nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2024‒02‒05
eight papers chosen by

  1. Why Do Female Lead Auditors Charge a Fee Premium? Evidence from the UK Audit Market By Owusu, Andrews; O'Sullivan, Noel; Kwabi, Frank; Holmes, Mark
  2. "The application of analytical procedures in Big Four audit firms in Vietnam " By Phuong Thi Nguyen
  3. Does the Ind AS moderate the relationship between capital structure and firm performance? By M N, Nikhil; S Shenoy, Sandeep; Chakraborty, Suman; B M, Lithin
  4. Unleashing the Potential of Artificial Intelligence in Auditing: A Comprehensive Exploration of its Multifaceted Impact By Patel, Rajesh; Khan, Fatima; Silva, Buddhika; Shaturaev, Jakhongir
  5. Enforcement of Financial Reporting Regulation: Insights From New Data By Bissessur, S.; Litjens, Robin; Ormazabal, Gaizka
  6. Pronoun Disclosure and Hiring Discrimination: A Resume Audit Study By Taryn Eames
  7. The impact of assurance on compliance management systems on bank directors' decisions By Quick, Reiner; Sayar, Sanjar
  8. Designing EU Supply Chain Regulation By Gabriel Felbermayr; Klaus Friesenbichler; Markus Gerschberger; Peter Klimek; Birgit Meyer

  1. By: Owusu, Andrews; O'Sullivan, Noel; Kwabi, Frank; Holmes, Mark
    Abstract: Existing research documents a fee premium for female partner led audits (Ittonen & Peni, 2012; Hardies et al., 2015; Burke et al., 2019; Lee et al., 2019; Hardies et al., 2021). We take this work forward by investigating a possible justification for the observed premium by examining how auditor gender is related to audit report lag and whether the female partner audit fee premium is driven by audit report lag. We find that firms audited by a female lead auditor have a significantly shorter audit report lag but pay a significantly higher audit fee. In further analysis, we find that the fee premium for a female partner led audits is higher for clients receiving a more timely audit opinion. Our findingsare consistent with female lead auditors delivering more timely audits and audit clients being prepared to pay a premium for such timeliness. Our study extends our understanding of the importance of gender in the auditing process and the value clients see in audits led by female auditors. Given the relatively low proportion of female lead auditors, our findings should also encourage audit firms to appreciate the economic value of female lead auditors and to actively facilitate their progression to senior roles.
    Keywords: female auditors; audit partners; audit report lag; audit fee premium; UK audit market;
    Date: 2024–01–23
  2. By: Phuong Thi Nguyen (International School, Vietnam National University, Vietnam Author-2-Name: Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: "Objective - The primary objective of this exploratory research is to investigate the perception of Big Four auditors in Vietnam on the importance of analytical procedures in financial audits, factors affecting the adoption of analytical procedures, and how Big Four auditors apply analytical procedures in audit practice. Methodology/Technique - Through the utilization of qualitative research methods, including interviews, internal documents from Big Four audit firms, and secondary data, this study seeks to uncover valuable insights into the adoption of analytical procedures within the Big Four audit firms. The current study uses thematic analysis as the method for data analysis. Findings - The results indicate that analytical procedures were important and necessary in an audit engagement at the Big Four. Experienced auditors consider analytical procedures to be more important than less experienced auditors. Big Four employees actively apply these procedures in all three phases of an audit. Managers mainly perform analytical procedures when planning, and partners and seniors might be involved. The auditors utilize trend analysis, ratio analysis, and reasonable testing in the planning state. However, trend analysis is the major technique preferred. During the audit stage, the application of analytical procedures depended on the auditors' experience, audit clients' size, and characteristics. Big Four auditors use simple analytical techniques such as trend analysis, ratios analysis, and reasonable analysis but do not use advanced techniques such as regression analysis. The team leader, executives, and partners perform the analysis at the reviewing stage. The auditors still mainly apply Excel in the analytical procedures with almost all audit clients. With some extensive audits whose books are suitable with the data analysis software, auditors will utilize such software to automate analytical procedures. Novelty - The first study addresses the factors affecting and mode of application of analytical techniques in Big Four audit firms in Vietnam by utilizing a qualitative method. Type of Paper - Empirical"
    Keywords: Big Four; auditors; analytical procedures; analytical techniques; audit work
    JEL: M42 M49
    Date: 2023–12–31
  3. By: M N, Nikhil; S Shenoy, Sandeep; Chakraborty, Suman; B M, Lithin
    Abstract: In line with the wide implementation of IFRS around the globe, the significant shift in the Indian accounting system appertained to the Ind AS is expected to have a substantial impact on the firm-level information environment. Nevertheless, the question of whether the adoption of such standards moderates the relationship between leverage and firm performance remains unanswered. In this backdrop, we aim to close this research gap employing 3120 firm-year observations from 401 Indian non-financial firms for a period from 2013 to 2022. Notably, we found that the leverage among Indian firms discourages profitability. Further, the adoption of Ind AS negatively moderates the leverage and firm performance association. The findings suggest that the enhanced transparency and the firm's reporting quality dissuade risk-averse investors from investing in highly levered companies. As a result, investors avoid risky investments, and firms must strive to foster their trust and motivation. The conclusion of the present research draws significant implications for management and policymakers while also contributing to the ongoing debate on capital structure and firm performance.
    Keywords: emerging country, debt, GMM, IFRS convergence, India, investors, information environment, leverage
    JEL: C33 G32 M48
    Date: 2023–09–02
  4. By: Patel, Rajesh; Khan, Fatima; Silva, Buddhika; Shaturaev, Jakhongir
    Abstract: This research paper examines the impact of Artificial Intelligence (AI) on the financial audit process and explores how it enhances auditing practices. The integration of AI technology in financial audits has the potential to revolutionize the profession by automating tasks, providing real-time analysis, enhancing risk assessment capabilities, and offering valuable insights. This research investigates the implications, benefits, challenges, and ethical considerations associated with AI integration in the audit process. The literature review reveals that AI improves audit efficiency by automating manual processes and reducing the time required for data analysis. AI-powered tools enable real-time analysis, enhancing risk assessment by detecting anomalies and potential fraud indicators promptly. AI algorithms also contribute to more accurate and informed decision-making by analyzing complex datasets and identifying patterns. Ethical considerations, such as fairness, transparency, and unbiased decision-making, must be addressed when integrating AI technology into audits. Based on the literature review, hypotheses are developed to test the relationships between AI and audit efficiency, risk assessment, audit quality, and decision-making. These hypotheses propose that AI integration improves audit efficiency, enhances risk assessment capabilities, facilitates more informed decision-making, and requires ethical considerations and collaboration with IT professionals for successful implementation. The findings and discussion emphasize that AI technology has significant potential implications for audit quality, efficiency, risk assessment, and decision-making. By leveraging AI's analytical capabilities, auditors can improve audit quality, proactively address risks, and make more accurate decisions. However, further empirical research is needed to validate these findings and address ethical considerations. Future research should focus on the long-term effects of AI on audit quality, explore ethical frameworks for AI integration, and examine auditors' technological skills and collaboration with IT professionals.
    Keywords: Artificial Intelligence; Audit; Transparency; Fraud; Financial Accounting
    JEL: M4 M42 M48 O3 O33
    Date: 2023–08–08
  5. By: Bissessur, S.; Litjens, Robin (Tilburg University, School of Economics and Management); Ormazabal, Gaizka
    Date: 2023
  6. By: Taryn Eames
    Abstract: This paper presents the results of the first large-scale correspondence study estimating hiring discrimination against applicants who disclose pronouns. A resume audit design is leveraged, where two fictitious resumes are sent in response to each job posting: in each pair, the treatment resume contains pronouns listed below the name and the control resume does not list any pronouns. Two treatments are considered: nonbinary "they/them" pronouns and binary "he/him" or "she/her" pronouns congruent with the sex implied by the applicant's name. Strong evidence is found that disclosing "they/them" pronouns reduces positive employer response: discrimination estimates are robust to the Heckman-Siegelman critique and magnitude is statistically larger compared to those disclosing "he/him" or "she/her" pronouns. Further, there is suggestive evidence that discrimination is higher in Republican than Democratic geographies. By comparison, there is limited evidence that disclosing "he/him" or "she/her" pronouns results in discrimination.
    Keywords: field experiment; correspondence study; resume audit study; discrimination; pronouns; nonbinary people; labour market
    JEL: C93 J15 J16 J23 J71
    Date: 2024–01–15
  7. By: Quick, Reiner; Sayar, Sanjar
    Abstract: Numerous corporate scandals, in conjunction with managerial misbehavior, demonstrate the need for compliance management systems (CMS) and the relevance of CMS assurance. This study investigates the impact of CMS assurance on German bank directors' perceptions and decisions, and analyzes whether the type of assurer and the level of provided assurance are relevant. For this purpose, we conducted an experiment with 105 bank directors and used ANOVA to analyze their reliance on the hypothetical company's CMS, and their decisions regarding credit granting, purchase, and recommendation of shares. We chose a 2 × 2 + 1 between‐subjects design, manipulating the assurance provider (audit firm vs. third party) and the level of assurance (limited vs. reasonable), and adding a control condition without any assurance. Our results suggest that assured CMS positively affect bank directors' perceptions and decisions, compared to CMS without assurance. Furthermore, we find that our perception measure and all three of our decision measures are strongly associated with the choice of assurance provider, but only two decision measures are associated with the assurance level. Bank directors prefer assurance provision by an audit firm, whereas the findings regarding the impact of the assurance level are inconclusive. The study's results, which confirm the decision‐usefulness of CMS assurance, are of interest for managers, in particular compliance officers, auditors, creditors, regulators, and academics.
    Date: 2024–01–05
  8. By: Gabriel Felbermayr (WIFO); Klaus Friesenbichler; Markus Gerschberger; Peter Klimek; Birgit Meyer (Austrian Institute of Economic Research)
    Abstract: The EU Directive on Corporate Sustainable Due Diligence has sparked fierce debate about the regulations of supply chains. The Directive's objectives are aligned with European values. Assuming that enforcements of social and environmental rules are absent in certain third countries, it privatises compliance costs in complex supply networks. This paper suggests options to make the Directive more effective and efficient. It should exclude countries with a sufficient regulatory system and focus not on the entire network but on supplier-buyer relationships only. Public agencies should set harmonised regulatory standards, interpret the regulations and organise a private certification scheme in which liabilities are assumed by certification companies. The proposed system resembles the market for financial auditors.
    Keywords: EU, Supply Chain, Due Dilligence, Regulation, Firm, International Trade
    Date: 2024–01–15

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.