| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 123 - 140 |
| Abstraksi Narasi | : | Porter`s (1985) analysist of competitive strategy is used to explain industry specialization by Big 6 accounting firms. In porter`s framework, industry specialization can be viewed as a differentiation strategy whose purpose is to create a sustainable competitive advantage relative to nonspecialist auditors. A differentiation strategy will lead to higher audit fees if valued by clients. We find evidence of higher fees for big 6 industry specialists relative to nonspecialists in the U.S. audit market, but only for companies in the lower half of the sample based on size (assets < $123 million). By contrast, companies in the upper half of the sample do not pay a specialist premium, and audit fees actually decrease as a company becomes increasingly large relative to its auditor`s industry clientele. Together these results suggest that audit fees are higher when clients are small and have little bargaining power, but audit fees are lower when clients have greater bargaining power and this is more likely companies are laarge in absolute size and large relative to their auditor`s industry clientele. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 69 - 87 |
| Abstraksi Narasi | : | This study addresses the impact of certain audit committee characteristics identified by the blue Ribbon Committeee on Improving the effectiveness of corporate audit committee (BRC) on the likehood of financial retatement. We examine 88 restatements of annual results (without allegations of fraud) in the period 1991 - 1999, together with a matched pairs control group of firms of similar size, exchange listing, industry and auditor type. We find that the independence and activity level (our proxy for audit committee diligence) of the audit committee exhibit a significant and negative association with the occurence or restatement. We also document a significant negative association between an audit committee that includes at least one member with financial expertise and restatement. To test the robustness of the results we also consider a sample of 44 fraud and no-fraud firms and arrive at largely similar findings. Our results underscore the importance of the BRC`s recommendations as a means of strengthening the monitoring and oversight role that the audit committee plays in the financial reporting process. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 53 - 67 |
| Abstraksi Narasi | : | This paper examines rhe relationship between the 1994 change in audit firm legal structure from general partnerships to limited liability partnerships (LLps) on underpricing in the initial public offering (IPO) market. The change in legal structure of audit irms reduces an audit firm`s wealth at risk from litigation damages and reduces the incentives for intrafirm monitoring by partners within an audit firm. Prior reseach suggest that underpricing protects underwriters from litigation damages, and that the level of underpricing varies inversely with both the amount of implicit insurance provided by the audit firm and the quality of the audit services provided. We hypothesize the change in audit firm legal structure reduced the assets available from audit firms in IPO-related litigation and indirectly reduced audit quality by lowering intrafirm monitoring. As a result, underwriters have incentives as a joint and several defendant with the audit firms to increase IPO underpricing, particularly for high-litigation-risk IPOs, following audit firms` shiffts to LLP status. Our findings are consistent with hypothesis. |
| Nama Pengarang | : | J. Scott Whisenant, Sankaraguruswamy, Srinivasan, Johnstone, Karla M. , Brian W. Mayhew, Larry E. Rittenberg, Steven R. Muzatko, Abbott, Lawrence J. [et al.], Jeffrey R. Casterella, et.al., Murthy, Uday S. , David S. Kerr, Yves Gendron, Jean Bedard, Maurice Gosselin, Francis, Jere R., Reynolds, J. Kenneth, Donald R. Deis, Robert A. Leitch, Dennis M. O`Reilly, Douglas H. Wedell, Koonce, Lisa, Kadous, Kathryn, Urton Anderson |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 107 - 121 |
| Abstraksi Narasi | : | In this paper we investigate whether voluntarily disclosed reasons for auditor-client realignments (as encouraged by the SEC) have information content for investors. After classifying realignment reasons into two types-verifiable and non-verifiable, with the latter representing disclosures about the auditor-client relationship not evident from alternative sources-we find that, as predicted by the "good news" precept or theoretical signaling models, non-verifiable realignment reasons are positively associated at the time of their announcement with abnormal returns. We also investigate whether voluntarily disclosured realignment reasons are associated with the relative size of the predecessor or successor auditor. We find that clients are more likely to cite service-related (non-verifiable) reasons when dismissing large predecessor auditors, and are more likely to cite fee-related (non-verifiable) reasons when choosing small successor auditors. These findings are consistent with auditors competing for the clients of large auditors by offering better or broader services, and with smaller auditors competing based upon price. All of our findings are robust to controlling for mandatory auditor change disclosures (auditor-client disagreements, reportable events, and going concern opinions), and operating, financing, and activities found in prior research to be associated with auditor changes. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 265-279 |
| Abstraksi Narasi | : | Some large public accounting firms that emphasize the business risk audit methodology revised their audit support software to organize audit evidence around business process rather than transaction cycle. These business-process focused (BPF) systems present client information grouped by calue chain activities, while firms that use traditional transaction-cycle-focused (TCF) audit support software might group client information primarily by account classification. Our study examines whether the presentation differences between BPF and TCF audit support software influence auditors` risk judgment during planning-phase analytical procedures. In a field experiment, experienced audit planning-phase analytical procedures. In a field experiment, experienced audit seniors performed analytical procedures on case materials containing a variety of seeded risk factors. One group completed the exercise using software organized around the BPF while the other group used software organized around the TCF. Participants who used the BPF system identified more of the seeded risk conditions and assessed misstatement risk at higher levels than did their counterparts who used the TCF system. These findings provide the experimental evidence that audit support software organized around business processes can influence decision performance while conducting planning-phase analytical procedures. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 207-218 |
| Abstraksi Narasi | : | This research examines the individual and interactive effects of client retention incentive and client business risks on auditors` decisions regarding whether to accept clients` aggressive reporting practices. Fifty-five audit seniors and managers from all of the Big 5 accounting firms participated in this experimental study. We find a significant main effect of client business risks and an interactive effect between client retention incentives and client business risks on auditors` decisions. Specifically, the results indicate that, when a client`s business risks are high, auditors tend to scrutinize such risks and carefully evaluate a client`s proposed accounting practices. However, when there is less concern over a client`s business risks, auditors may be willing to accept the client`s aggressive reporting proposal if retention incentives are high. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 147-170 |
| Abstraksi Narasi | : | This study analyzes the hypothesis generation and elimination capability of analytical procedures using Structural, Stepwise, Martingale, and ARIMA (Auto Regressive Integrated Moving Average) expectation models. We seed 14 errors into 36 complete sets of actual monthly financial statements from three companies. The bivariate pattern of differences, along with the structure of the accounting, business process, and economic system, are used to analytically determine (hypothesize) the most likely cause of the error. We then test the capability of these expectation models to generate correct hypotheses or to eliminate incorrect hypotheses. Positive and negative testing approaches, founded on multivariate normal theory, are examined. From a hypothesis generation perspective using the positive testing approach, the results indicate that the Structural and Stepwise models, yield lower effectiveness risks (type II error) than the ARIMA and Martingale models, with the edge going to the Structural model. From a hypothesis elimination perspective using the negative approach, the results indicate that the Structural and Stepwise models yield lower efficiency risks (type I error) than the Martingale and ARIMA models, with the edge going to the Stepwise model. This study provides strong evidence to support the use of the structure of an organization`s business processes (McCarthy 1982; Bell et al. 1997), its associated accounting system, and economic structure to build an expectation model. Moreover, the joint consideration of errors is found to be superior to the marginal approach advocated by Kinney (1987). The results presented here have the potential to assist auditors in directing audit efforts. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 17-32 |
| Abstraksi Narasi | : | This study examines the association between audit committee characteristics and audit fees, using data gathered under the recent SEC fee disclosure rules. We hypothesize that audit fees will be positively associated with audit committee independence, financial expertise, and meeting frequency. We examine a sample of 492 nonregulated, Big 5-audited firms that filed proxy statements with the SEC in the period from February 5, 2001 to June 30, 2001. We find that audit committee independence (defined as an audit committee comprised entirely of outside, independent directors) and financial expertise (defined as an audit committee containing at least one member with financial expertise) are significantly, positively associated with audit fees. This is in contrast to the findings of Carcello et al. (2002a), who find that audit committee characteristics are not significant in the presence of board-related variables. Meeting frequency (defined as an audit committee that meets at least four times annually) was not associated with higher audit fees at conventional levels. This evidence is consistent with audit committees taking actions within their span of control to ensure a higher level of audit coverage. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 99-119 |
| Abstraksi Narasi | : | Managers of organizations establish control systems to reduce the agency costs inherent in those organizations. Control systems include both internal and external control mechanisms, some of which may be viewed as substitutes for each other. We develop a model of the demand for external auditor industry expertise and then examine whether managers substitute such expertise for certain closely related internal control mechanisms in their overall control systems. Using a sample of municipalities, we find evidence that managers who do not hire internal auditors or who hire accounting personnel with low levels of accounting expertise tend to hire external auditors with higher levels of industry expertise. We interpret this to be a conscious trade-off on the part of the managers, which appears to be linked to the costs of hiring the internal mechanisms in question. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 297-307 |
| Abstraksi Narasi | : | This study investigates the planning materiality values used by auditors in The netherlands for a sample of engagements performed by Big 5 and non-Big 5 firms in 1998-99. We find that, consistent with archival evidence from KPMG in Elliott (1983), planning materiality is not a constant percentage of a base, but increases at a decreasing rate with client size. In addition, we find that planning materiality values increase with the quality of the client`s control environment and the magnitude of the client`s rate of return on assets, while decreasing with the complexity of the client. We also find that Big 5 firms use lower planning materiality values than non-Big 5 firms, ceteris paribus, which is consistent with the production of relatively higher audit quality levels by the Big 5. Finally, we find that auditors use lower materiality values in situations where earnings might be managed to show a small profit or a small loss. |
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