Contemporary Accounting Research
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Impact of Joint Auditing on Audit Quality
This study seeks to assess the impact of joint auditing on the quality of the audit. It builds on the hypothesis that Big 4-non Big 4 (BS) audit pair is likely to expose more substantial impairment than Big 4-Big 4 couples in case of losses in a client firm. Firms audited by the Big 4 (BB) pair are more likely to minimize impairment exposure in a low performance unlike Big 4- non-Big 4 (BS) audit pair, thus reduces openness for such organizations.
This study employs a combination of matched and full samples to test hypotheses while performing the empirical test. The samples include 551 full and 396 matched samples uniformly that are distributed. The study employs propensity-score-matched samples for matching and replacement because of its small size. The research also uses descriptive analysis.
From the research, firms audited by BB are “larger and riskier,” make limited asset growth, and sell more in exports. Results show these firms had impairment 48 percent of the time, while clients of the BS recorded 41 percent. The probability of impairment is higher when firm performance is low. BS combinations (68 percent) have a higher chance of finding impairment than BB pairs (43 percent).
Debt Covenant Violations, Firm Financial Distress, and Auditor Actions
This study attempts to establish a relationship between dishonoring credits and the acts of an auditor on a financially distressed firm. It emphasizes on results of violation of debt agreement due to the actions of the auditor.
The research uses a computer model and audit analytics to gather data. The audit fee model used samples from 28318 firm-years. It also employs descriptive statistics for violations, audit fees, and auditor resignation. It relies on secondary data for its research.
Results show that audit fees increase, and debt violation is directly proportional. Firms that continuously violate debts agreement face more severe consequences. Auditors have higher chances of resigning from violator firms. Big auditors react strongly to firm violations.
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