Audit committee characteristics and financial statement comparability

Financial statement comparability enables weighing the similarities and differences in financial performance between firms. Prior studies mainly focus on the role of accounting standards in the production of comparability, but the role of economic agents has been largely overlooked. We find that a firm's audit committee size and financial expertise affect its financial statement comparability. Financial information tends to be more comparable among industry peers when audit committees are larger and more members have financial and accounting expertise. The effect of audit committee expertise on comparability is stronger for firms with less independent and smaller boards, for firms with non-Big 4 auditors and for firms with CEOs serving as the chairperson of the boards.     

Audit committee quality,auditor independence,and internal control weaknesses

In this paper we investigate the relation between audit committee quality, auditor independence, and the disclosure of internal control weaknesses after the enactment of the Sarbanes-Oxley Act. We begin with a sample of firms with internal control weaknesses and, based on industry, size, and performance, match these firms to a sample of control firms without internal control weaknesses. Our conditional logit analyses indicate that a relation exists between audit committee quality, auditor independence, and internal control weaknesses. Firms are more likely to be identified with an internal control weakness, if their audit committees have less financial expertise or, more specifically, have less accounting financial expertise and non-accounting financial expertise. They are also more likely to be identified with an internal control weakness, if their auditors are more independent. In addition, firms with recent auditor changes are more likely to have internal control weaknesses.     

突出内审优势 推进审计转型积极搭建内部审计和外部审计监督的科学平台

今年初,中国农业银行股份制有限公司一成立,总行党委就确立了董事会领导下的内部审计监督模式,在分离了原有部分操作层面的审计职能后,赋予了农行内部审计更高的独立性、权威性与超脱性,以确保内部审计职能的充分有效发挥,这是完善公司治理机制的重要举措。这种建立在董事会领导下的内部审计模式,是以系统化、规范化、制度化的方法对风险管理、控制及治理程序进行监督评价,为农行股改后提高运作效率,增加价值,促进各项业务健康有序、持续发展提供监督保障。     

Audit committee characteristics and firm performance during the global financial crisis

We address the question ‘do governance enhancing audit committee (AC) characteristics mitigate the firm performance impact of significant‐adverse‐economic events such as the Global Financial Crisis (GFC)?’ Our analysis reveals that smaller audit committees with more experience and financial expertise are more likely to be associated with positive firm performance in the market. We also find that longer serving chairs of audit committees negatively impacts accounting performance. However, accounting performance is positively impacted where ACs include blockholder representation, the chair of the board, whose members have more external directorships and whose chair has more years of managerial experience. We contribute to the growing body of research on the impact of audit committee governance attributes on performance during times of financial distress.     

Audit committee,board of director characteristics,and earnings management

This study examines whether audit committee and board characteristics are related to earnings management by the firm. A negative relation is found between audit committee independence and abnormal accruals. A negative relation is also found between board independence and abnormal accruals. Reductions in board or audit committee independence are accompanied by large increases in abnormal accruals. The most pronounced effects occur when either the board or the audit committee is comprised of a minority of outside directors. These results suggest that boards structured to be more independent of the CEO are more effective in monitoring the corporate financial accounting process.     

Audit technology and preferences for auditing standards

This paper investigates factors associated with audit firm positions on Auditing Standards Board issues during the three-year period ending during 1984. The major finding is that firms with relatively structured audit technologies tend to favor proposed statements while firms with relatively unstructured technologies do not. Audit firm size is not associated with firm position. Also, Big 8 firms favoring proposed statements have lower staff-to-partner ratios and concentrate less in auditing. The staff-to-partner ratio is negatively associated with technology. The results' implications for auditing profession organization studies and auditing and financial reporting research are investigated.     

Audit committee activity and agency costs

Menon and Williams indicate that many United States (US) over-the-counter (OTC) firms which form audit committees appear not to rely on them (cf. Menon, K., Williams, J.D. 1994. Journal of Accounting and Public Policy, 13(2), 121–139). Reliance on audit committees appears to depend upon board composition, while audit committee activity is associated with firm size. In this paper, we compare the US experience and evidence on audit committees and monitoring with the position in the United Kingdom (UK), where there has been a steady growth in the number of major companies voluntarily forming audit committees over the last 15 years (Collier, P.A. 1996. Accounting, Business and Financial History 6(2), 121–140). We contend that the dataset is best analyzed using the Heckman procedure (cf. Heckman, J.A. 1979. Econometrica 47(1), 153–161) which captures the two stages of the decision on audit committee activity.Our results show little support from the UK data for the findings of Menon and Williams (cf. Menon and Williams, 1994. Journal of Accounting and Public Policy 13(2), 121–139). However, consistent with their agency theoretic perspective of monitoring, we found that high quality (Big Six) auditors, and to some degree leverage have a positive relationship with audit committee activity. Contrary to an agency theoretic expectation, we found that audit committee activity is reduced in firms that combine the role of chairman and chief executive. On the basis of this result we explored the impact of insiders (executive directors) and found that their presence on an audit committee had a significant negative impact on audit committee activity. This result suggests that the emphasis placed by the US Securities and Exchange Commission (SEC) (Staff Report on Corporate Accountability, US Government Printing Office, Washington, DC, 1980, p. 491) and the Cadbury Committee (Committee on the Financial Aspects of Corporate Governance. 1992. Report of the Committee on the Financial Aspects of Corporate Governance. Gee, London) on the independence of audit committee members may be well founded.The reduction in audit committee activity that arises from the combination of the role of chairman and chief executive officer, and the presence of insiders on the audit committee, has important policy implications. Indeed, in the UK, both practices are the subject of recommendations in the Hampel Committee report Hampel Committee 1998. Committee on Corporate Governance. Gee, London.     

Relation between external audit fees, audit committee characteristics and internal audit

This study examines whether the existence of an audit committee, audit committee characteristics and the use of internal audit are associated with higher external audit fees. Higher audit fees imply increased audit testing and higher audit quality. We find that the existence of an audit committee, more frequent committee meetings and increased use of internal audit are related to higher audit fees. The expertise of audit committee members is associated with higher audit fees when meeting frequency and independence are low. These findings are consistent with an increased demand for higher quality auditing by audit committees, and by firms that make greater use of internal audit.     

小规模企业审计风险与审计重点

一、小规模企业的审计风险 小规模企业固有风险和控制风险通常很高,因其业务比较简单,参加审计人员少,审计外勤的时间较短,实施的审计程序一般都可适当简化,但注册会计师应审慎考虑到审计风险,采取必要的防护措施,将审计风险降低至可接受的水平.     

论发挥农业银行内部审计职能作用

文章探讨农业银行发挥内部审计职能作用,加强对权力制约和监督问题。     

The antecedents of the use of continuous auditing in the internal auditing context

The concept of continuous auditing originated over two decades ago. Yet despite its much touted benefits, its acceptance and use in practice has been slow. To gain insight into the state of affairs, we surveyed 210 internal auditors worldwide on the status of their use of continuous auditing. Using the Unified Theory of Acceptance and Use of Technology (UTAUT) we explore the antecedents of internal auditors' intentions to use continuous auditing technology. Employing the Partial Least Squares method, we find strong support for the model with an R² of 44.3%. Specifically, we find that internal auditors' perceptions of effort expectancy and social influence are significant predictors of their intentions to use continuous auditing. We also find that annual sales volume of the company and voluntariness of use significantly moderate the relationship between performance expectancy and social influence respectively. Additionally, we find regional differences in the significance of key UTAUT antecedents. Specifically, we find that the North American internal auditors are more likely to use continuous auditing due to soft social coercion pressures of Social Influence through peers and higher authorities. On the other hand, Middle Eastern auditors are more likely to use the technology if it is mandated by the higher authorities.     

Audit committee diligence around initial audit engagement

Studies focusing on governance mechanisms argue that auditor monitoring is one of several governance mechanisms that exist in the firm, and these mechanisms supplement each other. Extending this argument, I examine whether firms support auditor monitoring with audit committee monitoring when auditor oversight is deemed to be weak. Prior auditing literature argues that audit quality is affected by auditors' lack of familiarity with their clients' activities. Since lack of auditor–client familiarity exists in the first year of auditor–client tenure, I examine whether firms increase their audit committee monitoring during the year of auditor change. For a sample of firms that changed auditors between 2006 and 2012, the findings show that audit committees meet more frequently in the first year of audit engagement. Further tests show that firms' past reporting behavior play a significant role in the demand for more audit committee meetings and the increase in the audit committee meetings in the initial year of auditor engagement positively affects reporting quality.     

关于农业银行内部审计创新的思考

现代风险导向审计是在账项导向审计和内控导向审计等传统审计模式基础上发展起来的,通过对被审计单位全面风险评估,量化风险,把审计资源集中于高风险领域,使剩余风险降低到可接受水平的一种审计方法。本文介绍了现代风险导向审计的特征,就农业银行高管人员责任审计中引入现代风险导向审计技术的迫切性展开分析,着重探讨了现代风险导向审计在高管责任审计中的应用方法,并提出了为引入现代风险导向审计创造条件的措施。     

From inspection to auditing: Audit and markets as linked ecologies

This paper studies the roles that images and ideas of market creation played in the re-articulation of relations between government, audit expertise and professional organisation in post-Soviet Russia. It examines the change from state-led inspection to market-oriented auditing between 1985 and 2005, and analyses this in terms of the notion of “linked ecologies”. The paper queries the relationship between audit and neoliberal modes of governing. It argues that we should be careful not to see audit as an unproblematic expression of neoliberalism. Investigating the dynamics and conflicts accompanying attempts to establish auditing as a site for governmental reform, this paper examines the manifold ways in which the meaning of markets and the roles of auditing in them can be unsettled, reinvented and transformed. The paper analyses how auditing was made marketable, and investigates how projects of post-Soviet audit development came to be carried forward, shifted and changed through new “enterprising selves” and their newly founded audit and consulting firms. The paper concludes with a more general discussion of the implication of these findings for our understanding of the dynamics of professionalisation, and the changing of relations between politics and expertise.     

Audit committee financial expertise and properties of analyst earnings forecasts

An important role of financial accounting information is to aid financial statement users in forming expectations about the firm's future earnings. Prior research finds that accounting financial expertise of the audit committee is associated with higher financial reporting quality. We extend this literature by examining the association between audit committee financial expertise and analysts' ability to anticipate future earnings. We find a significant association between accounting financial expertise on the audit committee and analyst earnings forecasts that are more accurate and less dispersed. In contrast, we do not find a significant association between non-accounting financial expertise (i.e., supervisory expertise) and forecast accuracy or forecast dispersion. These findings contribute to our understanding of the benefits of accounting expertise in audit committees by demonstrating an association between accounting financial expertise and improvements in analyst earnings forecasts.     

Audit committee quality indices,reporting quality and firm value

We investigate the relation between audit committee (AC) quality indices, financial reporting, internal control quality and firm value using a US dataset for the period 2002–12. The indices are developed by linking firm value with principal component analysis (PCA) factors based on a broad set of 82 AC variables, some of which influence the quality of the AC, but are not addressed in prior literature. Significant AC factors include ‘overlapping directors’, ‘busyness’ and ‘foreign director’, and we use these factors to develop ‘high’ and ‘low’ AC quality indices. We show that low AC quality firms are more likely to manage earnings, be external auditor dependent with respect to non‐audit tax services, and switch to a lower quality auditor. Low AC quality firms are also more likely to have internal control concerns disclosed by predecessor auditors, including accounting issues, financial restatements, audit opinion concerns and deficiencies that undermine internal control effectiveness. Further, they are more likely to receive an audit report containing additional explanatory notes. Conversely, high AC quality firms are significantly less likely to have these concerns. Our findings highlight the value of using AC quality indices in delivering greater oversight of the financial reporting process.     

Sourcing of internal auditing: An empirical study

This paper studies the factors associated with organizations’ internal audit sourcing decisions, building from a previous study by Widener and Selto (henceforth W&S) [Widener, S.K., Selto, F.H., 1999. Management control systems and boundaries of the firm: why do firms outsource internal audit activities? J. Manage. Account. Res. 11, 45–73]. In their study, W&S used Transaction Cost Economics (TCE) to explain the governance of internal auditing. Our study seeks to replicate their results, using newly collected data from 66 companies headquartered in the Netherlands. Our findings are supportive of W&S. Like W&S, we find asset specificity and frequency (both individually and in interaction) to be significantly associated with sourcing decisions. These findings are robust against different model specifications, and they hold across variously defined samples. We conclude that the W&S results are reproducible in different conditions, enhancing the credibility of the TCE-based explanation of organizations’ internal audit sourcing practices.     

关于农行内部审计如何发挥免疫系统功能的思考

文章探讨农业银行内部审计如何发挥免疫系统功能。     

农业银行公司治理机制下的内部审计转型研究

为确保内部权利制衡与监督决策的科学，国际上流行的公司治理结构中，监督管理层的职责由董事会下设的、独立董事领导的审计委员会承担。但内部审计的内在服务性决定了其需要进一步转型，借鉴外部审计先进的手段和管理方法，加强协调与互补。     

Risk assessment in internal auditing: a neural network approach

Risk assessment is a systematic process for integrating professional judgments about relevant risk factors, their relative significance and probable adverse conditions and/or events leading to identification of auditable activities (IIA, 1995, SIAS No. 9). Internal auditors utilize risk measures to allocate critical audit resources to compliance, operational, or financial activities within the organization (Colbert, 1995). In information rich environments, risk assessment involves recognizing patterns in the data, such as complex data anomalies and discrepancies, that perhaps conceal one or more error or hazard conditions (e.g. Coakley and Brown, 1996; Bedard and Biggs, 1991; Libby, 1985). This research investigates whether neural networks can help enhance auditors’ risk assessments. Neural networks, an emerging artificial intelligence technology, are a powerful non‐linear optimization and pattern recognition tool (Haykin, 1994; Bishop, 1995). Several successful, real‐world business neural network application decision aids have already been built (Burger and Traver, 1996). Neural network modeling may prove invaluable in directing internal auditor attention to those aspects of financial, operating, and compliance data most informative of high‐risk audit areas, thus enhancing audit efficiency and effectiveness. This paper defines risk in an internal auditing context, describes contemporary approaches to performing risk assessments, provides an overview of the backpropagation neural network architecture, outlines the methodology adopted for conducting this research project including a Delphi study and comparison with statistical approaches, and presents preliminary results, which indicate that internal auditors could benefit from using neural network technology for assessing risk. Copyright © 1999 John Wiley & Sons, Ltd.