The Empirical Research on Auditor Independence and Mandatory Auditor Rotation

Using, the method of correlation coefficient, this paper discusses the empirical relationship between audit tenure and audit opinion in annual reports in China A-share market and period of mandatory rotation of auditor. The research finds that the negative correlation between auditor tenure and non-standard unqualified audit opinion is statistically significant, and auditor tenure might impair his/her independence. To enhance auditor independence and improve audit quality, it is necessary to rotate mandatory auditor. The results also fred that consecutive auditing years should not exceed 5 years when the existing auditor has been the auditor of listed company, and mandatory rotation of auditor adapts to the rotation of CPA firms in charge of a client.

The Impact of Auditor Quality on Audit Quality--Evidence from China Based on Data from 2014-2016

This paper studies the impact of auditors'own quality on audit quality.Through the test of relevant models,it is necessary to find out whether the conclusions of predecessors have practical significance in improving the quality of auditing as time goes by and other relevant influencing factors of the market.The paper collects relevant data from multiple dimensions such as the age level of the auditors,the accumulation of audit experience,and the level of education by collecting the relevant data of the 2016 A-share listed companies and the top 100 CPA firms in 2014-2016.An empirical test was conducted.According to the results of the empirical test,the discussion and research will be carried out,and further opinions and suggestions on how to improve the quality of the auditor should be put forward.The innovation of the research is that the level of earnings management is used as a measure of audit quality,and non-recurring gains and losses are used as explanatory variables.On the basis of previous studies,time and environmental institutional variables were further introduced for further verification.

Audit Partner Rotation, Audit Quality, and Dynamic Industry Structure

Previous research on the relationship between audit partner tenure and audit quality assumed that auditors conducted auditing works in a stable external environment where the corporate and management behavior was highly predictable. This study uses the joint tenure between audit partners and management to explain audit quality, because corporate directors would consider an appropriate adjustment in the management to deal with a dramatic change in the external environment. First, we examined whether there is a significant association between audit partner tenure and audit quality after the implementation of mandatory audit partner rotation by using the auditor tenure only. We addressed this issue by using a sample of Taiwan Residents companies and found no significant association between audit partner tenure and the magnitude of discretionary accruals （DA）, a common proxy for audit quality. Second, we tested the relationship between audit partner tenure and audit quality under the consideration of industry structure stability. The result exhibits a negative relation between audit partner tenure and audit quality under the control of industry structural stability which is measured by a proxy variable, the joint tenure between audit partner and management. Third, we investigated whether the association does exist between joint tenure of auditors and management and audit quality. We also addressed this issue by using Taiwan Residents data and found a significant association between the joint tenure of auditor and management and the magnitude of DA. Our findings provide evidence that the use of a mandatory rotation rule is an ineffective way to improve audit quality.

Toward the Effect of Audit Quality on Earnings Management——Empirical Evidence from Manufacturing Enterprises Listed in Shanghai Stock Market

Nowadays, earnings management is a hot issue, but most of the researches focus on the incentives of earnings management and few of them refer to the effect of audit quality on earnings management. In this study, we directly examine the effect of external audit quality on earnings management by using discretionary accruals. We find that the discretionary accruals of non-dual audit companies are significantly greater than those of dual audit companies. We also find that clients of non-First Ten auditors intend to report greater discretionary accruals than those of First Ten auditors.

The Effect of the Board of Directors and Audit Quality on Disclosure of Internal Control Practices: Evidence from European Companies

The purpose of this paper is to examine the effect of the board of directors,namely board size,board independence,and CEO duality,as well as audit quality on the disclosure of internal control information.The sample consists of 164 European companies listed in the STOXX Europe 600.Based on positive agency theory,the authors posit that board of directors and audit quality influence corporate internal control disclosure practice.The content analysis and the design of the evaluation criterion were used to calculate the disclosure index of internal control.Thus,multiple regression analysis is utilized to analyze the results of this paper.The average internal control information disclosure index was 0.285,indicating that most of the companies in our sample do not disclose enough information about the internal control.This low level of forward-looking information disclosure makes it very difficult for corporate stakeholders to determine the future performance of the company.Multivariate results indicate that internal control disclosure is positively and significantly associated with board independence,CEO duality,and audit quality.This study contributes to the literature on the various governance characteristics and disclosure by showing that the disclosure of internal control information in European countries is positively and significantly associated with board independence,separation of duties,and audit quality.Our study was based on a sample of European companies including countries regulating IC disclosure as well as unregulated settings.As noted by Bedard and Graham(2014),regulatory differences in countries can contribute insights on the costs and benefits of disclosure.Findings also have policy implications for investors,managers,and regulators.

How does auditors' work stress affect audit quality?Empirical evidence from the Chinese stock market

With reference to the Job Demands-Control Model,we empirically examine the effect of auditors' work stress on audit quality using a sample of Chinese A-share listed companies and their signature auditors from 2009 to 2013.The results show that(1) there is generally no pervasive deterioration in audit quality resulting from auditors' work stress;(2) there is a significant negative association between work stress and audit quality in the initial audits of new clients;and(3) the perception of work stress depends on auditors' individual characteristics.Auditors from international audit firms and those in the role of partner respond more strongly to work stress than industry experts.Auditors tend to react more intensively when dealing with state-owned companies.We suggest that audit firms attach more importance to auditors' work stress and rationalize their allocation of audit resources to ensure high audit quality.

Quality in Independent Auditing:A Research on Auditors

The aim of this study is to determine the opinion related to the audit quality of independent auditors in Turkey.For this purpose,a study was carried out on the auditors operating in the TRC 1 region and having an auditor certificate.Questionnaire method was used in the research.In the evaluation of the data,frequency,mean,and standard deviation were used as descriptive statistical methods.In addition,t-test and one-way ANOVA test were used to compare the data between independent groups.Research results show no significant difference between the opinions of the independent auditors according to various variables.

Effects of Mandatory Audit Firm Rotation Upon Quality of Audit： The Perception of Audit Firms Evidence From Bahrain

The objectives of this study are： （1） to explore current audit appointment practices by audit firms in Bahrain; （2） to look into the opinions of audit firms in Bahrain on potential effects provided by implementing mandatory audit firm rotation （audit quality）; and （3） to investigate audit firms＇ views in implementing mandatory audit firm rotation in Bahrain. To achieve these objectives, a questionnaire was developed and distributed to respondents that consist of all auditors working in audit firms in Bahrain. The findings indicated that there is a significant relationship between mandatory audit firm rotation and quality of audit. The study also indicated that longer partner tenure makes the auditor＇s performance lack the quality in the auditing process. The average mean for all questions of the hypothesis together is 2.73 with average standard deviation of 0.94 which is less than half of the mean. This means that there is no dispersion among respondents about the questions of the hypothesis. Also, the analysis shows that the t-value is 29.922, which is greater than the table critical value of t （1.66）, and the p-value obtained is 0.000 which is less than the value of significance at p 〈 0.05. These results confirm statistically that there is a significant relationship, so the null hypothesis is rejected and the alternative hypothesis is accepted.

Can industry information disclosure improve audit quality?

We investigate the impact of industry information disclosure(IID)on audit quality in Chinese listed companies from 2010 to 2021,by constructing a staggered difference-in-differences model based on the implementation of the IID guidelines in the Shanghai and Shenzhen stock exchanges in 2013 as an exogenous shock.Audit quality is significantly improved after the implementation of the IID guidelines.We also use a parallel trend test,different measurements of key variables,propensity score matching,a placebo test and different samples,to ensure the validity of our findings.IID enhances audit quality by improving auditor independence,professionalism and audit engagement,particularly in firms with high-quality and numerous IIDs,high auditor rankings,strong auditor industry expertise,IIDs with a negative tone and low R&D investment.We demonstrate the effectiveness of the IID guidelines from the perspective of auditing.

Risk-preparedness mechanism and audit quality:Evidence from mandatory increase of professional indemnity insurance and professional risk fund

We examine the risk-preparing benefits of Chinese audit firms’professional indemnity insurance(PII)and professional risk fund(PRF)by using the Notice on Adjusting the Application Requirement of Audit Firms for Securities Qualifications as an exogenous shock.This policy requires audit firms to raise the sum of the cumulative compensation limit of their PII and PRF from 6 million to 80million yuan.It is found,first,that the capital market regards this policy revision as a signal to strengthen investor protection and responds positively;client firms with high audit risks have a stronger response.Second,auditors’governance of financial information has strengthened,resulting in the significant improvement of their clients’financial reporting quality,with a stronger effect on firms with higher earnings management risk.There is no evidence that audit firms pass the costs on to their clients.Finally,the mismatch between auditors and new client firms is alleviated.We show that in an emerging market with weak investor protection,establishing a sound risk-preparedness mechanism for audit firms and strengthening the capacity for civil compensation ex post greatly improve the adaptive degree between international auditing standards and the legal environment of China,thereby enhancing the overall service quality of the audit market.

Audit Quality in Kazakhstan： Does Big 4 Provide High-Quality Audits？

This paper provides empirical evidence on audit quality in Kazakhstan as measured by audit tenure and the frequency of issuing modified opinions. In addition, an overview of audit institutions of Kazakhstan and an analysis of the current audit market for public companies are offered. This paper also sheds light upon the potential independence problems resulting in low audit quality and current barriers to audit researches in Kazakhstan. Consistent with the findings of extant researches on audit quality and the general perceptions of investors, two hypotheses were developed, i.e., the audits performed by Big 4 audit firms in Kazakhstan also have higher quality than non-Big 4 audit firms in terms of audit tenure and the frequency of issuing modified opinions. The result confirms the hypothesis that Big 4 audit firms provide higher audit quality than smaller local firms in association with audit tenure instead of in relation to the frequency of issuing modified opinions. The result indicates that Big 4 audit firms may not be as independent as they will be in a highly litigious market. Therefore, an independent inspection should be regularly implemented according to the audit law, and the inspection report should be publicized by Chamber of Auditors （COA）1. If this is not practical due to the lack of qualified inspectors, a peer review may be an altemative to implement the quality control policy immediately. To the author＇s best knowledge, this is the first audit quality research in countries of the Commonwealth of Independence States （CIS）.

Extemal Quality Control and its Impacts on Quality in Auditing Companies With Focus on Small and Medium-sized Audit Companies

After numerous spectacular balance scandals in the United States and Europe, an international discussion about the quality of audits as well as the necessity to raise the quality of financial audits arose. The United States of America responded to this discussion with the ＂Sarbanes-Oxley Act＂, while the European Union decreed the directive 2006/43/EC. The mentioned directive updated the statutory provisions for the professional guild of auditors to increase the quality of audits. In detail, it demanded an external quality-control-system combined with public supervision for the profession of auditors to ensure a better quality. Due to this fact, the audit companies now have to fulfill a large range of requirements to provide evidence of their consistent auditing-quality and furthermore of the quality standards within their company. Since many small and medium-sized companies are not able to fulfill these new requirements, the number of small and medium-sized audit companies decreases noticeably. This paper discusses the research results on the effects of external quality control^given by law---on the auditor market in Germany focusing on small and medium-sized audit companies. Additionally the research examines that, if the external quality control, which was one of the justifications of the conversions of the EU-directive 2006/43/EC is able to increase the quality in audit companies at all. Therefore it needs to be tested whether there is a uniform and fits all approach of quality in audits. The research questions and the tests were analyzed scientifically and confirmed in several expert interviews with four different expert groups in Germany.

A Research on the Application of XBRL in the Independent Audit

XBRL (extensibility commercial language) network financial report is gradually extending in our country, which will have a far-reaching impact on independent audit. The research on the application of XBRL’s principle, operation process and the improvement of the audit process in the audit work is helpful for bringing some developing measures for independent audit based on XBRL.

Voluntary resignation of independent directors and auditor responses:Empirical evidence from Chinese A-share listed firms

We examine auditor responses to the voluntary resignation of independent directors.We show that auditors respond by increasing audit fees or rescinding engagement with their clients,but not by increasing their audit effort.Mechanism tests reveal that independent directors’voluntary resignation leads to increased regulatory sanctions and negative media coverage,these relationships are more pronounced after the New Securities Law.Auditor response strategies follow an order of priority:at an acceptable level of perceived risk,auditors increase audit fees;when perceived risk exceeds this level,auditors will discontinue the client relationship.Auditors associate greater risk with firms that have(vs.have not)experienced consecutive voluntary resignations by independent directors.Mandatory resignation has no such effect.

Do investors care about auditor assignments?Evidence from last-minute changes to signing auditors

Against the background of China’s strengthening of finance and accounting supervision,this study examines the practice among listed companies of changing signing auditors at the last minute and explores whether Chinese investors can capture this information in a timely manner.We find that China’s capital market responds significantly negatively to these last-minute changes,implying that investors perceive a potential negative impact of this behavior.Crosssectional analyses suggest that the characteristics of the change event,recent corporate events,and accounting firm capability significantly affect the stock price response.Furthermore,in terms of the individual characteristics of signing auditors,external investors appear to comprehensively consider busyness level,industry experience,and the timing of the change to determine the causes and effects of the auditor change and make different market reactions accordingly.In addition,consistent with investor perceptions,we find that last-minute changes significantly impair the quality of financial statements,indicating that external investors’judgments based on information about changes in signing auditors are rational and effective.

Is the quality of female auditors really better? Evidence based on the Chinese A-share market

Unlike previous studies in which a single index was used to measure audit quality, this study establishes a new comprehensive index to measure audit quality via Discretionary Accrual, as estimated by Jones' basic model(1991) and Audit Opinions. The former is used to measure the quality of financial statements, and the latter is used to measure the auditors' independence in the mainstream international literature. We examine whether and how an auditor's gender affects the quality of his or her audits under the framework of empathy theory and gender role socialization theory. Using a large sample of 9861 auditor-firm-year observations from Chinese A-share–listed companies from 2011 to 2015, we find that the audit quality of signed auditors shows significant gender differences: these significant gender differences differ from the findings of previous studies that female auditors could provide a higherquality audit than male auditors; that is, in our study the audit quality of the male auditors exceeds that of the female auditors. After distinguishing the positive and negative directions of the Discretionary Accrual, we find no significant gender differences in audit quality between male and female auditors when the earnings had been adjusted upward by the client; that is, female and male auditors had the same audit risk perception. However, when the client adjusted earnings downward, which indicates a lower audit risk for theauditor, the audit quality of female auditors was significantly lower than that of the male auditors. After controlling for the age and position of the auditors,we also find that the gender differences in the auditors' audit quality decreased significantly or even disappeared when the auditor's age exceeded 45 years and/or their position was manager or above. These results are consistent with the empathy theory and gender role socialization theory.

直面挑战:审计师数字化专长是否有助于提高审计质量?

借鉴审计师行业专长的度量方法,将数字化客户占比较高的审计师定义为数字化专长审计师,并检验在数字化变革过程中,积极参与数字化审计并取得数字化审计经验的审计师是否能够取得更好的审计结果。结果发现数字化审计专长审计师在数字化市场领域能够带来更优的审计质量,并且他们的特殊技能带来的积极作用能够被资本市场的投资者和分析师识别和认可(股价同步性更低且分析师预测更精准)。该结论为在数字化变革中,审计师如何能动应对大样本档案提供了证据,并为实务中事务所发展数字化审计提供了一些启示。

审计师地区专长与审计质量——基于异地审计视角的分析

地区知识会对公司的运营管理、信息披露、财务风险等造成不同的影响,现有文献识别了本地专长和地理距离对审计质量的影响,本文以2018-2022年异地审计样本,研究了异地审计情景下审计师地区专长对审计质量的影响。研究发现,审计师地区专长可以显著提高审计质量。机制检验表明,地区专长主要通过提高风险识别能力和降低代理成本的途径来提高审计质量,进一步分析发现,地区专长提高审计质量的效应在区域隐性知识复杂的环境中更为明显,即在中西部地区、市场化程度更低、资产负债率更高的企业中更显著。在政府鼓励地区间要素流动、打造统一市场的背景下,应该鼓励审计师通过异地审计建立地区专长能促进地区间信息互通,帮助打破地区间的知识壁垒,推动建立全国统一大市场。

Quality of Financial Statements and Tenure of Statement-Related Personnel

This study investigates the association between quality of financial statements and tenure of statement-related personnel. First, we examined whether there is still a significant association between financial statement quality and the tenure of audit partners who are responsible for the quality assurance of financial statements after the implementation of mandatory audit partner rotation. We addressed this issue by using a sample of Taiwan Residents companies, with which no significant association between audit partner tenure and the magnitude of discretionary accruals （DA）, a common proxy for financial statement quality, was found. Second, we investigated whether an association exists between the financial statement quality and the tenure of management who is responsible for the preparation of financial statements. We also addressed this issue by using Taiwan Residents data and found a significant association between management tenure （MT） and the magnitude of DA. Our findings provide evidence that audit partner tenure would neither improve nor deteriorate the quality assurance of a financial statement, when there is a mandatory audit partner rotation after a fixed period of time. Whereas how MT affects financial statement quality after the enactment of the mandatory audit partner rotation is dependent on the management position. Increasing tenure of chief executive officer （CEO） and chief financial officer （CFO） will enhance and hinder financial statement quality respectively. In the end, we found a significant interaction of tenure between auditor and CFO. This result implies that the downward bias of CFO on the financial statement preparation can be mitigated by auditors with increasing tenure.

业绩期望落差与审计质量——基于A股上市公司的经验数据

以2010—2022年A股上市公司为样本实证检验业绩期望落差对审计质量的影响。研究发现,业绩期望落差与审计质量显著负相关,稳健性检验没有改变结论。机制分析显示,业绩期望落差增大了企业的财务舞弊风险,降低了审计质量。异质性分析表明审计师具有较强的独立性和行业专长有助于提升审计质量;进一步地,新冠疫情前的“四大”审计能够更好发挥外部治理作用,同时业绩期望落差对低质量审计的持续性具有显著的正向影响。研究结论拓展了业绩期望落差的审计后果,同时为推动企业和资本市场高质量发展提供了丰富的经验证据。