审计意见的决定因素：来自中国上市公司的证据

利用中国上市公司和相应会计师事务所2001—2003年的综列数据,本文研究了审计意见和会计师事务所规模、上市公司的风险和盈余管理等因素之间的关系。本文发现有破产风险的、进行盈余管理的或小规模的上市公司更可能得到非标准审计意见。如果它们又是大会计师事务所的客户,则得到非标意见的概率更大。本文不支持合资会计师事务所的审计质量更高的结论。     

Adjustment costs of institutional tax changes from the audit pricing perspective: Empirical evidence from the VAT reform

Institutional changes inevitably impose adjustment costs on firms while also generating benefits. However, empirical evidence regarding the adjustment costs of institutional changes is limited, with much of the focus centered on benefits. Using data on China’s A-share listed companies from 2010 to 2018 and the nation’s staggered adoption of the “business tax to value-added tax reform” (hereafter, “VAT reform”) as a natural experiment, we examine the impact of this reform on a particular corporate cost: audit fees. We find audit fees to be 8.11% higher for VAT reform firms than for non-VAT reform firms. This difference does not exist before or after the reform year. That is, it is only observed in the year of VAT reform implementation. This indicates the existence of an adjustment cost specifically related to the VAT reform. Furthermore, we observe larger fee increases among firms audited by Big 4 international audit firms, firms that require more audit work, firms that are more complex, and firms with weak internal controls. From the audit pricing perspective, we provide evidence of the economic consequences of tax reform. The corporate adjustment costs that arise from institutional changes deserve more attention from decision-makers.     

Embedding process mining into financial statement audits

The audit of financial statements is a complex and highly specialized process. Digitalization and the increasing automation of transaction processing create new challenges for auditors who carry out those audits. New data analysis techniques offer the opportunity to improve the auditing of financial statements and to overcome the limitations of traditional audit procedures when faced with increasingly large amounts of financially relevant transactions that are processed automatically or semi-automatically by computer systems. This study discusses process mining as a novel data analysis technique which has been receiving increased attention in the audit practice. Process mining makes it possible to analyse business processes in an automated manner. This study investigates how process mining can be integrated into contemporary audits by reviewing the relevant audit standards and incorporating the results from a field study. It demonstrates the feasibility of embodying process mining within financial statement audits in accordance with contemporary audit standards and generally accepted audit practices. Implementation of process mining increases the reliability of the audit conclusions and improves the robustness of audit evidence by replacing manual audit procedures. Process mining as novel data mining technique provides auditors the means to keep pace with current technological developments and challenges.     

Employee quality and audit fee: evidence from China

This study investigates the association between employee quality and audit fee. Using data for firm-level employee quality (as proxied by employee education) from Chinese listed firms from 2011 to 2018, we find that firms operated by high-quality employees enjoy lower audit charges. The association between employee quality and audit fee is more pronounced in firms with a culture of high integrity. Our 2SLS estimation helps us establish a causal link between employee quality and audit fee. The final validity tests suggest that high-quality employees contribute to lower audit fee by reducing audit risk and audit effort.     

The impact of PCAOB international registration on audit quality and audit fees: Evidence from China

Despite the importance of registration with the PCAOB, there is surprisingly little academic research on the registration process and its impact on audit outcomes (Abernathy et al., 2013). The PCAOB allows registration of audit firms from non-US countries. However, China and a few other countries do not allow the PCAOB to conduct inspections of audit firms. We take advantage of this setting to investigate whether PCAOB-registered audit firms improve audit quality in the absence of inspections and whether they charge an audit fee premium. Our findings indicate that audit quality increases following PCAOB registration and that clients pay higher audit fees for audits by PCAOB-registered firms.     

Audit effort and fees under concentrated client ownership: Evidence from four international audit firms

Using proprietary audit hour and fee data from the internal records of four Big Six firms in Finland, this study examines the influence of audit client ownership type on audit effort and fees. The primary argument is that there are differential effects of ownership concentration depending on the particular nature of concentrated ownership (i.e., firms in which the majority of shares are manager-owned versus foreign-owned versus state-owned). Consistent with this, the paper documents that audit hours and fees are lower for companies majority-owned by their management and higher for subsidiaries of foreign companies than for other firms. However, no difference between companies owned by the state or municipalities and companies with a more diverse ownership structure can be found. This suggests that governmental ownership is actually closer to a dispersed than a concentrated ownership structure in terms of audit quality.The results show that replacing the variable indicating majority-ownership with the variables capturing the type of a controlling owner increases the explanatory power of the models significantly, which demonstrates the importance of ownership type in the production and pricing of an audit. The findings have important implications for those examining audit markets with client firms owned by different types of controlling shareholders.     

How do auditor rotations affect key audit matters? Archival evidence from South African audits

The expansion of the auditor's reporting duties with the introduction of critical or key audit matters (KAMs) has reignited interest in the determinants and consequences of the rules and regulations aimed at improving audit's functionality and quality. This paper expands on a growing body of work which investigates possible determinants of the KAMs being included in audit reports. It provides an original perspective on KAM identification and reporting in three ways. Firstly, the paper deals specifically with audit partner and firm rotations as possible KAM determinants. Secondly, hand-collected details are analysed to test for changes in the absolute number of KAMs as well as for KAMs added to or removed from audit reports to provide a more refined measure of how KAM disclosures are varying. Finally, data are gathered from South Africa to complement the empirical work which, to date, has largely focused on the U.S. and U.K. Our findings reveal a duality of stability and variability in how the requirement to report KAMs is being operationalised. A change in audit partner is not associated with changes in reported KAMs but changing audit firms appears to have a significant impact on the KAMs added to or removed from an audit report. The provisions of ISA 701 promote consistency in how KAMs are identified and disclosed by individual partners. However, ISA 701 cannot define and control every aspect of KAM determination. As a result, there is a degree of agency at the firm-level which allows for differences in how audit firms choose to implement the standard's provisions. Our study makes an important contribution by providing evidence of the complex interaction between standardisation of audit practice and sources of performative variability and may lend weight to the regulatory arguments in favour of mandatory firm rotation.     

How audit effort affects audit quality: An audit process and audit output perspective

Using a unique dataset of audit days in China from 2006 to 2011, this paper examines the relationship between audit effort and audit quality from the perspective of audit process and audit output. The results show that audit effort significantly increases the probability of audit adjustments, which inhibits positive earnings management and improves the quality of audited financial statements. We also find that audit effort does not have a significant effect on the issuance of modified audit opinions overall, but that a modified audit opinion is more likely to be issued in the absence of an audit adjustment. Furthermore, we find that the impact of audit effort on audit quality is attenuated when clients are more complex and when audit firms are larger. Collectively, our evidence suggests that audit effort plays an important role in improving audit quality by influencing audit process and audit output. Our study extends the literature on the impact of audit effort on audit quality in emerging markets, and the conclusions have important implications for the improvement of China’s audit market efficiency.     

Using machine learning to predict auditor switches: How the likelihood of switching affects audit quality among non-switching clients

In this paper, we utilize machine learning techniques to identify the likelihood that a company switches auditors and examine whether increased likelihood of switching is associated with audit quality. Building on research that finds a deterioration in audit quality associated with clients that engage in audit opinion shopping, we predict and find lower audit quality among companies that are more likely to switch auditors but remain with their incumbent auditor. Specifically, we find that companies more likely to switch auditors have a higher likelihood of misstatement and larger abnormal accruals. These results are consistent with auditors sacrificing audit quality to retain clients that might otherwise switch. Our findings are especially concerning because there is no public signal of this behavior, such as an auditor switch. Our methodology is designed such that it could be implemented by investors, audit firms and regulators to identify companies with a higher probability of switching auditors and preemptively address the deterioration in audit quality.     

On the effort-saving effect of audit committee–auditor interlocking

Using unique data on audit hours from China, this paper investigates the effort-saving effect of the audit committee–auditor interlocking (AClk). We find that AClk is negatively associated with audit effort without any deterioration in audit quality. The results suggest that AClk has an effort-saving effect through information sharing between interlocked audit committee members and auditors. However, auditors retain the effort-saving benefits of AClk without sharing them with their client firms. Further analysis shows that the effort-saving effect of AClk is more pronounced for client firms whose auditors have industry expertise, for client firms that share the same individual auditor, or for client firms that share audit committee members with financial expertise.     

Public Oversight of Audit Firms: The Slippery Slope of Enforcing Regulation

This study uses the slippery‐slope framework to understand how an oversight regulator's enforcement style influences audit firm compliance. Using data from interviews with audit regulators and audit partners, we find that partners perceive the regulator's enforcement style has shifted from being more collaborative to being more coercive. A consequence of this shift is that partners believe the development of trust between the two parties has been inhibited and a forced compliance climate has emerged. In response, firms have mandated strategies to increase the visibility of compliance, such as increasing mandatory use of checklists. Audit partners express some concern that oversight of the profession has resulted in firms adapting their audit process in ways aimed at minimizing inspection risk and not necessarily improving audit quality.     

Audit Firm Ranking,Audit Quality and Audit Fees: Examining Conflicting Price Discrimination Views

In this study, we examine whether highly ranked audit firms in Iran, as determined by the Securities and Exchange Organization (SEO), earn a fee premium, firstly, by providing superior quality audit services or, secondly, due to reputation created by the ranking system implemented by the SEO. We employ price discrimination theory, and we test quality discrimination versus brand reputation explanations in the context of a unique institutional setting (where international audit firms are not allowed to operate). The data are derived from firms listed on the Tehran Stock Exchange (TSE) for the period 2006 to 2015. Our results show that the quality of audit services (using all of our measures) provided by the highest ranked audit firms is not superior to that of the non-highest ranked firms. In addition, the audit fee models suggest that the highest ranked firms charge significantly more audit fees compared to lower ranked firms. We employ several sensitivity tests and the results do not change materially. Such findings go against the “quality-based price discrimination” view but support the reputation-based view, and make a significant contribution towards understanding the economic consequences of state-determined ranking of audit firms rather than allowing the market to determine quality differentiation.     

Big Data and changes in audit technology: contemplating a research agenda

This study explores the most recent episode in the evolution of audit technology, namely the incorporation of Big Data and Data Analytics (BDA) into audit firm approaches. Drawing on 22 interviews with individuals with significant experience in developing, implementing or assessing the impact of BDA in auditing, together with publicly available documents on BDA published within the audit field, the paper provides a holistic overview of BDA-related changes in audit practice. In particular, the paper focuses on three key aspects, namely the impact of BDA on the nature of the relationship between auditors and their clients; the consequences of the technology for the conduct of audit engagements and the common challenges associated with embedding BDA in the audit context. The study’s empirical findings are then used to establish an agenda of areas suitable for further research on the topic. The study is one of the first empirical accounts providing a perspective on the rise of BDA in auditing.     

Audit Effort and Stock Price Crash Risk

We examine how stock price crash risk is affected by audit effort, as measured by audit hours. Using a unique dataset of audit hours in China, we find that audit effort is negatively related to crash risk. The negative impact of audit effort on crash risk is more pronounced for listed firms that have higher inherent risks and weaker external monitoring of their information environment. Our findings are robust to various tests, including a two-stage regression analysis, controlling for listed firm-fixed effects and audit firm-fixed effects, and using alternative measures of crash risk. In addition to audit output measures, audit effort has an incremental influence on crash risk. The effects of audit effort on crash risk continue to hold after controlling for auditor industry expertise and auditor tenure.     

Going big,going small: A perspective on strategies for researching audit quality

This paper updates how archival audit research has evolved since the summary in Francis (2004) of what we knew then about audit quality. The paper describes an evolution from “going big” and asking basic questions about the audit market, institutions, and audit quality, to “going small” with a focus on smaller units of analysis (offices, partners, and engagement teams) as the key to understanding audit quality. I used to believe that audit firm differences, and differences across offices within firms, were the most important audit-related sources of variation in quality, and that differences in people and audit teams were relatively unimportant. However, the evidence in Cameran, Campa, and Francis (2022) using UK partner data convinced me otherwise. I now believe the behaviors of partner-led engagement teams are just as important (and maybe more important) than audit firms and offices in understanding audit quality. However, to learn more about partner-led teams means going inside the black box of audit firms, which requires proprietary data from audit firms and research access to their professional staff. I conclude with an example of collaborative research with audit firms.     

Mandatory audit partner rotation,audit market concentration,and audit quality: Evidence from China

This research examines the audit quality consequences of China's mandatory audit partner rotation (MPR) regulation, which became effective in 2004. The rule requires firms to rotate signing audit partners of audit reports every five years. We find that audit quality improves in the three years immediately following a client firm's MPR during the 2004–2011 period for a sample of 273 Chinese publicly listed firms. Specifically, we find that the improvement is most pronounced in those Chinese provinces with both low levels of audit market concentration and low levels of legal development. However, MPR does not improve audit quality in jurisdictions where legal conventions are more developed and/or where audit markets are highly concentrated with a handful of large audit firms dominating the market.     

The Uses of Advanced Information Technology in Audit Planning

Expert systems, intelligent databases and other forms of advanced information technology are quickly becoming pervasive tools in accounting and auditing. All the major public accounting firms are either using such systems in their auditing practice or have them under development. This paper describes the use of several systems used for audit planning. These are divided into three functional areas: audit risk assessment, internal control evaluation and audit program development. The advantages and disadvantages of these systems as they relate to auditing are discussed.     

Auditor health and audit outcomes before COVID-19

This study examines whether influenza-like illnesses (ILIs), a potential threat to the conduct of public company audits, are associated with audit outcomes. Because the peak months of flu season overlap with audit busy season, audit offices most at risk of ILIs may be adversely affected. The demanding nature of audit busy season and the culture of audit firms may compel employees to go to work sick, a phenomenon known as presenteeism. When auditors go to work with flu-like symptoms, cognitive functioning is impaired, resulting in brain fog. This impairment may influence auditors’ ability to exercise judgment and professional skepticism, leading to adverse outcomes. Using data collected from the Centers for Disease Control and Prevention (CDC) we find that the filing of audit reports is delayed and audit quality suffers in audit offices most at risk of influenza-like-illnesses. The observed effects of health impairments on company outputs have broad implications for both the audit profession and workplaces as a whole.