What do we know about empirical joint audit research? A literature review

  • Received March 11, 2017;
    Accepted April 11, 2017;
    Published April 19, 2017
  • Author(s)
    Patrick Velte
    ORCID Researcher ID
  • DOI
    http://dx.doi.org/10.21511/afc.01(1).2017.01
  • Article Info
    Volume 1 2017, Issue #1, pp. 4-14
  • TO CITE
  • Cited by
    15 articles
  • 2014 Views
  • 1275 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

This literature review evaluates empirical studies which concentrate on economic effects on joint audits from an international perspective. We briefly introduce the theoretical and empirical joint audit framework that comprises an adequate structure of the state-of-the-art of empirical research in this field. This is followed by a discussion of the following output factors of joint audits: (1) audit quality; (2) audit costs and (3) audit market concentration. We will summarize the key findings in each area, and provide a description of the analyzed proxies. Finally, we will discuss the current limitations of the studies and give useful recommendations for future empirical research activities in this topic.

view full abstract hide full abstract
    • Fig. 1. Joint audit research framework
    • Table 1. Count of published papers cited
    • Table 2. Empirical joint audit studies
    • Alfraih, M.A. (2016). Corporate governance mechanisms and audit delay in a joint audit regulation. Journal of Financial Regulation and Compliance, Vol. 24 (online first).
    • André, P., Broye, G., Pong, C. and Schatt, A. (2016). Are Joint Audits Associated with Higher Audit Fees? European Accounting Review, Vol. 25, pp. 245-274.
    • Antle, R. (1982). The Auditor as an Economic Agent. Journal of Accounting Research, Vol. 20, pp. 503-527.
    • Audousset-Coulier, S. (2015). Audit Fees in a Joint Audit Setting. European Accounting Review, Vol. 24, pp. 347-377.
    • Baldauf, J. and Steckel, R. (2012). Joint Audit and Accuracy of the Auditor’s Report. An empirical study. International Journal of Economic Sciences and Applied Research, Vol. 5, pp. 7-42.
    • Ballas, A.A. and Fafaliou, I. (2008). Market shares and concentration in the EU auditing industry. International Advances in Economic Research, Vol. 14, pp. 485-497.
    • Bédard, J., Piot, C. and Schatt, A. (2016). An evaluation of the French expertise with joint auditing. Working paper.
    • Bennouri, M., Nekhili, M. and Touron, P. (2015). Does auditors' reputation “discourage” related-party transactions? The French case. Auditing, Vol. 34, pp. 1-32.
    • Bisogno, M. and De Luca, R. (2016). Voluntary Joint Audit and Earnings Quality. Evidence from Italian SMEs. International Journal of Business Research and Development, Vol. 5, pp. 1-22.
    • Broye, G. (2007). Concentration du marché de l'audit. Un état des lieux. Revue Francaise de Comptabilité, Vol. 399, pp. 34-47.
    • Chow, C. (1982). The demand for external auditing. The Accounting Review, Vol. 57, pp. 272-291.
    • DeAngelo, L.E. (1981a). Auditor Independence, „Low Balling“ and Disclosure Regulation. Journal of Accounting and Economics, Vol. 3, pp. 113-127.
    • DeAngelo, L.E. (1981b). Size and Audit quality. Journal of Accounting and Economics, Vol. 3, pp. 183-199.
    • Dechow, P.M., and Dichev, I.D. (2002). The quality of accruals and earnings: the role of accrual estimation errors. The Accounting Review, Supplement, Vol. 77, pp. 35-59.
    • Dechow, P.M., Ge, W., and Schrand, C. (2010). Understanding earnings quality: A review of the proxoxies, their determinants and their consequences. Journal of Accounting and Economics, Vol. 50, pp. 344-401.
    • Dechow, P.M., Richardson, S., and Tuna, I. (2003). Why are earnings kinky? An examination of the earnings management explanation. Review of Accounting Studies, Vol. 8, pp. 355-384.
    • Dechow, P.M., Sloan, R.G., and Sweeney, A.P. (1995). Detecting earnings management. The Accounting Review, Vol. 70, pp. 193-225.
    • DeFond, M., and Zhang, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, Vol. 58, pp. 275-326.
    • Deng, M., Lu, T., Simunic, D. and Ye, M. (2014). Do Joint Audits Improve or Impair Audit Quality? Journal of Accounting Research, Vol. 52, pp. 1029-1060.
    • El Assy, M.G. (2015). The Effect of Joint Audit on Audit Quality. Empirical Evidence from Companies Listed on the Egyptian Stock Exchange. International Journal of Accounting and Financial Reporting, Vol. 5, pp. 195-207.
Related Articles

  • The impact of key audit matter (KAM) disclosure in audit reports on stakeholders’ reactions: a literature review

    Patrick VelteORCID Researcher ID, Jakob Issa doi: http://dx.doi.org/10.21511/ppm.17(3).2019.26
    Problems and Perspectives in Management Volume 17, 2019         Issue #3         pp. 323-341 Views: 4688 Downloads: 1889 TO CITE АНОТАЦІЯ

    This article presents a literature review of 49 empirical studies on key audit matter (KAM) disclosure in audit reports. The study involves a structured literature review on KAM disclosure based on the reactions of stakeholders. The limitations of former studies and useful recommendations for research are stressed. Five major streams of empirical research that analyze the impact of KAM disclosure on stakeholders’ reactions are focused: (1) shareholders (e.g. investors’ perceptions of auditors’ responsibility and litigation, value relevance and investors’ decisions); (2) debtholders (e.g. loan contracting terms); (3) external auditors (e.g. audit processes and audit fees); (4) boards of directors (e.g. earnings management); and (5) other stakeholders (e.g. informational value for suppliers and customers). The authors stress that most of the included studies use experimental or archival data and analyze the impact of KAM disclosure on investor reactions in a US-American setting. As the international standard setters assume a positive impact of KAM on stakeholder reactions, mixed empirical results are found. Although there are some indications of decreased earnings management behavior, most studies find no significant changes in auditor behavior. Furthermore, there are many insignificant results with regard to shareholders’ reaction in line with our stakeholder and behavioral agency framework. The literature review is especially useful for management decisions, because firm reputation may be positively or negatively influenced by KAM regulations.

  • The relationship between corporate social responsibility and earnings management: accounting for endogeneity

    Hyunjung Choi , Byungchul ChoiORCID , Jungyoon ByunORCID doi: http://dx.doi.org/10.21511/imfi.15(4).2018.06
    Investment Management and Financial Innovations Volume 15, 2018         Issue #4         pp. 69-84 Views: 4663 Downloads: 550 TO CITE АНОТАЦІЯ

    This study examines the relationship between corporate social responsibility (CSR) and earnings management after controlling for endogeneity of CSR. Using a sample of non-financial firms listed on Korean Securities Market between 2002 and 2010, this study finds that ignoring endogeneity biases the estimated relation between CSR and earnings management. Specifically, the results show that the negative and significant relation between CSR commitment and discretionary accruals reported in the previous studies becomes insignificant. However, the negative and significant relation between CSR commitment and real activities manipulation remains significant even when the endogeneity of CSR commitment is taken into account. Therefore, this study provides evidence that proactive CSR engagement significantly affects firm’s practice of real activities manipulation, while it does not affect its practice of discretionary accruals. These results indicate that CSR commitment leads managers to be more responsible in management of operational activities than in accruals management.

  • Impact of corporate governance mechanisms on financial reporting quality: a study of Indian GAAP and Indian Accounting Standards

    Faozi A. AlmaqtariORCID Researcher ID, Abdulwahid Abdullah HashedORCID , Mohd ShamimORCID , Waleed M. Al-ahdal doi: http://dx.doi.org/10.21511/ppm.18(4).2020.01
    Problems and Perspectives in Management Volume 18, 2020         Issue #4         pp. 1-13 Views: 3062 Downloads: 626 TO CITE АНОТАЦІЯ

    The present study examines the impact of corporate governance mechanisms on financial reporting quality under Indian GAAP and Indian Accounting Standards (Ind. AS). A sample of 97 companies listed on the Bombay Stock Exchange is selected. Corporate governance mechanisms have been considered as independent variables, and financial reporting quality is the dependent variable. Corporate governance is measured by board effectiveness (board size, independence, diligence, and expertise), audit committee attributes (size, independence, diligence, and expertise), foreign ownership, and audit quality. Descriptive statistics, correlation, and OLS regression are conducted to estimate the results. The study results reveal that board characteristics and audit committee attributes, except for audit committee diligence, have a significant effect on financial reporting quality. However, the impact of board diligence and audit committee attributes is negative. Foreign ownership has no contribution to financial reporting quality, but audit quality has a significant effect. The findings of the study have considerable implications for regulators, policymakers, managers, investors, analysts, and academicians. More emphasis should be given to compliance with Ind. AS, and an oversight body for compliance with Ind. AS should be established.

    Acknowledgment
    This publication was supported by Deanship of Scientific Research, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia.

Download Preview
Close
Accounting and Financial Control
Accounting and Financial Control