Industry specialist auditors, outsider directors, and financial analysts

This study investigates the relationships among industry specialist auditors, outside directors, and financial analysts. Specifically, we examine the effect of analyst coverage on the association between auditor industry specialization and outside directorship. We find that outside directors are less likely to hire industry specialist auditors for firms with high analyst coverage than for firms with low analyst coverage. Our findings suggest that analyst coverage moderates outside directors’ demand for industry specialist auditors, that is, financial analysts may compete with industry specialist auditors to some extent in monitoring financial reporting process.     

The use of analytical procedures by external auditors in Canada

The Enron debacle and other scandals highlight the issue of whether analytical procedures (APs) or more traditional audit approaches based on substantive testing are more appropriate. This paper surveys the use of APs by Canadian external auditors and augments understanding of the impact of auditing standards on professional practice. Our results demonstrate that APs are extensively applied in practice, particularly by larger firms, and that their use dominates the final review stage of the audit regardless of firm size. While standards do not appear to be an important influence upon practice for audit firms in general, this is not the case for smaller firms. Though auditors place more reliance on APs to reduce tests of detail, there are limits to this reliance. Our results indicate that while auditors may have increased their use of APs with the expectation of efficiency gains, these may be realized at present only partially.     

Using industry momentum to improve portfolio performance

Minimum-variance portfolios, which ignore the mean and focus on the (co)variances of asset returns, outperform mean–variance approaches in out-of-sample tests. Despite these promising results, minimum-variance policies fail to deliver a superior performance compared with the simple 1/N rule. In this paper, we propose a parametric portfolio policy that uses industry return momentum to improve portfolio performance. Our portfolio policies outperform a broad selection of established portfolio strategies in terms of Sharpe ratio and certainty equivalent returns. The proposed policies are particularly suitable for investors because portfolio turnover is only moderately increased compared to standard minimum-variance portfolios.     

The impact on the market for audit services of aggressive competition by auditors

Supporters of direct uninvited solicitation activities argue that clients can make more informed choices of auditors when auditors are allowed to solicit prospective clients. In banned markets, auditors are allowed to submit bids to provide audit services only when invited by the client. This study provides theoretical models that examine the efficiency of client–auditor alignments in the banned and allowed market. We identify conditions under which realignment differences between the two markets occur and derive client losses in the banned market as compared to the allowed market. We also identify conditions under which independence may be impaired in the allowed market, consistent with the claims of solicitation opponents. However, we believe that, in view of the potential positive effects related to audit pricing and client–auditor alignment, restrictions on advertising or direct uninvited solicitation are not necessarily indicated. Instead, regulators or market mechanisms should insure that the independence (truth-telling) condition is so readily satisfied as to be virtually irrelevant. This can happen in one of two ways: (a) increased scrutiny, leading to an increased likelihood of discovery, or (b) increased penalties when an audit failure is discovered, leading to increased costs of an audit failure, or both.     

The attitude of Libyan auditors to inherent control risk assessment

Previous empirical evidence contradicts the practices of audit risk assessment recommended by the professional auditing standards. Key differences represent the presumption that auditors can readily distinguish between different categories of risk, how they assess such risks in practice, their application to the different account levels and their capacity to differentiate between what may constitute potentially high or low risks. The paper addresses these differences in the context of the Libyan auditors’ perceptions and practices. The nature and development of the audit profession in Libya makes this a good comparator for the US and UK contexts of audit behaviour. Equally importantly, the religious, political and socio-cultural context combined with Libya's role as an emergent economy is representative of many other economies in the world, thus providing a good comparator for assessing the validity and applicability of the established auditing management principles and procedures. One hundred and sixty four practicing auditors in Libya were investigated, initially by questionnaire and subsequently interview of a smaller sample of 20 auditors. The evidence reinforces prior empirical evidence that inherent and control risks are assessed interdependently, auditors are aware of the risk differentials depending on the level of account and are cognizant of factors normally associated with potentially high and low risk levels.     

注册会计师和内部审计师在公司治理结构中的作用

什么是"公司治理结构"?简而言之,公司治理结构意味着健全的管理、透明度和披露.就公司而言,公司治理结构是指确定管理当局、董事会、股东以及其他证券持有者之间的关系,由此实现透明度、经营责任和公平的目标和理想.     

Audit committee composition and the use of an industry specialist audit firm

Independent, competent boards of directors and audit committees are said to be important mechanisms of corporate governance. The purpose of the present study is to empirically examine the association between audit committee composition and audit quality. Specifically, the link between the proportion of non‐executive directors on an audit committee, financial qualifications of directors and the number of audit committee meetings held in a year are investigated and expected to have a positive association with the quality of the audit firm used. Audit quality is proxied by industry specialization. The results support the link between a higher proportion of non‐executive directors on an audit committee and use of an industry specialist audit firm. Other measures of audit committee quality (those with a higher proportion of directors with financial qualifications and those that meet more frequently) are not significantly associated with the use of an industry specialist audit firm. Sensitivity analysis shows that the presence of an audit committee is linked to use of an industry specialist audit firm.     

Big Six auditors and audit quality: The Korean evidence

This study investigates the association between discretionary accruals and Big Six and non-Big Six auditors, and the direction of auditor change. We hypothesize that there is no significant difference in discretionary accruals between Big Six and non-Big Six clients when there is low incentive for auditors to provide high-quality audits, as in Korea.Upon examination of the discretionary accruals of firms listed on the Korean Stock Exchange from 1994 to 1998, we find there is no significant difference between the discretionary accruals of firms with Big Six and non-Big Six auditors. This holds true for firms that switch from non-Big Six to Big Six auditors and vice versa. These resources imply that there may be no difference in audit quality between Big Six and non-Big Six auditors in Korea. This is consistent with other studies in Korea, while inconsistent with the findings of previous studies on audit quality in other countries.     

A study of whistleblowing among trainee auditors

Over the last number of years whistleblowers have been gaining prominence. This paper investigates some of the factors that influence the propensity or willingness to blow the whistle among trainee auditors. Three categories of factors are examined: audit firm organisational structures, personal characteristics of whistleblowers and situational variables.A survey of 240 final year students of the Institute of Chartered Accountants in Ireland was undertaken. Trainee auditors (just about to sit their finals) were asked about their confidence in internal and external reporting structures in their firms. Using four scenarios, audit trainees were questioned on their willingness to challenge an audit partner's inappropriate response to concerns raised during the audit. Finally, audit trainees were asked about the influence of legal protection on their likelihood of whistleblowing.Results indicate that where firms have adequate formal structures for reporting wrongdoing, trainee auditors are more likely to report wrongdoing and have greater confidence that this will not adversely affect their careers. Training increases this confidence. Trainee auditors also express a willingness to challenge an audit partner's unsatisfactory response to wrongdoing. Significant differences were found in attitudes depending on whether the reports of wrongdoing were internal or external. The willingness to report wrongdoing externally reduces for older (aged over 25) trainees.     

The significance of the market portfolio

Arguments for creating a market to allow trading the portfolioof all endowments in the entire world, the 'market portfolio',are considered. This world share market would represent a radicalinnovation, since at the present time only a small fractionof world endowments are traded. Using a stochastic endowmenteconomy where preference are mean variance, it is shown thatcreating such a market may be justified in terms of its contributionto social welfare. It is also argued that creating a marketfor world shares is attractive for certain reasons of robustnessand simplicity.     

The dynamics of portfolio management contracts

We consider the multiperiod relationship between a client anda portfolio manager and the resulting problem of motivatinga manager of unknown ability to acquire valuable information.We explore the contractual form and the optimal retention policyof the client and find that the optimal initial set of contractsfeatures a smaller performance based fee component paid to themanager than in a first-best contract, and the contract choiceelicits only partial information about the manager. As a result,ex post performance measurement is critical to future recontracting.In general, managers are retained only if the returns on theirportfolio exceed the benchmark by an appropriate amount.     

如何看待美国上市公司审计师角色的变化

金融危机加大了投资者对公司财务报告及审计师在财务报表审计中作用的期望差距。作为回应,美国、英国和欧洲的各国政府和监管机构正在采取各种办法．以满足投资者的报告需要,如何看待这种变化,请看国际专家分析     

Financial crisis and the silence of the auditors

Against the backdrop of the current financial crisis, this paper seeks to stimulate debates about contemporary auditing practices. It notes that many financial enterprises have sought state support within a short period of receiving unqualified audit opinion. Auditors collected large amounts in audit and non-audit fees. The events raise questions about the value of company audits, auditor independence and quality of audit work, economic incentives for good audits and the knowledge base of auditors.     

审计师变更下公司自利特征的经验分析

本文从审计师特征视角考察不同类型的上市公司在变更审计师后选择的继任审计师是否具有系统性差异,以此揭示上市公司变更审计师的真实动因.研究结论表明,在上市公司掌握主导权的审计市场中,上市公司有预谋的解聘审计师是为选择特定类型的会计师事务所做准备,这是利益驱使的结果,是上市公司自利动机的体现.本文为国有股减持和大小非解禁等政策的实施提供一定的理论参考.     

The effects of experience and task difficulty on accuracy and confidence assessments of auditors

This study extends prior research in psychology and auditing by examining the effects of audit experience and task difficulty on control risk evaluation. It also examines whether the effect of framing is mitigated by the simultaneous presentation of information. Ninety‐eight auditors performed a control risk evaluation task and recorded their judgement and their confidence. We find that judgement confidence increases with audit experience and that judgement confidence decreases as perceived task difficulty increases. However, we find no relation between audit experience and judgement accuracy or between perceived task difficulty and judgement accuracy. In addition, we find a significant negative relation between judgement confidence and judgement accuracy, which indicates that the participants' confidence is not appropriate. As expected, there is no framing effect when information is presented simultaneously.     

The semi-log portfolio balance schedule is tenuous

A well-known procedure in the context of the semi-log portfolio balance schedule is to impose an arbitrary terminal condition that rules out the occurrence of runaway inflations in the absence of runaway growth in the money supply. Notwithstanding the fact that a formal justification for this procedure is sometimes available in the context of equations that emerge from optimum problems, this paper finds that no such justification is available in the context of several leading optimizing models of money that either conceivably or actually deliver the Cagan schedule. A byproduct of the analysis is a demonstration that the semi-log, double-log, and Box-Cox schedules are integrable (can be generated by at least one optimizing framework).     

The single family home in the investment portfolio

This article uses recent measures of the risk and return to investment in housing to estimate the effects of including a single family home in the investor portolio. We estimate the expected return and standard deviation of that return, as well as its correlation with other major investment classes.