Although a number of studies suggest that big audit firms provide higher audit quality in strict legal environments, empirical evidence remains inconclusive. As little is known about the effect of auditor type on audit quality in less strictly legal environments, this study aims to investigate the impact of auditor type on audit quality in the Egyptian market.,Data of Egyptian-listed companies during the period 2011–2018 are used. To examine the impact of auditor type on audit quality, ordinary least square regression and robust standard errors clustered at year and industry level are used. This study uses discretionary accruals as a proxy for audit quality. Several additional analyzes are conducted to assess the robustness of the main results, including alternative measures of audit quality and auditor type.,The results show that audit firms tend to provide higher audit quality when they are affiliated with a foreign audit firm. However, Big 4 auditors do not provide higher audit quality compare to their counterparts. Additionally, the governmental agency, accountability state authority, that monopolize audit function in state-owned companies do not appear to be associated with higher audit quality. Finally, local audit firms have a negative association with audit quality. This may be their strategy to secure future clients that seek low-quality audits.,This study suggests that affiliation with foreign audit firms will help the Egyptian firms to develop their abilities by using advanced technology and techniques and transfer rare expertize to the Egyptian auditors. This study also shows that the strategy adopted by many Egyptian audit firms to affiliate with foreign auditors reflects the desire of these firms to be included in one tier alongside Big 4 audit firms to increase their market share under a claim of providing a higher audit quality.,This study adds to the rare but growing body of literature by investigating how auditor type affects audit quality in the context of less strictly legal environments. The results are important, as investors, standards-setters and regulators have growing concerns over audit quality since the Enron scandal. The findings suggest that audit quality depends on auditor type. These findings have important implications for investors, standards-setters and auditors interested in auditor oversight, audit quality and auditor choice.

/pdf/the-effect-of-auditor-type-on-audit-quality-in-emerging-5f6h956ikj.pdf

The effect of auditor type on audit quality in emerging markets: evidence from Egypt


Purpose
This paper aims to examine the relationship between audit characteristics (ACs) and audit fees on classification shifting (CS) among German-listed non-financial firms.


Design/methodology/approach
Using a sample of 130 German-listed (Deutscher Aktienindex, Mid Cap dax and Small caps Index) firms from 2010 until 2019, this study investigated the impact of audit committee size, audit committee meetings, audit committee financial expertise and audit fees on CS.


Findings
This study found the evidence of CS, meaning that managers misclassify recurring expenses in the income statement into non-recurring expenses to inflate core earnings. This study also found that the audit fee ratio, audit committee financial expertise and frequency of audit meetings are negatively associated with CS among German-listed firms. However, the audit committee size does not influence CS.


Research limitations/implications
This study will help the board improve its internal auditing practices and provide essential information to investors to assess how ACs affect the quality of financial reporting.


Originality/value
This study focused on a bank-oriented economy, i.e. Germany, with lower investor protection and low transparency. This paper documents new evidence on how ACs and audit fees impact CS among German firms, as most of the previous studies on CS mainly focused on market-oriented economies such as the UK and the USA.


/pdf/the-impact-of-audit-characteristics-audit-fees-on-1ewc96hf.pdf

The impact of audit characteristics, audit fees on classification shifting: evidence from Germany

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Financial reporting standards

SUMMARY: Audit fees are related to important ethical issues for auditors. There has been increasing research on audit fees recently, including research on potential ethical risks regarding audit fees, which helps to illuminate some of these professional issues. The International Ethics Standards Board for Accountants (IESBA) is very interested in this area and asked me to prepare a paper reviewing the relevant research. This summary reviews research that became available from 2006 to 2016 on four issues related to audit fees—fee level, dependence, non-audit fees, and firms that have a significant non-audit services business. Examining the research shows consistent evidence about two issues, namely that audit fees for new engagements are lower and that non-audit services affect independence in appearance. There are two further issues about which there is some concern. First, there are occasional studies reporting evidence that non-audit services provided by an auditor are associated with a loss of independ...

/pdf/audit-fee-research-on-issues-related-to-ethics-2fhoq1qrxa.pdf

Audit Fee Research on Issues Related to Ethics

This research aimed to examine the effect of audit tenure, audit rotation, and audit fee on audit quality. The population in this research are all property, real estate, and building construction sector companies listed on the Indonesia Stock Exchange in 2018-2020. The sampling technique used the purposive sampling. Total sample are 111 companies. The statistical method used logistic regression analysis. The result showed that audit tenure and audit rotation had a negative effect on audit quality, and audit fee had no significant effect on audit quality in property, real estate, and building construction sector companies listed on the Indonesia Stock Exchange in 2018-2020.

Pengaruh Audit Tenure, Rotasi Audit, dan Fee Audit terhadap Kualitas Audit

This paper aims to examine how the relationship between abnormal audit fees and audit quality changed after adoption of the International Financial Reporting Standards (IFRS) in Korea.,Using empirical data collected over the period from 2008 to 2013, this study analyzes the association between abnormally high/low audit fee and audit quality. This study uses linear regression to test the hypothetical relation using discretionary accrual as a proxy for audit quality.,This study finds that there exists no significant relationship between abnormally high audit fees and audit quality measured by the magnitude of discretionary accruals in the pre-IFRS adoption period. However, the relationship between abnormally high audit fees and the magnitude of discretionary accruals turns to be positive in the post-IFRS adoption period. These finding suggests that the IFRS enables some clients to engage more discretion in the choice of discretionary accruals and auditors charge higher audit fees in return for allowing the discretion for such clients.,This study provides insight to regulators of the need to review carefully the financial statements of firms with abnormally high audit fees, and to investors to be more cautious when using financial information about these firms.,To the best of authors’ knowledge, this is the first study to assess IFRS impact on audit fee-quality relation. Also, unique Korean audit market with intensifying competition and discounting audit fee provides interesting setting to review the impact of abnormal audit fee on audit quality.

The association between abnormal audit fees and audit quality after IFRS adoption: Evidence from Korea

[Purpose] R&D investment is indispensable for long-term growth and survival in business and the amount involved is quite significant. However, the outcome and benefit are not visible in short term, which increase the information asymmetry between management and information users. Also R&D is often misused as a tool for real earning management or accounting treatment. Therefore in this study we analyse how the R&D affect the audit quality, proxied by management-auditor disagreement. 
[Methodology] The regression model is used with KSE and KOSDAQ listed firms. Also for robustness test, propensity score matching method is used to mitigate potential endogeneity issue. 
[Findings] We find that firms with larger research and development investment have less management-auditor disagreement, and this association weaken in big4 auditor group. This results imply that high audit risk decreases the audit quality, but high quality audit by big4 auditor could decrease the audit quality deterioration. Also the firm expensing all R&D investment rather than capitalization has higher management-auditor disagreement, which indicate that the auditor adjust capitalized R&D expenditure to expense. 
[Implications] This study could broaden the understanding on financial statement and audit quality by suggesting that R&D expenditure affects the audit environment.

R&D and Management-auditor Disagreement

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The association between abnormal audit fees and audit quality after IFRS adoption: Evidence from Korea

R&D and Management-auditor Disagreement