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Article
Publication date: 3 February 2014

Claus Holm and Frank Thinggaard

The authors aim to exploit a natural experiment in which voluntary replace mandatory joint audits for Danish listed companies and analyse audit fee implications of using one or…

2168

Abstract

Purpose

The authors aim to exploit a natural experiment in which voluntary replace mandatory joint audits for Danish listed companies and analyse audit fee implications of using one or two audit firms.

Design/methodology/approach

Regression analysis is used. The authors apply both a core audit fee determinants model and an audit fee change model and include interaction terms.

Findings

The authors find short-term fee reductions in companies switching to single audits, but only where the former joint audit contained a dominant auditor. The authors argue that in this situation bargaining power is more with the auditors than in an equally shared joint audit, and that the auditors' incentives to offer an initial fee discount are bigger.

Research limitations/implications

The number of observations is constrained by the small Danish capital market. Future research could take a more qualitative research approach, to examine whether the use of a single audit firm rather than two has an effect on audit quality. The area calls for further theory development covering audit fee and audit quality in joint audit settings.

Practical implications

Companies should consider their relationship with their auditors before deciding to switch to single auditors. Fee discounts do not seem to reflect long-lasting efficiency gains on the part of the audit firm.

Originality/value

Denmark is the first country to leave a mandatory joint audit system, so this is the first time that it is possible to study fee effects related to this.

Details

Managerial Auditing Journal, vol. 29 no. 2
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 July 2014

Mahbub Zaman and Jaravee Chayasombat

There is limited evidence on how differences in economic environments affect the demand for and supply of auditing. Research on audit pricing has mainly focused on large client…

537

Abstract

Purpose

There is limited evidence on how differences in economic environments affect the demand for and supply of auditing. Research on audit pricing has mainly focused on large client markets in developed economies; in contrast, the purpose of this paper is to focus on the small client segment in the emerging economy of Thailand which offers a choice between auditors of two different qualities.

Design/methodology/approach

This paper is based on a random stratified sample of small clients in Thailand qualifying for audit exemption. The final sample consists of 1,950 firm-year observations for 2002-2006.

Findings

The authors find evidence of product differentiation in the small client market, suggesting that small firms view certified public accountants as superior and pay a premium for their services. The authors also find that audit fees have a positive significant association with leverage, metropolitan location and client size. Audit risk and audit opinion are not, however, significantly associated with audit fees. Furthermore, the authors find no evidence that clients whose financial year ends in the auditors’ busy period pay significantly higher audit fees, and auditors engage in low-balling on initial engagements to attract audit clients.

Research limitations/implications

The research shows the importance of exploring actual decisions regarding audit practice and audit pricing in different institutional and organizational settings.

Originality/value

The paper extends the literature from developed economies and large/listed market setting to the emerging economy and small client market setting. As far as the authors are aware, this is the first paper to examine audit pricing in the small client market in an emerging economy.

Details

Journal of Accounting in Emerging Economies, vol. 4 no. 2
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 9 February 2015

Leif Atle Beisland and Kjell Henry Knivsflå

The purpose of this paper is to examine how the mandatory shift from Norwegian Generally Accepted Accounting Principles (NGAAP) to International Financial Reporting Standards…

2028

Abstract

Purpose

The purpose of this paper is to examine how the mandatory shift from Norwegian Generally Accepted Accounting Principles (NGAAP) to International Financial Reporting Standards (IFRS) in Norway affected the valuation weights of earnings and book values, with the aim of gaining insights that are relevant for standard setters, investors and other users of accounting information.

Design/methodology/approach

The authors extend the IFRS literature on structural shifts between the pre- and post-adoption periods by comprehensively controlling for factors that vary between the IFRS sample and the domestic Generally Accepted Accounting Principles (GAAP) sample. Moreover, the tests are designed to reveal the underlying accounting causes of the observed differences in value relevance.

Findings

IFRS are balance sheet-oriented and emphasize measurement at fair value. By contrast, NGAAP are earnings-oriented and focus on historical cost. IFRS also differ from NGAAP by recognizing more intangible assets. Overall, IFRS are thus less conservative than NGAAP. It was found that expanded fair value accounting increases the value relevance of book values and decreases the value relevance of earnings. However, the improved matching of intangible asset expenditures with the future economic benefits of such intangible assets increases the persistence and value relevance of earnings relative to book values.

Originality/value

This paper introduces a test methodology that is designed to identify the effects that specific accounting differences between the IFRS sample and the domestic GAAP sample have on value relevance. Consequently, this paper not only identifies the overall effects on value relevance but also contributes to the literature by identifying specific accounting differences between IFRS and GAAP that cause these overall effects, and thus obtain insights that are valuable for standard setters and other users of accounting information.

Details

Review of Accounting and Finance, vol. 14 no. 1
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 3 July 2017

Damai Nasution and Karin Jonnergård

This study aims to examine the association between auditor and chief financial officer (CFO) gender and earnings quality, utilising data from Sweden. This study also aims to…

2027

Abstract

Purpose

This study aims to examine the association between auditor and chief financial officer (CFO) gender and earnings quality, utilising data from Sweden. This study also aims to examine whether interactions between auditor and CFO, which may affect a firm’s earnings quality, are associated with their gender. These aims are inspired by the notion that gender differences will be overruled by the rewards and socialisation into the occupational roles as suggested by the structural approach to gender.

Design/methodology/approach

This study uses a multivariate regression model to test its hypotheses. The sample consists of 976 firm-year observations covering the period 2008 to 2013.

Findings

The results show that gender of the auditor and CFO is not associated with earnings quality, and the interactions between auditors and CFOs, which may affect earnings quality, are not associated with their gender. Consequently, the results give tentative support for the structural approach in gender studies in the accounting and auditing field.

Research limitations/implications

This study indicates that future research in gender studies should consider the structural approach based on the argument of gender similarities. This approach contends that work-related behaviour of women will more resemble men, and this is caused by the socialisation process into the occupational role and the structure where they work (e.g. organisational and professional culture, work conditions, a compensation scheme, national culture, etc.) instead of gender.

Originality/value

This study contributes to the understanding whether gender – auditor and CFO gender – is associated with firms’ earnings quality and standing whether the interactions between auditor and CFO are associated with their gender, something that, to the best of the authors’ knowledge, has not been tested previously. It also re-introduces the structural approach within the gender research in the accounting and auditing field.

Details

Gender in Management: An International Journal, vol. 32 no. 5
Type: Research Article
ISSN: 1754-2413

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Article
Publication date: 22 January 2020

Hana Ajili and Hichem Khlif

The purpose of this paper is to examine the association between political connections and tax avoidance in Islamic banking industry and to test whether joint audit affects this…

1618

Abstract

Purpose

The purpose of this paper is to examine the association between political connections and tax avoidance in Islamic banking industry and to test whether joint audit affects this relationship.

Design/methodology/approach

Tax avoidance is measured using effective tax rate while political connections represent an indicator variable that equals 1 if a bank has at least one politically connected director on the board of directors and zero otherwise.

Findings

This study documents that political connections are negatively associated with effective tax rate, while joint audit is positively related to the same variable. We also find that the negative association between political connections and effective tax rate becomes insignificant for joint-audited banks, while it remains negative and significant for banks audited by one auditors.

Originality/value

The findings of this study have policy implications for banking industry because joint audit reduces the adverse effect of political connections on tax avoidance.

Details

Journal of Financial Crime, vol. 27 no. 1
Type: Research Article
ISSN: 1359-0790

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