scholarly journals Internal Control Opinion Shopping and Audit Market Competition

2015 ◽  
Vol 91 (2) ◽  
pp. 603-623 ◽  
Author(s):  
Nathan J. Newton ◽  
Julie S. Persellin ◽  
Dechun Wang ◽  
Michael S. Wilkins
Keyword(s):  
Internal Control ◽  
Audit Quality ◽  
Market Competition ◽  
Policy Debate ◽  
Current Policy ◽  
Empirical Results ◽  
Audit Market ◽  
Opinion Shopping ◽  
The Impact

ABSTRACT This study examines the extent to which audit clients successfully engage in internal control opinion shopping activities and whether audit market competition appears to facilitate those activities. Regulators have long been concerned about the impact of both audit market competition and opinion shopping on audit quality. We adopt the framework developed in Lennox (2000) to construct a proxy to measure the tendency that clients engage in internal control opinion shopping activities. Our empirical results suggest that clients are successful in shopping for clean internal control opinions. In addition, we find evidence that internal control opinion shopping occurs primarily in competitive audit markets. Finally, our results indicate that among auditor dismissal clients, opinion shopping is more likely to occur when dismissals are made relatively late during a reporting period and when audit market competition is high. Our findings have implications for the current policy debate regarding audit quality and audit market competition.

Dressing for the Occasion? Audit Quality in the Presence of Competition for New Clients

2021 ◽  
Author(s):  
Henrik Moser
Keyword(s):  
Audit Quality ◽  
Market Competition ◽  
New Approach ◽  
Auditor Choice ◽  
Audit Market ◽  
Auditor Quality ◽  
The Impact

This paper investigates the impact of increased audit market competition on audit quality and auditor choice. I develop a model comprising two auditors who compete for a new client by choosing the audit quality for their respective existing clients and using the audited report as a signal. I identify factors that influence auditor quality decisions as well as the behavior of clients, who potentially misstate their reports. Auditors are tempted to alter audit quality because they are eager to appear desirable from a new client's perspective. Interestingly, while recipients of the audited report adjust their conjectures about audit quality, there are conditions under which auditors lower their audit quality to increase the likelihood of being hired. The analysis extends the existing literature by describing a new approach to modeling the auditors' motivation to signal reputation for certain behavior.

scholarly journals Internal Control Opinion Shopping and Audit Market Competition

2014 ◽  
Author(s):  
Nathan J. Newton ◽  
Julie Persellin ◽  
Dechun Wang ◽  
Michael S. Wilkins
Keyword(s):  
Internal Control ◽  
Market Competition ◽  
Audit Market ◽  
Opinion Shopping

The effect of auditor narcissism on audit market competition

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hojat Mohammadi ◽  
Mahdi Salehi ◽  
Meysam Arabzadeh ◽  
Hassan Ghodrati
Keyword(s):  
Financial Markets ◽  
Significant Relationship ◽  
Design Methodology ◽  
Audit Quality ◽  
Stock Exchange ◽  
Market Competition ◽  
Competitive Pressure ◽  
Content Type ◽  
Listed Firms ◽  
Audit Market

Purpose This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure). Design/methodology/approach This paper’s method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2018 using a sample of 188 firms (1,310 observations). The method used for hypothesis testing is linear regression using panel data. Findings The results show a negative and significant relationship between auditor narcissism and audit market competition and its indices, including auditor concentration, clients’ concentration and competitive pressure. Moreover, a positive and significant relationship was observed between audit quality and audit market competition and its indices, including auditor concentration, client concentration and competitive pressure. Originality/value To analyzes competition indices in the audit market (auditor concentration, clients’ concentration and competitive pressure). The variable is assessed once more using the exploratory factor analysis of the so-called three variables single variable, named audit market competition. So the central question of the study is investigated within a broader sense. Moreover, as the present study is carried out in the emergent financial markets with extremely competitive audit markets to figure out the effect of auditors’ intrinsic characteristics on such markets’ competitiveness, it can provide useful information in this field.

scholarly journals AUDIT MARKET COMPETITION: AUDITOR CHANGES AND THE IMPACT OF TENDERING

1998 ◽  
Vol 30 (3) ◽  
pp. 261-289 ◽  
Author(s):  
VIVIEN BEATTIE ◽  
STELLA FEARNLEY
Keyword(s):  
Market Competition ◽  
Audit Market ◽  
The Impact

The Impact of Management Alumni Affiliation and Persuasion Tactics on Auditors' Internal Control Judgments

2017 ◽  
Vol 93 (2) ◽  
pp. 97-115 ◽  
Author(s):  
Sudip Bhattacharjee ◽  
J. Owen Brown
Keyword(s):  
Internal Control ◽  
Social Identity Theory ◽  
Audit Quality ◽  
Revolving Door ◽  
Auditor Judgment ◽  
Professional Skepticism ◽  
Sarbanes Oxley ◽  
External Auditor ◽  
One Year ◽  
The Impact

ABSTRACT Concerns over “revolving door” practices of companies hiring directly from their external auditor led to a Sarbanes-Oxley Act provision mandating a one-year cooling-off period before such hires can occur. Yet little is known as to whether these alumni affiliations, still prevalent today, actually impair audit quality. Drawing on Social Identity Theory, we conduct an experiment to examine whether auditors experience heightened identification with an alumni-affiliated client manager and, if so, how this perceived relationship affects their professional skepticism in response to a management persuasion attempt. As predicted, absent the use of a management persuasion tactic, auditors identify more with an alumni-affiliated manager than a non-alumnus with equal professional experience, and this perceived social bond enhances the manager's influence. However, the use of a common persuasion tactic, while effective at influencing auditor judgment when used by an unaffiliated manager, “backfires” when used by an alumni-affiliated manager, leading to diminished persuasion and increased professional skepticism. Evidence suggests that auditors are better able to identify the inappropriateness of the persuasion attempt when the tactic is used by an alumni-affiliated manager.

The Association between the Number of Auditors as a Proxy for Audit Market Competition and Audit Quality

2018 ◽  
Vol 43 (5) ◽  
pp. 159-196
Author(s):  
Wonsuk Ha ◽  
Catherine Heyjung Sonu ◽  
Jong-Hag Choi ◽  
Ahrum Choi
Keyword(s):  
Audit Quality ◽  
Market Competition ◽  
Audit Market

Organizational unlearning, knowledge generation strategies and radical innovation performance: evidence from a transitional economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Feng Zhang ◽  
Chongchong Lyu ◽  
Lei Zhu
Keyword(s):  
Knowledge Creation ◽  
Positive Relationship ◽  
Market Competition ◽  
Radical Innovation ◽  
Innovation Performance ◽  
Knowledge Generation ◽  
Content Type ◽  
Empirical Results ◽  
Types Of Knowledge ◽  
The Impact

Purpose Empirical results remain unclear as to whether organizational unlearning can improve radical innovation performance. The purpose of this study is to investigate how, and under which conditions, organizational unlearning influences firms’ radical innovation performance. Design/methodology/approach Drawing on the knowledge-based view, this study develops a theoretical model that hypothesizes a positive relationship between organizational unlearning and radical innovation performance, which is mediated by knowledge generation strategies. It also proposes that the impact of unlearning on knowledge generation strategies will be moderated by dysfunctional competition. Using survey data from 191 Chinese manufacturing firms, the hierarchical regressions were used to test the hypotheses. Findings The empirical results show that organizational unlearning not only impacts radical innovation performance directly, but also indirectly affects radical innovation performance through two distinct types of knowledge generation strategies: (internal) knowledge creation and (external) information searching. Moreover, dysfunctional competition plays a dual role, strengthening the positive relationship between organizational unlearning and information search and weakening the positive relationship between organizational unlearning and knowledge creation. Research limitations/implications The present research broadens the understanding of how to promote radical innovation performance, which has great potential to improve the performance of firms on the market. Specifically, it deepens the knowledge of how organizational unlearning facilitates radical innovation performance by focusing on two distinct types of knowledge generation strategies as the crucial links, and enriches existing literature on the effectiveness of organizational unlearning in a dysfunctional competitive environment. Practical implications Practicing organizational unlearning for firms’ long-term success requires firms to develop and implement appropriate knowledge generation strategies in accordance with the characteristics of market competition in their operating environment. Originality/value This study offers new insights into how and under what conditions organizational unlearning affects radical innovation performance, enhancing the understanding of how organizational unlearning can be implemented to drive firm radical innovation.

scholarly journals The Effect of Corporate Governance in Palestine on the Efficiency of Internal Audit: Empirical Evidence

2016 ◽  
Vol 8 (5) ◽  
pp. 124 ◽  
Author(s):  
Suhaib Tawfiq Jarrar
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Audit Committee ◽  
Audit Quality ◽  
Internal Audit ◽  
Public Companies ◽  
Internal Auditor ◽  
The Right ◽  
The Impact

This paper comes to examine the impact of corporate governance in Palestine on the efficiency of internal audit from the reality of the listed corporations in the Palestine Exchange; [PEX]. The population of this paper consists of all the 25 listed Palestinian companies in the Palestine Exchange that have internal auditor. It also includes another 5 companies that rely on the internal audit by external companies. Hence, the number of the reviewed companies by this study is 30 companies (Palestine Exchange Market). Thereupon, 30 questionaires were distributed and retrived. However, this manuscript states a summary of the most important results. These results are explained as is shown in the following: (1) the findings of the study state that there is an effect of applying the variables of corporate governance altogether on the quality of the internal audit of the listed public companies in the Palestine Exchange. These rules are (disclosure and transparency, accountability, responsibility, justice, and independency). (2) The results of the study indicate that there is a significant effect of applying the corporate governance variables individually on the quality of the internal audit of the listed public companies in the Palestine Exchange. Thus, the effect of these variables appears contrasted respectively as the following: disclosure and transparency, justice and accountability, independency and responsibility. (3) The corporate governance represents combining the right practices and procedures which operate within the standards and rules that governed by the obligatory standards. These standards aim at ensuring that there aren’t any contradictions between the strategic goals of the company and the fuctional procedures of the administration in achieving these goals. (4) The internal audit adds value to the company through the functions that enhance its performance within corporate governance. This includes providing information to all levels of the management, evaluating the system of the internal control and the risk management, in addition to sticking the company with the principles of corporate governance. The findings of the study come up with the following recommendations: (1) the study assures the importance of applying the corporate governance principles because of their clear effect on the internal audit quality. It also recommends working efficiently on the professional development of the auditors and improving their performance through training programs, as well, encouraging them to keep up with the latest developments in the field of the auditing and other related fields. (2) It strongly recommends working on enhancing and activating the role of the board of directors and the audit committee; as well as granting them the independency. Hence, they will be able to carry out the tasks assigned to them. Consequently, they will avoid the effects that the company may be exposed to as a result of the internal weakness of the practical aspects of the principles of corporate governance; in addition to the negative impacts of this issue on the quality of the internal audit.

scholarly journals Auditor Integration of IT Specialist Input on Internal Control Issues: How a Weaker Team Identity Can Be Beneficial

2021 ◽  
Author(s):  
Cassandra Estep
Keyword(s):  
Information Technology ◽  
Social Identity ◽  
Financial Reporting ◽  
Internal Control ◽  
Social Identity Theory ◽  
Audit Quality ◽  
Identity Theory ◽  
Team Identity ◽  
The Impact ◽  
Insight Into

I investigate how auditors integrate information technology (IT) specialist input into internal control over financial reporting (ICFR) issue classifications. Given the ill-structured nature of evaluating ICFR issues and the impact of these issues on audit quality, combining knowledge from different perspectives is likely beneficial. Drawing on social identity theory, I predict and find that a weaker one-team identity between auditors and IT specialists yields benefits. Auditors with a weaker versus stronger team identity place more weight on IT specialist input for IT-related issues and differentially weight higher and lower quality input for non-IT issues. I also find that more severe ICFR issues drive the predicted results. My study provides insight into how team identity influences auditor integration of input from specialists. The implications of my study are of interest to researchers, regulators, and practitioners, especially as recent firm initiatives encourage a one-team view for auditors and IT specialists.

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