audit quality. Results: Findings indicate that the audit quality of the interviewed auditors is significantly greater than that of the non-interviewed auditors. The frequency of the audit engagement interviews is positively associated with audit quality. The interviewed auditors spend significantly more time on the audit. Furthermore, the positive association between audit engagement interviews and audit quality only exists in non-Big 4 auditors. Conclusions: Our findings provide evidence for the effectiveness of audit regulation enforcement. The results suggest that in an emerging market with weak legal systems, preventive regulations such as audit interviews have a deterrent effect and are necessary in alleviating information asymmetry and improving information environment.

• Journal of Distribution Science
• /
• v.15 no.8
• /
• pp.47-54
• /
• 2017

Purpose - According to agency theory, managers have incentives to adjust firm revenues to meet earnings expectations or delay bad news disclosure because of performance-based compensation and their reputation in the market. When the bad news accumulates, stock prices fail to reflect all available information. Thus, market prices of stocks are higher than their intrinsic value. After all, bad news crosses the tipping point, it comes out all at once. That results in stock crashes. Auditors can decrease stock crash risk by reducing agency costs through their informational role. Especially, stock price crash risk is expected to be lower for firms adopting high-quality audits. We focus on distribution and service industry to examine the relation between audit quality and stock price crash risk. Industry specialization and auditor size are used as proxies for auditor quality. Research design, data and methodology - Our sample contains distribution and service industry firms listed in KOSPI and KOSDAQ during a period of 2004-2011. We use a logistic regression to test whether auditor quality influences crash risk. Auditor quality was measured by industry specialist auditor and Big4 / non-Big4 dichotomy. Following the approach in prior researches, we use firm-specific weekly returns to measure crash risk. Firms experiencing at least one stock price crash in a specific week during year are classified as the high risk group. Results - The result of analyzing 429 companies in distribution and service industry is summarized as follows: Above all, it is shown that higher audit quality has a significant negative(-) effect on the crash risk. Crash risk is alleviated for firms audited by industry specialist auditors and Big 4 audit firms. Therefore, our results show that hypotheses are supported. Conclusions - This study is very meaningful as the first study which investigated the effects of high audit quality on stock price crash risk. We provide evidence that high-quality auditors reduce stock price crash risk. Our finding implies that the risk of extreme losses can be reduced through screening of high-quality auditors. Therefore investors and regulators may utilize our findings in their investment and rule making decisions.

• The Journal of Asian Finance, Economics and Business
• /
• v.9 no.4
• /
• pp.251-259
• /
• 2022

This study investigates the impact of ownership structures and audit quality on carbon emission disclosure. It also examines how audit quality affects the relationship between ownership structures and carbon emission disclosure. This research includes 106 standalone sustainability reports from non-financial companies that were listed on the Indonesia Stock Exchange (IDX) between 2015 and 2018. Our findings show that family and concentrated ownerships convey less information about carbon emissions. Our results fail to demonstrate that disclosure of carbon emissions could be a corporation's approach to respond to stakeholder pressure and public visibility and to provide legitimacy for its existence. We also find a positive and significant association between high-quality (Big4) auditors and carbon emission performance. Our further result suggests that Big4 auditors seem to compromise their high standard quality on auditing family and concentrated ownership firms. They fail to influence their family and concentrated ownership clients to be socially responsible. Policymakers should support the existence of Big4 auditors as a driver of carbon emission performance. Top management should be proactive to tackle carbon emission issues by adopting stakeholder-driven mechanisms and establishing legitimacy with society. Nevertheless, the involvement of family and highly concentrated shareholders in decision-making processes and information disclosure should not be encouraged.

• Asia-Pacific Journal of Business
• /
• v.12 no.3
• /
• pp.193-212
• /
• 2021

Purpose - This study investigates the effect of auditor change on client firm's accounting (financial statement) comparability. Design/methodology/approach - The comparability of accounting information is measured by the difference in accruals between the two firms. Additionally, the study uses earnings-stock return relationship as another proxy of accounting comparability. In particular, the paper examines whether there is a systematic difference between initial audit years and the other years with respect to the client firm's accounting comparability. Moreover, current study tests how changes in auditor size or industry expertise before and after the switch of auditors affect the accounting comparability. Findings - The results show that the level of accounting comparability is lower in the year of auditor change than in the other years. Furthermore, this lower level of comparability is derived by the observations that switch their auditors from non-Big4 to non-Big4 or from non-specialist to non-specialist. These results are consistent when accounting comparability is measured by different proxies. Research implications or Originality - The findings of this study provide important policy implications for the regulations related with auditor selection.

• The Journal of Asian Finance, Economics and Business
• /
• v.8 no.3
• /
• pp.833-843
• /
• 2021

This research examines the impact of audit quality on the extent to which firm-specific information is integrated with a firm's share price - which is determined inversely using stock price synchronicity. The study sample consists of non-financial companies listed on the Amman Stock Exchange i.e., the Jordanian Stock Market, from 2014-2018. After examining 810 firm-year observations from Jordanian industrial companies listed on the ASE, during the study period, we find that the companies using one of the BIG4 audit firms for auditing have less synchronous and more informative stock prices, suggesting high-quality audit improved governance and reduce information asymmetry between firms' insiders and investors which enhances the capitalization of firm's specific information into the stock price, thus less synchronous and more informative stock return. The findings remain consistent over 2 separate measurements of stock price synchronicity (Market and Industry model and Market Model) and show robustness for fixed effect tests. Our multivariate regression results are also robust after controlling for a number of features at the firm level with potential associations with stock price synchronicity. These include the firm size, leverage, return on assets (ROA), and market to book value (MBV).

• Korean small business review
• /
• v.42 no.4
• /
• pp.123-146
• /
• 2020

This study, targeting KOSDAQ-listed companies, examined the relationship between variability of accruals and corporate characteristics. First, the analysis results show that executives of companies with high debt ratios are more likely to violate debt contracts, so there is a strong temptation to use discretionary accrual items. Second, for companies with large volatility in operating cash flows, Executives of these companies are strongly inclined to utilize accruals for the purpose of abuse of discretion. Third, the larger the company, the more sensitive it is to political costs, so it is less tempted to use the accruals item than a smaller company. Fourth, the corporate age is thought to be the maturity of the company, Executives of such companies have little room to use accruals to abuse their discretion. Fifth, in the case of profit dummy variables, the companies reporting losses have more temporary accrual items than those reporting profits, so this increases the uncertainty in their accounting information than the latter. Sixth, for those companies that are indicated as inappropriate as a result of audit, the more likely their executives are to use the accrual items, and the lower the quality of their accounting profits is. Lastly, Companies audited by 4 Big domestic accounting firms have less discretionary accrual fluctuations than companies audited by non-big 4 accounting firms. Thus, it was found that the accrual amount allows the discretion of corporate executives differently according to the characteristics of the company.