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Article
Publication date: 3 September 2018

Richard D. Morris and Per Christen Tronnes

The purpose of this paper is to examine the roles of country-level characteristics versus firm-level characteristics in explaining variations in firms’ voluntary strategy…

1189

Abstract

Purpose

The purpose of this paper is to examine the roles of country-level characteristics versus firm-level characteristics in explaining variations in firms’ voluntary strategy disclosures.

Design/methodology/approach

Strategy disclosure in annual reports is measured using an index of 40 items derived from the strategy literature. The sample is 204 large companies from 12 Asian and European countries in 2005. The disclosure index is subdivided into four underlying latent constructs using principal components analysis. The authors then use OLS regression to test whether total disclosure score, and the latent constructs are associated with country-level characteristics and firm-level characteristics.

Findings

The authors find that total strategy disclosures are more prevalent in stakeholder-oriented countries, in countries with greater levels of financial transparency, but are less prevalent in countries with a culture of secrecy, and strategy disclosures are more likely to occur in companies with greater economic incentives to disclose, with a Big 4 auditor or which are listed in New York. These findings also occur but not as consistently with the four latent constructs.

Research limitations/implications

The sample used in this paper comprises large public companies, so the findings may not be generalisable to all companies. Nevertheless, the findings demonstrate that both country- and firm-level variables matter in explaining voluntary strategy disclosure.

Practical implications

The IASB released an IFRS Practice Statement in 2010, which recommends, but does not require, disclosure of information about corporate strategy in Management Commentary statements. The findings of this paper may help inform the issue of whether regulators should make strategy disclosures mandatory.

Originality/value

The paper contains the first detailed examination of the roles of country-level characteristics versus firm-level characteristics in explaining variations in corporate voluntary strategy disclosures.

Details

Accounting Research Journal, vol. 31 no. 3
Type: Research Article
ISSN: 1030-9616

Keywords

Available. Open Access. Open Access
Article
Publication date: 27 June 2019

Kim Ittonen, Emma-Riikka Myllymäki and Per Christen Tronnes

This paper focuses on bank audit committees and examines whether audit committee members who are former auditors are associated with the acquisition of audit and non-audit…

3108

Abstract

Purpose

This paper focuses on bank audit committees and examines whether audit committee members who are former auditors are associated with the acquisition of audit and non-audit services from their former employers.

Design/methodology/approach

The study empirically examines a sample of large banks that are included in the S&P Composite 1500.

Findings

The paper reports significantly lower audit fees and a higher proportion of non-audit fees to total fees when the audit committee chair is an alumnus of the incumbent audit firm. Moreover, additional analysis reveals that these findings are stronger for banks with more earnings management.

Research limitations/implications

Overall, the findings indicate that audit firms might consider banks using their alumni as audit committee chairs to be less risky or easier to audit, thus requiring relatively less effort from the auditors. The reduced effort required to audit clients with audit firm alumni on their audit committees then has the effect of reducing the audit fees charged. Alternatively, their auditing experience and cognitive proximity might influence the assessment of the need for auditing or the ability to negotiate lower audit fees on the part of audit firm alumni.

Originality/value

This paper provides empirical evidence of the association between audit firm alumni in influential positions on an audit committee and fees paid to those audit firms in the banking industry. The findings contribute to the literature by suggesting that banks with affiliated former auditors chairing their audit committees not only have significantly lower audit fees but also a higher proportion is spent on non-audit services.

Details

Managerial Auditing Journal, vol. 34 no. 7
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 21 November 2017

Hooi Ying Ng, Per Christen Tronnes and Leon Wong

Auditing is seasonal, with the majority of U.S. public companies having a December fiscal year-end. This results in an audit “busy season” and “off-season” with a non-trivial…

260

Abstract

Auditing is seasonal, with the majority of U.S. public companies having a December fiscal year-end. This results in an audit “busy season” and “off-season” with a non-trivial seasonal impact on the pricing of audit services. We apply an economic framework that explains how audit seasonality affects both the magnitude and the price elasticity of audit demand and audit supply. We find that the audit busy season is associated with an audit fee premium of approximately 10% based on a meta-analysis of 97 analyses from 18 audit fee studies of U.S public companies. A meta-regression of the contextual differences in research design between studies reveals that examining only Big N attenuates the busy season effect size but does not eliminate it, and that the busy season effect size may be larger post-SOX.

Details

Journal of Accounting Literature, vol. 40 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

Available. Open Access. Open Access
Article
Publication date: 5 January 2024

Jesper Haga and Kim Ittonen

This paper examines the organizational resilience of audit firms during the early stages of COVID-19. The unexpected restrictions placed on travel and on-site working created…

1095

Abstract

Purpose

This paper examines the organizational resilience of audit firms during the early stages of COVID-19. The unexpected restrictions placed on travel and on-site working created unanticipated barriers for auditors in Hong Kong. The authors expect that auditors with greater organizational resilience can respond to unexpected situations and restore expected performance levels relatively quickly.

Design/methodology/approach

The authors utilize a sample of 1,008 companies listed on Hong Kong Stock Exchange (HKEX) with a financial year-end of December 31. The authors identify five proxies contributing to organizational resilience: auditor size, industry specialization, diversity, geographic proximity to the client and auditing a new client. The authors use audit report timeliness as this study's main dependent variable.

Findings

This study's full-sample results suggest that larger auditors, industry specialists and auditors with closer relationships to clients issued more timely audit reports during the pandemic. The analysis of a subsample of companies that initially published unaudited financial statements reveals that industry expertise and longer auditor-client relationships significantly reduced the need for year-end audit adjustments. Finally, the authors find that larger auditors were more likely to offload clients, whereas industry specialists were more likely to retain clients.

Research limitations/implications

The results of the paper suggests that audit firm characteristics associated cognitive abilities, behavioral characteristics and contextual conditions are associated with audit firm organizational resilience and, consequently, helps auditors respond unexpected changes in the audit environment.

Practical implications

The findings of the paper are informative for those involved in audit firm management or auditor hiring and retention decisions.

Originality/value

This study is the first to link organizational resilience to the performance of audit firms in a time of unexpected events. The authors connect three auditor and two auditor-client dimensions to the organizational resilience of the audit firms.

Details

Journal of Applied Accounting Research, vol. 26 no. 6
Type: Research Article
ISSN: 0967-5426

Keywords

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