2, pp. and Twedt, B.J. Your email address will not be published. He should have an understanding of the general principles of economics. Therefore, auditor tenure leads to a better understanding of client's business strategy. Characteristics and Importance of Auditing with PDF 1-22. (2020) examine the relationship between a firm's business strategy and its corporate social responsibility (CSR) performance. Additionally, based on agency theory, it is necessary for auditing firms to evaluate accounting information to reduce the information asymmetry between managers and users of accounting information (Bushman and Smith, 2003). At the federal level, the three primary agencies are the General Accounting Offices (GAO), the Internal Revenue Services (IRS), and the Defense Contract Audit Agency. 4. Olson, E.M., Slater, S.F. Auditors that specialize in crimes and are used by law enforcement organizations. Government auditors employ various local, state, and federal government auditors. (2013), Firm characteristics and financial reporting quality of quoted manufacturing firms in Nigeria, International Journal of Accounting, Banking and Management, Vol. Quality Assurance, Quality Management Full Details, International Organization for Standardization, ASQ/ANSI/ISO 19011 Guidelines for Auditing Management Systems Standard. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode. Previous research has only examined the role of auditor industry specialization. He should be aware of the latest developments in the field of accounting. Karami, G., Karimiyan, T. and Salati, S. (2017), Auditor tenure, auditor industry expertise, and audit report lag: evidences of Iran, Iranian Journal of Management Studies, Vol. In previous research such as Tang etal. Mintzberg, H. (1978), Patterns in strategy formation, Management Science, Vol. Business owners will be satisfied by auditing reports that the books of accounts are properly maintained and all departments are working efficiently. With the change in economic conditions, the Ministry of Economy passed the Law on the Use of Certified Public Accountants in 1993. Lapai International Journal of Administration. 4, pp. Audit evidence obtained directly by the auditor (for example, observa-tion of the application of a control) is more reliable than audit evidence obtained indirectly or by inference (for example, inquiry about the ap- 484-503. Chen etal. Accordingly, the F-Limer test was performed. They discover issues in organization workings and books of accounts and give their opinions for resolving them. and Lin, Y.C. The paper took a conceptual approach and drew its basis from the Institutional and Protection Motivation theories. 147-173. According to neo-institutional theory, many companies tend to follow industry norms because doing so will gain legitimacy and resources, reduce performance uncertainty, and increase company survivability (DiMaggio and Powell, 1983; Tang etal., 2011). Poner, M.E. These results are consistent with those reported by Ghorbani and Salehi (2020). Investors must consider the auditor characteristics when selecting companies listed on the TSE. Thus, auditors are required to demonstrate certain qualities in conducting such work. A person selected as an auditor of the company. The sample includes all the companies listed on the TSE from 2011 to 2020. 613-623. Medium quality audit directly and significantly affected by the variable competence of auditors amounted to 25.1%, the independence of auditors of 12%, 20.9% of audit experience, and organizational culture of 14.7%, and the leadership has no direct influence on the quality of the audit, and direct leadership does not have a significant effect on audit quality. 8 No. Qualities of a Good Auditor - Commerce & Management Sciences Studies Stuff Yuan, Y., Lu, L.Y., Tian, G. and Yu, Y. Bentley-Goode etal. By using our site, you agree to our collection of information through the use of cookies. Findings from previous empirical research show that expert auditors have excellent knowledge of the industry, operations, and business of the client; therefore, the industry expert auditor can better assess the risks associated with the firm's strategy (Moroney, 2007). These are not new to anyone and should be considered a baseline set of characteristics that is expected of all auditors. Habib and Hasan (2020) investigated association between firm-level business strategies and the readability of narrative disclosures in annual reports. In the first hypothesis of the research, it was mentioned that the positive association between auditor industry specialization and financial reporting quality will be more pronounced for clients with deviant strategies. (2005), The performance implications of fit among business strategy, marketing organization structure, and strategic behavior, Journal of Marketing, Vol. (2008), Audit partner tenure, audit firm tenure, and discretionary accruals: does long auditor tenure impair earnings quality?, Contemporary Accounting Research, Vol. In summary, the results indicate that auditor characteristics affect the financial reporting quality in the Iranian capital market and that this relationship can be improved through the client's business strategy. (Ref: Para. The return on assets ratio (ROA) variable can be calculated by dividing net income by assets (Gul etal., 2013; Ittonen etal., 2013; Chi and Chin, 2011). 600-623. Auditing ensures the authenticity of all accounts by performing a detailed examination and presenting a trusted opinion regarding them. Li, C., Xie, Y. and Zhou, J. Previous research has shown that control variables including firm size (SIZE), return on assets ratio (ROA), financial leverage (LEV), quick ratio (QR), and firm age can affect the quality of financial reporting (Yuan etal., 2016; Sari, 2018; Chi and Chin, 2011; Gul etal., 2009). Previous empirical evidence suggests that client characteristics (e.g. The person doing auditing should be qualified for job to perform it with accuracy. auditor industry specialization and auditor tenure). viii) Being independent in thought and neutral in attitude, in the event of any dispute. 69 No. The subject matter. However, with the beginning of the Iranian revolution in 1979, most companies in Iran became nationalized and their ownership became state-owned. To learn more, view ourPrivacy Policy. Although there exist significant differences in the regulatory framework, corporate governance regime, and accounting and auditing standards between the UK and the US, the financial regulation of the publicly-quoted companies in the UK has come under scrutiny. It supports management in decision making by providing them with crucial information regarding the organization. Managers of companies listed on the TSE should consider the relationship of the auditor's characteristics to increase the quality of financial reporting when selecting an auditor. For both ADA and CFADA dependent variables, the coefficient of the interaction of auditor industry specialization and strategy deviation is positive and significant (i.e. and Sharp, N.Y. (2013), Business strategy, financial reporting irregularities, and audit effort, Contemporary Accounting Research, Vol. If the client deviates from the business strategy, it is expected that auditors with high tenure will be able to better evaluate accounting policies and procedures, and thus increase the financial reporting quality. The person (or firm) doing the audit and ultimately responsible for the audit results is called an auditor. 315, requires auditors to have sufficient knowledge of the company's strategies and business risks when planning the audit. Does industry expertise improve the efficiency of audit judgment? Deviant strategy (DS) refers to the company's strategy, which deviates from the industry strategy norm. 6 See AS 2501.15 for procedures to perform when identifying significant assumptions. The instruction prescribed by the law; and. 5 No. Moroney, R. (2007), Does industry expertise improve the efficiency of audit judgment?, Auditing: A Journal of Practice and Theory, Vol. Audit working papers | F8 Audit and Assurance - ACCA Global Auditing simply refers to the evaluation of business book of accounts and vouchers. DiMaggio and Powell (1983) found that firms usually follow a corporate strategy similar to that of their industry peers because strategy deviation reduces shareholder confidence and corporate legitimacy. Palmrose, Z.V. The remainder of this paper is recognized as follows. 205-228. Higher residual values represent a lower quality of financial reporting. 297-318. Farhangdoust, S. and Sayadi, L. (2020), Capturing differences in conservatism following earnings restatements: further evidence from Tehran stock exchange, Asian Journal of Accounting Research, Vol. 97-110. Soroushyar, A. 2) the auditors competences, auditor independence, audit experiences, organizational culture, and leadership directly in the professionalism of auditors. In the first step, it is necessary to choose between the least-squares regression (OLS) and panel data methods. 2, pp. He must have a communication ability he can motivate and control the audit staff. Gul, F.A., Fung, S.Y.K. The intention behind auditing a financial record is to allow the auditor express an independent opinion on the financial statements whether it was prepared in all material aspects, in agreement with an accepted framework of financial reporting, whereby the auditor expresses an opinion as true and fair all significant aspects. viii) Able to make sound judgments on the matters observed. The deep concern about the quality of reported earnings led to the Sarbanes-Oxley Act, imposing new requirements on directors and audit committees and effectively ending the self-regulation of the auditing profession in the US. The main problem studied is that management prepares financial statements that contain financial information, in order to be useful for decision making by different stakeholders and management services, a proper examination of such information in today's business environment and legal framework requires the assurance, credibility, and confidence from a third party that will certify what managers have reported. These reports contain accurate information regarding the business organization and depict a fair financial position. 2. The aspect in which competence is made in the auditors report should be as such that no allowance for doubt in the public minds. (2010) argue that with longer tenure periods, the auditor's learning of client-specific knowledge is expected to better complemented. i) Poor personal organization. Future research should consider the impact of other audit features, such as auditor fees and auditor size. Qualities of a Trusted Information Systems Auditor A firm selected as an auditor or by a partner of the firm exercising in India. Auditors examine every financial record to verify their accuracy and discover all mistakes or frauds committed within the organization. 26 No. This study examines whether and how a client's business strategy can affect the relationship between auditor characteristics and financial reporting quality. Balsam, S., Krishnan, J. and Yang, J.S. The research method using exploratory method by conducting a survey on General Inspectorate State Ministries and Non-Ministerial Agencies as the Situs. All data required to test the research hypotheses were collected directly from audited financial statements on the TSE. At the 95% confidence level, F-statistic was significant for both the models, indicating that the regression model is reliable. For example, in Iranian Auditing Standard (IAS) 315, the auditor is required to have sufficient knowledge of the firm's business strategy. 119-134. This study followed exploratory research design. This research aims to enrich the existing literature on public administration, public accountability and public sector auditing. Forensic auditors specialize in crimes and are used by law enforcement organizations when financial documents are involved in a crime. (PDF) Qualitative Characteristics of the Auditor's Report - ResearchGate Sari, D.K. The results of research by Bentley etal. Albeksh (2017) defined AUDINDP as the auditor's capacity to uphold an objective as well as unbiased mental perception, being neutral during the course of the audit, analyzing the outcomes as well as verification in the prepared audit report. Chen etal. (2013) showed that the firm business strategy affects the quality of financial reporting and auditor fees. Findings reached are that majority of employees in Nairobi County have unrealistic expectations regarding the mandate of a statutory auditor (x =64%, n=101). (2019) and also, is consistent with the knowledge gap hypothesis. However, there are other ways to calculate a company's strategy. (2014), A review of archival auditing research$, Journal of Accounting and Economics, Vol. In order to ensure the robustness of the research findings, Table8 (available online at: https://drive.google.com/file/d/17hTopgHc5I_ZotWWiGCWzOIgTaYbRt1p/view?usp=sharing) presents the results of estimating the models using the generalized method of moments (GMM) technique. Chen, C. (2021), The impact of deviant strategy on corporate innovation performance: the moderating role of equity incentives and market competition, 6th International Conference on Financial Innovation and Economic Development (ICFIED 2021), March, Atlantis Press, pp. Banimahd, B., Poorzamani, Z. and Ahmadi, S.A. (2013), The value relevance of audit report, auditor type and auditor tenure: evidence from Iran, Asian Journal of Finance and Accounting, Vol. client strategy) on the relationship between auditor characteristics (including auditor industry specialization and auditor tenure) with financial reporting quality. In other words, there is a hypothesis of a knowledge gap between auditors with a high tenure and those with a low tenure. Mintzberg, H., Ahlstrand, B. and Lampel, J. The period covered by the audit. Thus, in addition to state-owned companies, the IAO has audited private companies.
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