Accountability of Audit Firms: Content Analysis Method

Document Type : Research Paper

Authors

1 Ph,D. Candidate, Department of Accounting, Faculty of Management & Accounting, Shahid Beheshti University, Tehran, Iran.

2 Assistant Prof., Department of Accounting, Faculty of Management & Accounting, Shahid Beheshti University, Tehran, Iran.

3 Associate Prof., Department of Accounting, Faculty of Management & Accounting, Shahid Beheshti University, Tehran, Iran.

Abstract

Objective: Audit quality is a complex concept whose assessment depends on many latent factors. By providing information about them to stakeholders, the public accountability of audit firms contributes to assessing the quality of auditing and determining the extent to which they rely on audit reports. In this regard, this study examined the research in audit firm’s accountability to extract factors associating firm's accountability, the importance of which was determined by audit partners as experts.
Methods: This research applied a mixed (a combination of qualitative and quantitative data) method with exploratory objective. In this study, 99 papers were analyzed, and 23 experts who selected through the snowball method, ranked the extracted factors. According to the participants’ opinion, the factors were prioritized using the quantitative Entropy-Shannon method.
Results: Factors connecting to audit firm's accountability divided into three categories including motivating factors (nine categories), disincentive factors (three categories) and accountability dimensions (eight categories).
Conclusion: The results show that the legal requirements for accountability, active professional associations, stakeholders demand for accountability, active audit committee, social importance of auditor's activities, partners ‘personal tendency for disclosure, information content of auditor's report, signal to stakeholders and professional ethics play role in audit firms’ accountability context. On the contrary, raising stakeholders’ expectations and disclosure costs are obstacles for audit firms to be accountable. Furthermore, information of the quality control system, the auditing technology, the ownership, the legal and governmental structure, the independence policies, the financial position and performance, professional training and international cooperation are important for the stakeholders of audit firm's accountability.

Keywords

References

AbdelLatif, M. & Watsone, E. (2015). The Effects of the Threats on the Auditor’s Independence. International Business Research, 8(8), 141-149.
Abreu, R. (2015). Accounting for Citizenship: The Role of Accountant, Procedia Economics and Finance, 26, 933-941.
Agus, A., Ghozali, L. (2019). Mediating effect of audit quality in relationship between auditor ethics and litigation: an empirical study. International Journal of Economics & Business Administration, 7 (2), 91-100.
Ahmad, M.B. (2012). Auditor independence in Malaysia: the perceptions of loan officers and professional investors. A thesis submitted in fulfilment of the requirements for the degree of doctor of philosophy of cradiff university, Cardiff University.
Alikhani, R., Maranjory, M., Davoudi, S. (2021). Audit committee characteristics and Audit reporting readability. Accounting and Auditing review, 28 (1), 80-101. (in Persian)
Alleyne, P. & Devonish, D. (2006). Perceptions of Auditor Independence in Barbados. Managerial Auditing journal, 21(6), 621-635
Alleyne, P.A., Hudaib, M., Haniffa, R. (2013). Towards a conceptual model of Whistle-blowing Intentions among External Auditors. The British Accounting Review, 45, 10-23.
Almer, E. D. & Kaplan, S. E. (2002). The effects of flexible work arrangements on stressors, burnout, and behavioral job outcomes in public accounting. Behavioral Research in Accounting, 14 (1), 1-34.
Andiola, L., Downey, D., Wastermann, K. (2020). Examining Climate and Culture in Audit firms: Insights, Practice Implications, and Future Research directions, Auditing: A Journal of Practice & theory, 39 (4), 1-29.
Azar. A. (2001). Expansion and development of Shannon's entropy for data processing in content analysis. Journal of Human Science, 11 (37), 1-18. (in Persian)
Bol, J., Grabner, I., Haesebrouck, K., Peecher, M. (2019). Literature Review The Effect of Audit Culture on Audit Quality. Foundation for auditing research, 1-11.
Broomhill, R. (2007). Corporate Social Responsibility: Key Issues and Debates, Duns tan. No.1
Brown, C. D., Read, W. J. and Raghunandan, K. (2003). The 150-hour rule: does it improve CPA exam performance? Managerial Auditing Journal, 18 (1), 31-38.
Buuren, J., Koch, C. (2010). Do Audit firms use the transparency report to signal audit quality? Economics of Innovation and new technology, 1-52.
Carcello, J. V., Hollingsworth, C. & Mastrolia, S. (2008). The Effect of PCAOB Inspections on Big 4 Audit Quality, Working paper, University of Tennessee.
Carrera, M., Gutierrez, I., Carmona, S. (2003). Specialzation and diversification in audit firms: A Test of firms strategies in the Spanish Audit market. Working paper.1-43.
Carson, E. (2009). Industry Specialization by Global Audit Firm Networks, Working paper, 355-382.
Castleberry, S. (2007). Prison field trips: can white-collar criminals positively affect the ethical and legal behavior of marketing and MBA students? Journals of marketing education, 29 (1), 5-17.
Chen, J., Dong, W., Han, H., Zhou, N. (2020). Does Audit Partner Workload compression Affect Audit quality?. European Accounting review, 29 (5), 1021-1053.
Chen, Y. & Huang, I. (2013). Financial Performance of audit firms in different life cycle stages: Evidence from Taiwan, The international Journal of Business and finance research, 7 (4), 43-62.
Cheng, Y., Lopin, K., Feng. K. (2017). The Relationship between CSR Disclosure and Competitive Advantage, Sustainability Accounting, Management and Policy Journal, 8 (5), 547-570.
Cheon, Y.S., Dhaliwal, D., Hwang, M., Kim, M. (2016). Do regulator inspections of audit firms discern audit quality? Evidence from Korean regulator inspections. Asia-Pacific Journal of Accounting & Economics, 24, 272-301.
Chow, C., Harrison, G., McKinnon, J., Wu, A. (2002). The organizational culture of public accounting firms: evidence from Taiwanese local and US affiliated firms. Accounting, Organizations and Society, 27 (2), 347-360.
Chu, L., Simunic, D., Ye. M., Zhang, P. (2014). Transaction Costs and Competition among Audit firms in local markets. Working paper, 1-43.
Cole, C.(2014). Audit Partner accountability and audit transparency: Partner signature or disclosure requirement. Journal of accounting and finance, 14 (2), 84-101.
Davis, M.S. (2006). Crime Mala in Se: An Equity Based Definition, Criminal Justice Policy Review, 17 (3), 270-289.
Defond, M., Zhang, J. (2014). A review of archival auditing research. Journal of accounting and economics, 58 (2-3), 275-326.
Deumes, R., Schelleman, C., Bauwhede, H.V. and Vanstraelen, A. (2012), Audit firm governance: Do transparency reports reveal audit quality? Auditing: A Journal of Practice and Theory, 31 (4), 193-214.
Dowling, C. (2009). Appropriate audit support systemuse: The influence of auditor, audit team, and firm factors. The Accounting Review, 84 (3), 771–810.
Du, X., Yin, J., Hou, D., Fei. K. (2018). Auditor human capital and financial misstatement: Evidence from China. China Journal of Accounting Research, 11 (4), 279-305.
Empson, L. & Chapman, C. (2006), Partnership versus corporation: Implications of alternative forms of governance for managerial authority and organizational priorities in Professional Service Firms, Research in the Sociology of Organizations, 24, 139-170.
European statutory audit regulations (article 13 of regulation (EU) 537/2014)
Fattah, A.T. (2013). Voluntary Disclosure Practices in Emerging Capital Markets: The Case of Egypt. Durham University.
Fernando, M., Dharmage. S., Almedia, S. (2008). Ethical ideologies of senior Australian managers:an empirical study. Journal of Business ethics, 82 (1), 145-155.
Financial Reporting council. Discussion: Technological resources: using technology to enhance audit quality. 2020.
Fogarty, T., J. Singh, G. Rhoads & R. Moore. (2000). Antecedents and consequences of burnout in accounting: Beyond the role stress model. Behavioral Research in Accounting, 12 (1), 31- 67.
Fu, Y. (2015). Transparency reporing and partner remuneration in Australian audit firms. UNSW Australia University.
Glen, D., Patricia, M., Williams, A., Koch, B. (2006). The effects of age and gender upon the perceptions of accounting professionals concerning their job satisfaction and work-related ttributes. Managerial Auditing Journal. 21 (5), 536-561.
Goodwin, J.A., Wu. D. (2016). What is the Relationship Between Audit Partner Busyness and Audit Quality?. Contemporary Accounting Research, 33 (1), 341-377.
Gramling, A., Hermanson, D., Hermanson, H. (2009). Audit committee material weaknessess in smaller reporting companies. The CPA Journal, 79 (12), 24-29.
Guo, Y. (2016). Audit Quality Control: Big Four Global Member Firms and Audit Services. Working paper, 1-18.
Hansen, G. (2010). Audit fees and engagement profitability: A threats ana safeguards approach to strengthen compliance with standards of ethical behavior. Ethics and Strategic professional Issues Committee, 1-22.
Hategan, C.D. (2020). Auditing the Auditors- Oversight: Necessity or Comlulsoriness. Challenges and perspectives of financial audit. Dol: 10.20869/AUDITF/2020/157/002.
Hermalin. B.E. & Weisbach, M.S. (2012). Information Disclosure and Corporate Governance. Journal of finance, 67 (1), 195-233.
Hoang, K., Jamal, K., Tan, H. (2019). Determinants of Audit Engagement profitability. The Accounting Review, 94 (6), 253-283.
Honigsberg, C. (2014). The case for individual audit partner accountability. Vanderbilt law review. 72 (6), 1871-1922.
Hosseini, S.A., & Shafizadeh, B. (2019). Developing a Model for Protecting Investors'
Rights With Emphasis On Accounting Constructs. Journal of Accounting and Auditing Review, 26(2), 193-216. (in Persian)
Hurley, P.J., Mayhew, B.W., Obermire, K.M. (2019). Realigning Auditors' Accountability: Experimental Evidence. The Accounting Review, 94 (3), 233-250.
IOSCO (2009) Transparency of firms that audit public companies, Consultation Report: International Organization of Securities Commissions.
Jalili, S. (2010). Accountability and effectiveness of regulatory systems. Iranian Journal of Public Administration Mission, 1 (1), 120-156. (in Persian)
Johnstone, K.M., Bedard, J.C. (2003). Risk management in client Acceptance Decisions. The Accounting Review, 78 (4), 1003-1025.
Kaspina, R. (2015). Continuing professional development of accounting and Auditing: Russian Experience and Challenges. Procedia-Social and Behavioral Sciences, 191, 550-553.
Khodadadi, V., Banaie Ghadim, R. (2015). Factors influencing voluntary disclosure of information (theories and Applications). Journal of Accounting and Auditing Studies, 4 (16), 32-43. (in Persian)
Khurana, I.K., Lundstrom, N., Raman, K.K. (2020). PCAOB Inspections and the Differential Audit quality Effect for Big4 and Non-Big4 US Auditors. Contemporary accounting research, 38 (1), 376-411.
Knechel, W., Robert, G., Krishnan, M., Lori. B., Uma, V. (2013). Audit quality: Insights from the academic literature. Auditing: A journal of practice & theory, 32 (1), 385-421.
Krishnan, J., Krishnan, J., Song, H. (2017). PCAOB International Inspections and Audit Quality. American Accounting Association. The Accounting Review, 92 (5), 143-166.
Kumar, P., Zattoni, A. (2014). Corporate governance, Information and investor confidence. Corporate governance: An international review, 22 (6), 437-439.
Lamboglia, R., Lavorato, D., Scornavacca, E., Za, S. (2020). Exploring the relationship between audit and technology. A bibliometric analysis. Meditari Accountancy Research, 29 (5), 1233-1260.
Lennox, C., Pittman, J. (2008). Auditing the Auditors: Evidence on the PCAOB’s Inspections of Audit Firms, ssrn electronic journal, 1-43.
Lennox, C., Pittman, J. (2010). Auditing the auditors: Evidence on the recent reforms to the external monitoring of audit firms. Journal of Accounting and Economics, 49 (1-2), 84-103.
Lenz, H., James, M.L. (2007). International Audit firms as Strategic Networks- the Evolution of Global Professional Service Firms. Economics and Management of Networks, 367-392.
Lightstone, K., Driscoll, C. (2008). Disclosing elements of disclosure: A test of legitimacy theory and company ethics. Canadian Journal of administrative sciences. 25 (1), 7-21.
Listya, Y, R. Sukrisno A. (2014). Influence of auditor independence, audit tenure, and audit fee on audit quality of members of capital market accountant forum in Indonesia، International Conference on Accounting, Studies Procedia - Social and Behavioral Sciences, 164, 324-331.
Mac, D. (2016). CEO Wealth Sensitivity and Corporate Social Responsibility, University of western Ontario.
Madalina, G., Nadia, A., Catalin, A. (2011). The role of the accountancy professional bodies in developing social and environmental reporting. Economics, annals of faculty of economics, 622-652.
Majoor, S., Vanstraelen, A. (2012). Research opportunities in auditing in the EU. Revisited. Auditing: A Journal of practice & Theory, 31 (1), 115-126.
Mao, J., Qi, B., Xu, Q. (2017). Does International Accounting Network Membership Affect Audit Fees and Audit Quality? Evidence from China. International Journal of Accounting, 52 (3), 262-278.
Mcnellis, C.J., Sweeney, J.T., Dalton, K. C. (2021). The Impact of requiring Audit Documentation on Judgments of audit quality and auditor responsibility. Advances in Accounting Behavioral Research, 24, 87-116.
Mehrabanpour, Mohammadreza; Karami, Gholamreza and Jandaghi Ghomi, Mohammad (2021). SWOT Analysis of the Independent Audit Profession in Iran. Accounting and Auditing Review, 28(2), 359 - 397. (in Persian)
Moradi. M., & Yahyaei, M. (2020). Develop a Model for Selecting an Independent Auditor in Iran. Accounting and Auditing Review, 27 (2), 258-287. (in Persian)
Nagy, A.L. (2014). PCAOB quality control inspection reports and auditor reputation. Auditing: A journal of practice & theory, 33 (3), 87-104.
Nazarian, R., Taftiyan, A., Heyrani, F. (2021). Examination of environmental reporting motives: Meta-synthesis application. Journal of Value & Behavioral Accounting, 6(11), 341-382. (in Persian)
Nikokar, A. (2019). The responsibility of the audit firm in the context of the quality control system. CPA Journal, 13-20. (in Persian)
Numan, W., Willekens, M. (2012). An empirical test of spatial competition in the audit market. Journal of accounting and Economics, 53, 450-465.
Olivia, F., Ratnawati, K. (2015). The Effect of Work Experiences, Competency, Motivation, Accountability and Objectivity towards Audit Quality, Procedia - Social and Behavioral Sciences, 211, 328-335.
Persellin, J., Schmidt, J., Vandervelde, S.D., Wilkins, M.S. (2019). Auditor Perceptions of Audit Workloads, Audit Quality, and Job Satisfaction, Accounting Horizons, 33 (4), 95-117.
Pickering, M.E. (2012). Partnership Versus Public Ownership of Accounting firms: Exploring Relative performance, performance measurement and measurement issues. Australasian Accounting, Business and finance journal, 6 (3), 65-84.
Pivac, S. and Čular, M. (2012), Quality index creating and analysis of the transparency of audit firms - Case study in Croatia, Croatian Operational Research Review, 3 (1), 224-235.
Pott, C., Mock, T. & Watrin, C. (2008). The effect of a transparency report on auditor independence: Practitioners’ self-assessment. Review Management Sciences, 2, 111-127.
Public Company Accounting Oversight Board (PCAOB) (2015). Concept release on audit quality indicators.
Razi, M., Madani, H. (2013). An analysis of attributes that impact adoption of audit software, International Journal of Accounting & Information Management, 21 (2), 170-188.
Rockness, H., Rockness, J. (2005). Legislated ethics: From Enron to Sarbanes-oxley, the impact on corporate America. Journal of Business Ethics, 57, 31-54.
Rosa, F., Caserio, C., Bernini, F. (2018). Corporate governance of audit firms: Assessing the usefulness of transparency reports in Europe-Wide analysis. Corporate Governance: An International review, 27 (1), 14-32.
Roxas, M., Stoneback Y. (2004). The importance of gender across cultures in ethical decision-making. Journal of Business Ethics, 50, 149-165.
Safakli, O.W. (2013). Ethical perceptions: Do they differentiate in respect to demographics, impact satisfaction and subsequent word of mouth? African Journal of Business Management, 5(2), 285-293.
Satava, D., Caldwell, C, & Richards, L. (2006). Ethics and the auditing culture: Rethinking the foundation of accounting and auditing. Journal of Business Ethics, 64, 271-284.
Serafeim, G, Ioannou, I. (2013). The Impact of Corporate Social Responsibility on Investment Recommendations: Analyst' perceptions and shifting institutional logic, Strategic management journal. 36 (7), 1053-1081.
Simnett, R., Carson, E., Fu, Y. (2015). Transparency report disclosure by Australian audit firms and opportunities for research. Managerial Auditing Journal, 30 (8-9), 870-910.
Sirois, L., Marmousez, S., Simunic, D. (2016). Auditor Size and Audit Quality Revisited: The Importance of Audit Technology. Accounting Auditing Control, 22 (3), 111-144.
Soltani, B. (2007). Auditing: An international approach, UK: Pearson Education.
Sommerfeldt, R.D., Zimbelman, A.F., zimbelman, M.F. (2019). The effect of audit culture on auditor honesty and skepticism. Working paper. 1-44.
Spencer, R., Johnston, R. (2005). Time to go paperless. Journal of accountancy.
Sun, P.C., Hsu, W.J., Wang, K.C. (2012). Enhancing the Commitment to Service Quality through Developmental and Rewarding Systems. CSQ Consistency as A Moderator, The International Journal of Human Resource Management. 23 (7), 1462–1480.
Susantio, A., Meiryani, A. (2018). The role of computer Assisted Audit Technique, International Journal of Scientific & Technology research, 7 (11), 99-102.
Svanberg, J., Ohman, P. (2016). Does Ethical Culture in Audit Firms Support Auditor Objectivity? Accounting in Europe, 13(1), 65-79.
Tarek, M., Mohamed, E.K.A., Hussain, M.M., Basuony, M.A.K. (2017). The implication of information technology on the audit perfession in developing country: extent of use and perceived importance. International Journal of Accounting & Information Management, 25 (2), 237-255.
Tuker, J.W. (2015). The relation between disclosure quality and reporting quality: A discussion of Cassell, Myers and Seidel (2015). Accounting, organizations and Society, 46: 39-43.
Vanstraelen, A., Zou, L. (2020). PCAOB Inspections and Audit fees: An Analysis of Inspection of Small Audit Firms. European Accounting Review, 31(2), 345-376.
Von, N.A. (2007). Is public ownership bad for professional service firms? Ad agency ownership, performance, and creativity, Academy of Management Journal, 50 (2), 429-445.
Wang, X., Wang, Y., Yu, L., Zhang, Z., Zhao, Y. (2012). Engaging Audit Partner Experience and Audit Quality. China journal of accounting studies, 3 (3), 230-253.
Widuri, R., O'Connell, B., Yapa, P. (2016). Adopting generalizes audit software: An Indonesian perspective. Managerial auditing journal, 31 (8-9), 821-847.
Yakubu, R., Williams. T. (2020). A theoretical approach to auditor independence and audit quality. Corporate Ownership & Contorl, 17 (2), 124-141.
Yang, Sh., Liu, Y., Mai, Q., (2018). Is the quality of female auditors really better? Evidence based on the Chinese A-share market. China Journal of accounting research. 11 (4), 325-350.
Zhang, P. (2010). The impact of the publics expections of auditors on audit quality and auditing standards compliance. Contemporary accounting research, 24 (2), 631-654.
Zhao, Z., Meng, F., He, Y. & Gu, Z. (2019). The Influence of Corporate Social Responsibility on Competitive advantage with Multiple Mediations from Social Capital and Dynamic Capabilities, Sustainability, 11 (1).
Accounting and Auditing Review
Volume 29, Issue 2
2022
Pages 213-241

Files

Share

How to cite

Statistics