Key audit risks and audit procedures during the initial year of the COVID-19 pandemic: an analysis of audit reports 2019-2020

Purpose The purpose of this study is to explore audit procedure disclosures related to key audit risks, during the prior year and the initial year of the COVID-19 outbreak, by reporting on matters published in over 3,000 Australian statutory audit reports during 2019 and 2020. Design/methodology/approach This study partially uses latent semantic analysis methods to apply textual and readability analyses to external audit reports in Australia. The authors measure the tone of the audit reports using the Loughran and McDonald (2011) approach. Findings The authors find that 3% of audit procedures undertaken during 2020 were designed to address audit risks associated with the COVID-19 pandemic. As a percentage of total audit procedures undertaken during 2020, the authors find that smaller practitioners reported much less audit procedures related to COVID-19 audit risks than most larger audit firms. Finally, the textual analysis further found differences in the sentiment or tone of words used by different auditors in 2020, but differences in sentiment or tone were not found when 2020 was compared to the prior year 2019. Originality/value This study provides early evidence on whether auditors designed audit procedures to deal specifically with audit risks that arose due to the COVID-19 pandemic and on the extent and nature of those audit procedures. The study will help policymakers to better understand whether Key Audit Matters provided informational value to investors during a time of global crisis.

Overseeing the external audit function: Evidence from audit committees’ reported activities

Recently, in response to calls for more transparency, many firms have begun reporting the activities undertaken by their audit committees in overseeing the work of the external auditor. We use a composite measure of audit committees’ reported oversight activities for a sample of S&P 1500 firms and examine the extent to which these reported activities are associated with audit quality. We find that when firms’ audit committees report exerting strong oversight, they have higher audit quality as proxied by audit fees, discretionary accruals, the likelihood of meeting or beating earnings benchmarks, and restatements. We also find that the market reacts positively to reports indicating strong oversight, consistent with perceptions of higher audit quality. This study extends prior literature on audit committees by introducing a new comprehensive measure of audit committees’ reported oversight activities and sheds light on how these activities map into audit quality.

The Demand for External Audit Quality: The Contribution of Agency Theory in the Context of Cameroon

This study examines the effect of agency theory on the demand for external audit quality in Cameroon. Specifically, it looks at the impact of shareholder/manager agency cost, shareholders/creditors agency cost, and majority/minority shareholders agency cost on external audit quality demand in Cameroon. The focus is on a sample of 171 companies drawn from the regions of Littoral, Centre and North-West using questionnaires. We assess the explanatory power of agency theory on the demand for a better quality of audit in the Cameroonian context by modelling external audit quality as a function of agency costs. The logistic regression analysis allows us to study the nature of any possible interaction. The analysis shows that while an increase in shareholder/creditor agency cost and an increase in shareholder/manager agency cost negatively affect the demand for audit quality, the majority/minority agency cost and the size of the audited client positively and significantly affect the demand for audit quality.

The Impact Of Adherence To International Auditing Standards In Increasing The Quality Of Audit Services A field study on external audit offices

The study aimed to identify the impact of adherence to the general standards of international auditing and increase the quality of audit services. Where the problem of the study was the collapse of many companies and economic institutions in recent years to filing complaints and judicial disputes against audit offices due to the poor quality of services provided by audit offices, which affected the reputation of the audit profession. Individuals to learn more effectively and use these strategies increased the quality of services provided, commitment to transparency and independence increased investor confidence and raised the level of service provided to the client, the study recommended developing the personal qualities necessary to carry out professional and technical duties throughout the auditor’s working life.

La relación entre la auditoría, la corrupción política y la transparencia informativa: un análisis comparativo de las Comunidades Autónomas españolas

Nowadays, public administrations are experiencing a trend towards greater control and supervision as a result of citizen demands and the financial situation of recent years. Specifically, the Spanish Autonomous Communities have suffered greatly from the effects of the economic crisis of 2008 and they have detected a large number of political corruption processes, which has focused the attention of experts. Therefore, the main objective of this work is to evaluate the effect that the level of implementation of external auditing and the degree of information transparency have on political corruption in the Spanish Autonomous Public Administration. To do this, firstly, a review of the current level of implementation of external auditing in the Autonomous Communities, its transparency level and the degree of political corruption at the regional level is carried out. Secondly, an exploratory study consisting of a bivariate analysis and a regression model is performed. The results of the bivariate analysis show that there is a significant relationship between the level of external audit implementation and transparency. However, the regression model indicates that neither transparency nor auditing has a significant influence on corruption, except when we analyze partial audit and transparency indexes since the 2010 PGCP turns out to have a significant effect regarding corruption cases. En la actualidad, las administraciones públicas están experimentando una tendencia hacia un mayor control y supervisión como consecuencia de las demandas ciudadanas y la situación financiera de los últimos años. Concretamente, las Comunidades Autónomas españolas han sufrido en gran medida los efectos de la crisis económica del año 2008 y en ellas se ha detectado un gran número de procesos de corrupción política, lo que ha centrado la atención de los expertos en su estudio. Por ello, el objetivo principal del presente trabajo consiste en evaluar el efecto que el nivel de implantación de la auditoría externa y el grado de transparencia informativa tienen sobre la corrupción política en la Administración Pública Autonómica española. Para ello, se realiza en primer lugar, una revisión del panorama actual del nivel de implantación de la auditoría externa en las Comunidades Autónomas, de su transparencia informativa y del nivel de corrupción política a nivel regional. En segundo lugar, se lleva a cabo un estudio exploratorio consistente en un análisis bivariante y un modelo de regresión. Los resultados del análisis bivariante muestran que existe una relación significativa entre el nivel de implantación de auditoría externa y transparencia. No obstante, el modelo de regresión nos indica que ni transparencia ni auditoría influyen significativamente en la corrupción, salvo cuando analizamos índices parciales de auditoría y transparencia ya que la adaptación al PGCP 2010 resulta tener un efecto significativo respecto a los casos de corrupción.

Impact of corporate board and external audit attributes on earnings quality: Experience from Nigeria quoted foods and beverages firms

The recent audit failures has pointed to weaknesses in financial report and give occasion of doubt to users about the reliability of earnings declared by firms. This study examines the effects of corporate board and external audit attributes on earnings quality of listed foods and beverages firms in Nigeria. Secondary data were employed through audited annual reports and accounts of eight (8) selected foods and beverages firms listed on the Nigerian Stock Exchange using judgmental sampling technique. Data collected were analyse using descriptive statistics like table, percentage and inferential statistics such as panel regression analysis. All Analysis were tested at 5% level of significance. The results revealed that audit firm size (β=14485.32, P=0.000) which is external audit attribute and board size (β=-2741.887, P=0.000), audit committee presence (β= -8225.11, P=0.044) and company size (β= 5454.20, P=0.000) were the significant determinants of external audit and corporate board attributes of listed foods and beverages firms in Nigeria. Also, the result of panel regression revealed that audit independence (β= -6.57e-06, P=0.035) and audit firm size (β=0.1141479, P= 0.018) were the external audit attributes that had significant effect on discretionary accruals. The study therefore concluded that corporate board attributes (audit committee) and external audit attributes (auditor independence, audit firm size) had significant effect on earnings quality as measured by earnings management of selected foods and beverages firms in Nigeria. The study recommends that in order to enhance auditor’s independence, uniform audit fee should be formulated, and also, disclosure should be made on other corporate board attributes like board members’ year of experience and gender and for effective monitoring system.