Effect of ethics and professionalism on audit quality: A moderating role of dysfunctional audit behavior
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Received April 11, 2022;Accepted September 11, 2022;Published October 3, 2022
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Author(s)Link to ORCID Index: https://orcid.org/0000-0002-5118-2268Link to ORCID Index: https://orcid.org/0000-0002-7024-1315
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DOIhttp://dx.doi.org/10.21511/ppm.20(3).2022.42
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Article InfoVolume 20 2022, Issue #3, pp. 529-539
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Dysfunctional auditor behavior becomes a driving variable for audit quality when an auditor has good ethics and professionalism. This study examines whether the ethics and professionalism of auditors can affect audit quality; dysfunctional audit behavior is used as a moderating variable. The study sample includes 348 auditors employed at public accounting companies throughout Indonesia and enlisted by the Indonesian Institute of Certified Public Accountants Directory. This paper used the SEM approach with WarpPLS software to analyze the respective data. Thus, it was found that auditors’ ethics and professionalism significantly and positively influence audit quality.
Meanwhile, dysfunctional audit behavior significantly moderated the relationship between professionalism and audit quality. In contrast, this behavior was not a moderating variable for auditors’ ethics and audit quality association. An interesting finding is the indicators of auditors’ ethical behavior in accepting audit engagements, where audit engagements are still accepted even though an auditor shares an association with an auditee. In conclusion, future studies can examine in more detail the effect of audit acceptance process on audit quality.
- Keywords
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JEL Classification (Paper profile tab)M42, L84
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References42
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Tables4
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Figures1
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- Figure 1. Research model test
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- Table 1. Descriptive statistics
- Table 2. Results of the validity and reliability test
- Table 3. Model fit test
- Table 4. Path coefficients
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Conceptualization
Yulianti, Grahita Chandrarin
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Data curation
Yulianti
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Formal Analysis
Yulianti
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Funding acquisition
Yulianti
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Investigation
Yulianti, Grahita Chandrarin, Fajar Supanto
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Methodology
Yulianti, Grahita Chandrarin, Fajar Supanto
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Project administration
Yulianti
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Resources
Yulianti, Fajar Supanto
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Software
Yulianti, Fajar Supanto
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Writing – original draft
Yulianti, Fajar Supanto
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Writing – review & editing
Yulianti, Fajar Supanto
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Supervision
Grahita Chandrarin, Fajar Supanto
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Validation
Grahita Chandrarin, Fajar Supanto
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Visualization
Fajar Supanto
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Conceptualization
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The impact of key audit matter (KAM) disclosure in audit reports on stakeholders’ reactions: a literature review
Problems and Perspectives in Management Volume 17, 2019 Issue #3 pp. 323-341 Views: 4542 Downloads: 1863 TO CITE АНОТАЦІЯThis 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.
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Impact of corporate governance mechanisms on financial reporting quality: a study of Indian GAAP and Indian Accounting Standards
Faozi A. Almaqtari , Abdulwahid Abdullah Hashed , Mohd Shamim , Waleed M. Al-ahdal doi: http://dx.doi.org/10.21511/ppm.18(4).2020.01Problems and Perspectives in Management Volume 18, 2020 Issue #4 pp. 1-13 Views: 2960 Downloads: 612 TO CITE АНОТАЦІЯThe 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. -
Impact of auditor tenure on audit quality: European evidence
Maria I. Kyriakou , Augustinos I. Dimitras doi: http://dx.doi.org/10.21511/imfi.15(1).2018.31Investment Management and Financial Innovations Volume 15, 2018 Issue #1 pp. 374-386 Views: 2094 Downloads: 522 TO CITE АНОТАЦІЯThis study examines the relationship of auditor tenure and audit quality in four European countries, namely Germany, France, Italy and Spain, with the innovative GMM (Generalized Methods of Moments) model during the period from 2005 to 2013.
Two GMM methods are used with two alternative definitions of crisis – the main and the robustness method. The results agree regardless of the fact that some of the control variables are excluded in the robustness test.
The results support the finding that in Spain, there is an impact of auditors’ long-term tenure on discretionary accruals, affecting auditors’ quality and independence indirectly. In addition, the crisis affected Germany and France as far as the change in negative and positive values of GDP is concerned. In this respect, the crisis affected the above two countries when the years before and after the crisis are considered as a robustness check. The results contain important implications for accountant regulators and policy makers.