EFFICACY OF AUDIT FEE ON AUDIT QAULITY OF SELECTED PHARMACEUTICAL FIRMS IN NIGERIA

The problem of poor accuracy and credibility in some audited financial statement has being a major form of information asymmetry which had led some shareholders and prospective investors to make wrong Judgment about the financial position of some organization due to poor audit quality. Thus, Specifically this study empirically examine how audit fee, audit report lag as well as mandatory auditor rotation affect the audit quality of the sample listed pharmaceutical firms on the floor of the Nigerian Stock Exchange. A GLS estimation method was employed to clearly establish the nature relationship that exists between the dependent variable and the adopted surrogates for the independent variables. A Secondary data was extracted from the annual audited reports from the ten selected pharmaceutical firms that serve as the fair representation for the population under study for a period of ten years 2009-2019. The result from the finding shows that all the adopted surrogates for the independent variable were jointly significant in explaining about 72% variation in audit quality given credence to the coefficient of (R2) which stood @ 0.72 as well as the combined p-value of 0.000. This implies that the predictive power of the surrogates of the independent variables can explain about 72% changes in audit quality of the population under study. In specific terms; Audit fee have a significant positive impact on audit quality of the selected pharmaceutical firms while audit report lag and mandatory auditor rotation have significant negative impact the audit quality of the selected pharmaceutical firms respectively. The study therefore recommends among many others that policy makers and regulators should put in place a framework that will ensure the payment of optimal compensation to audit firm as audit fee as this will no doubt go a long way in improving the audit quality of the firms under study.

Pengaruh fee audit, rotasi auditor, reputasi KAP, audit delay terhadap kualitas audit

The purpose of this study was to determine the effect of audit fees, auditor rotation, KAP reputation, and audit delay on audit quality. The unit of analysis is property, real estate, and construction companies listed on the Indonesia Stock Exchange in 2017-2019. The data used by the researcher was obtained from financial report data. The population is property, real estate, and construction companies on the IDX. In taking the sample using purposive sampling technique, and obtained a number of 22 companies multiplied by three years of the research period. The data analysis used is descriptive using SPSS version 23. The results show that simultaneously audit fees, auditor rotation, KAP reputation, and audit delay do not affect audit quality. For further research, it is hoped that researchers will add years of observation.

The impact of audit rotation on the comparability of financial reports,

This study aims to assess the effect of the rotation and tenure of audit firm and audit partner on the comparability and consistency of financial reports. Several studies have addressed the effect of auditor rotation on the quality of financial reports, but none of them focused specifically on the impact on the comparability and consistency of financial reports. Around the world, the impact of mandatory rotation of audit partner and audit firm is being discussed in academia and regulatory bodies. The peculiarity of the Brazilian regulatory environment allows us to contribute to the discussions on the effects of implementing mandatory auditor rotation. Our sample included 50 companies for which we analyzed data from 2012 to 2018. To measure comparability, we used the similarity of the accounting function model by DeFranco, Kothari and Verdi (2011), and to measure consistency we used the adaptations to this model proposed by Ribeiro (2014). For data analysis, we used descriptive statistics and multivariate panel analysis. Our results suggest that the rotation (mandatory and voluntary) of audit firm and audit partner does not affect the comparability and consistency of financial reports. Results also suggest that auditor-client relationships of up to three years contribute to a significant increase in comparability and consistency, indicating that mandatory rotation does not impair investors’ ability to compare the information concerning their investments. In addition, regulators are shown that a possible reduction in the mandatory rotation term (from five to three years, as in Italy) would be in line with market practices and would imply an increase in the comparability and consistency of financial information.

Relative Influences of Review and Engagement Auditor Rotation on Audit Quality: Evidence from China

Manuscript type: Research paper Research aims: This study focuses on the effects of audit partner rotation on audit quality (AQ) in China. In particular, we examine the effects of review auditors (RAs) and engagement auditors (EAs) on AQ when they voluntarily and mandatorily rotate. Design/Methodology/Approach: The data in this study are retrieved from the Chinese Stock Market and Accounting Research (CSMAR) database. We develop an OLS regression model and logit model respectively to test the hypotheses developed. Finally, we have 13,856 firm-year observations collected for the first regression model, and 16,893 firm-year observations gathered for the second logit model from 2003 to 2015. Research findings: Findings show that RAs are more likely to behave opportunistically to retain clients by weighing up the benefits and costs of compromising audit quality in the first year after a rotation. The results imply that RAs may have an incentive to acquiesce the clients’ accounting irregularities in their first year of audit engagement when they are mandatorily rotated. However, we do not find this trend in terms of EAs’ rotation, suggesting that EAs are less affected by the auditor-client relationship compared to RAs. In addition, we find that RAs are less likely to issue modified audit opinions (MOPI) as the magnitude of negative discretionary accruals (DA) increases when they are voluntarily rotated. Theoretical contribution/Originality: Previous studies have investigated the relationship between mandatory audit partner rotation and audit quality. The results are mixed and inconclusive. Our study contributes to the extant literature by considering RAs’ opportunistic behaviour after mandatory rotation, which has not been explored in previous studies. In China, only a few studies have examined the relationship between mandatory audit partner rotation and audit quality. Our study is one of the first study focusing on the RA’s influence on AQ. Practitioner/Policy implication: The findings of our study can help Chinese authorities, listed firms and academics gain more understanding on whether mandatory audit partner rotation improves audit quality in practice. Since RAs have greater incentive to retain the existing client, we propose that RAs should bear more responsibility for the audit work, instead of the equally shared responsibility with EAs. Research limitation/Implications: Our study is subject to some limitations. First, our study adopts the performance-adjusted discretionary accruals as a proxy for audit quality. However, there can be a measurement error in estimating discretionary accruals. Second, we focus on the auditor rotation and exclude the case of audit firm rotation. Since the AQ can be affected by various factors, audit firm rotation can also affect AQ. Third, although we test the relative effects of RAs and EAs in audit work, we do not examine the effect of RAs’ characteristics such as their professional experience, educational background, and years of service. AQ can be affected by RAs’ characteristics.

The Effect of Auditor Rotation on the Relationship between Financial Manipulation and Auditor’s Opinion

Background: Since external auditors possess the expertise necessary for detecting manipulations in financial statements, they should also take into account earnings management that could lead to it. In that context, auditor’s independence, which can be affected by auditor’s rotation, is of utmost importance. Objectives: This paper aims to examine the moderating effect of auditor rotation on the relationship between the extent of financial manipulation and the type of auditor’s opinion for companies listed on the Zagreb Stock Exchange in the Republic of Croatia. Methods/Approach: A panel analysis with logistic regression is conducted to test the research hypothesis. The sample consists of 210 observations during the three years from 2015 to 2017. Results: Results show a significant positive relationship between auditor rotation in a current financial year and auditor’s opinion. Furthermore, there is a negative, but the statistically insignificant moderating effect of auditor rotation in a current financial year on the relationship between financial manipulation and auditor’s opinion, as well as the statistically insignificant moderating effect of auditor rotation frequency over five years on the relationship between financial manipulation and auditor’s opinion. Conclusions: It is not likely that auditors take earnings management into account when generating their opinion on financial statements, and auditor rotation is not proven to be an adequate stimulus in that context.

Audit committee expertise in large European firms

Purpose This paper aims to study how audit committee member expertise is related to certain features of the committee and to the audit process. Design/methodology/approach Based on information from 2,477 directors from 296 firms in eight European countries between 2005 and 2014, this study measures average audit committee expertise using a continuous variable, which combines education-based and experience-based expertise. Different measures of the audit process are then regressed against this and other control variables. Findings Average committee expertise has increased in recent years. Education-based and experience-based expertise seem to be complementary. Results also show that committees with greater expertise meet more frequently, have fewer directors with full-time dedication and pay lower audit fees. There is no link to changes in the external firm audit, which may be due to mandatory auditor rotation. Originality/value The paper provides a comprehensive metric of audit committee expertise that includes directors’ academic background, professional experience and qualifications. In addition, this study expands current knowledge concerning whether and how committee expertise affects the audit process.

MANDATORY AUDITOR ROTATION: THE PERCEIVED BENEFITS AND DRAWBACKS (A CASE STUDY IN BPK)

After years of implementation of the policy, there is an inconclusive opinion of whether a mandatory auditor rotation could improve the independence of auditors, including those working within the public sector, such as BPK. This study intends to empirically test the impact of mandatory rotation towards auditors' independence in fact and in appearance. Additionally, the study examines how auditor satisfaction towards the policy affects their perceived benefits and drawbacks of the scheme. Following a statistical assessment of primary data using the independent-samples t-test, findings show that independence in appearance of auditors would be enhanced as a result of mandatory rotation. The rotation policy, however, could not by itself improve auditors’ independence in fact. Consequently, complementary schemes are needed to preserve the independence in fact of auditors. Further, auditors who have a favorable view of mandatory rotation would assume that the mechanism offers more advantages than disadvantages. On the other hand, unhappy employees would perceive that mandatory rotation brings more adverse effects than positive ones. The vast majority of respondents also believe that the rotation mechanism is necessary to be implemented in BPK. Lastly, a number of valuable respondent inputs aimed to improve the rotation scheme are elaborated in this study.

PENGARUH INTERVENSI MANAJEMEN, ROTASI SEMU AUDITOR, DAN PERSEPSI FEE AUDIT TERHADAP INDEPENDENSI AUDITOR

Financial report is an important media in communicating facts about company finances and as a basis for decision making. Many parties have an interest about the financial report of a company. Therefore a profession is needed that can guarantee that the financial report are free of fraud made by company management. This is where the auditor's role is needed. auditor independence is very important for public trust in financial reporting. This study aims to determine the effect of the influence of management intervention, pseudo auditor rotation and audit fees perception on auditor independence. The population in this study were all auditors in KAP throughout the Province of Bali. Samples were selected by purposive sampling method with the criteria that experienced auditors working at KAP at least one year, at least have done one audit assignment, and KAP is still active. The hypothesis was tested by multiple linear regression analysis. The results of this study indicate that management interventions and pseudo auditor rotation have a negative effect on auditor independence, while audit fees perception have a positive effect on auditor independence. This shows that the higher the audit fee, the auditor's independence will also increase.