Audit Quality and Audit Committees - Essay Example

Summary of Research Papers By Audit Quality Audit quality has attracted the attention of a number of scholars in the accounting profession over the last decades. Most of these studies have been carried out in the USA and the developed world. Very little has been done in the developing countries. Studies on audit quality have focused on the status of audit quality, the factors that influence the audit quality as well as the consequences of audit quality on a number of variables. Some of the studies are reviewed in this section. One study that focused on the status of audit quality is a meta-analysis study by Jere (2004) who sought to review audit failure rates, costs of auditing, audit report research, auditor differentiation and audit quality, big-firm small-firm dichotomy, and the role of audit research in policy making. The paper began with a review of outright audit failure rates. It posited that an outright audit failure occurs when GAAPs are not enforced by the auditor and when an auditor fails to issue a modified or qualified audit report when the circumstances are appropriate. The failure renders the reports misleading to the users. Where does audit failure rate data come from? This question is also answered by Jere (2004) as the paper defines audit failure rate using business failure rates – failures of publicly listed companies. Another audit failure could be observed from consent decrees from the reports of Accounting and Auditing Enforcement Releases (AAER). Further, the paper explains that data for audit failure rates could also be sourced from earnings restatements. The study found that the audit failure rates with significant economic consequences were infrequent, accounting for less than 1% annually. Jere (2004) also tackled the issue of audit fees and whether auditing was costly. The paper also found that audit fees were low at less than 0.1% of the client sales. The paper argues correctly that the fact that the auditing costs are very low does not necessarily suggest that the quality of audits is also low given that the audit failure rates are also very low. Auditing is therefore inexpensive. Jere’s (2004) meta-analysis revealed that despite the false positives and negatives, the audit reports were informative and therefore the audit quality was high. The author noted that auditors are not always accurate in their reporting and this can reduce the audit quality. Auditors tend to report more conservatively (false positives) but mostly fail to get it right when it matters (false negatives). What the false positives and negatives do is create noise and reduce informativeness of the reports but do not eliminate their informational value. The results also showed a voluntary differential audit quality among audit firms as audits of large accounting firms are of high quality. The paper also concludes that academic research has not influenced policy-making in US. Regulatory and professional bodies have acknowledged salient issues in audit quality and some have proposed frameworks within which audit firms need to operate to enhance audit quality. One of the bodies that has issued such proposals is the Financial Reporting Council (FRC). Holm & Zaman (2012) analysed the extent to which audit firms, professional bodies and investors considered the proposals by FRC sufficient for addressing the concerns about audit quality. The paper concluded that the proposals by FRC had focused on issues which do not pose a threat to the commercial interests of audit firms. The paper noted that the regulatory and professional bodies were engaging in image management and promotion of audit quality in order to remedy their tainted image following a number of financial scandals as well as to boost their legitimacy and standing. A number of studies have also examined the factors that influence audit quality. In this regard, tenure has been studied as one of the determinants of audit quality. For instance, Ghosh & Moon (2005) examined how information intermediaries and investors perceive auditor tenure and quality. The data was selected from publicly listed firms in the 2001 Compustat annual files and the analysis covered data from 1990 to 2000. The results showed that perceptions of audit tenure have a positive effect on earnings quality which suggests that investors and information intermediaries perceive longer audit tenures to have a positive impact on audit quality. Tenure as a determinant of audit quality was also examined by Carey & Simnett (2006). The study sought to examine the relationship between audit quality and long audit partner tenure. The paper was done using data from Australia where audit quality data for a period where partner rotation was not mandatory was compared to that where it was mandatory. The data was selected from published information for listed companies on the Australian Stock Exchange in 1995. A sample of 1021 companies was used in the analysis which excluded 25 banks and insurance firms. The results showed that a long audit partner’s tenure leads to a lower propensity of the partners to issue a going-concern opinion as well as just beating earnings benchmarks. This confirms that a longer audit partner tenure leads to deterioration of audit quality. Another factor that has been studies if audit fees. Ettredge, et al. (2014) examined the relationship between audit fee pressure and audit quality. The paper focused on the recession period of 2008. A sample of 3039 firms from Audit Analytics and Compustat was used. The results showed that audit fee pressure (measured as the difference between benchmark audit fee and the actual audit fee) had a positive effect on accounting misstatement. During the recession, audit firms reduced their audit fees. These fee concessions reduced the audit quality. Thus, the study confirmed that audit fees pressure negatively affects the audit quality. The study by Jere (2004) had revealed that the quality of audit was influenced by legal regimes and incentives created by them. This is so far one of the very few studies that have examined how legal regimes affect the audit quality as well as how incentives created by the regimes affect audit quality. Some studies have focused on the consequences of audit quality on a number of variables. For instance, Lin & Hwang (2010) did a meta-analysis of 48 prior studies on the effect of corporate governance and audit quality on earnings management. The study used Stouffer combined test to summarise the effects of governance and audit quality on earnings management. On audit quality, the results showed that auditor tenure, size, and specialisation had a negative effect on earnings management while auditor independence had a negative effect on earnings management. Another study also focused on how audit quality affects earnings management. The study by Jere (2004) had showed that audit quality had a positive effect on earnings quality. This suggests that earnings quality improved when audit quality was enhanced as opposed to when audit quality was low. The study by Ghosh & Moon (2005) on audit quality had revealed that audit tenure moderates the relationship between audit quality and firm performance as measured by stock rankings. The study confirmed that audit quality influences firm performance as measured through better stock rankings on the stock exchange markets. Audit Reporting Audit reporting has been a centre of debate for many years now in the accounting profession. Most of the issues have revolved around the quality of audit reports and the usefulness of the reports. A number of papers on audit reporting sprung up following the financial scandals involving audit firms and their clients in US. This section reviews a few papers on audit reporting. The style of presentation of an audit report has been examined by a number of scholars. In this section, one study delved into this matter. A matched-pair experiment of 50 part-time MBA students was used by (Hatherly, et al., 1998) to examine the ability of free-form audit report to change the perceptions of the readers on the auditor, the auditee and the auditee’s financial statements. A free-form reports are offered by audit firms to the client’s board of directors for their internal use and never issued publicly. The paper reviewed prior studies on the subject before delving into the description of the free-form report used in their study. The authors then exhaustively describe their experimental research design before presenting their results and discussions thereof. The study found that the free-form audit report elicited a user perception of a more rigorous and useful audit. In other words, when an audit report is structured around a framework of useful recommendations, adjustments, and issues arising significantly changes how users perceive the audit process and the audit product. Users perceive such audit process as rigorous and the product as useful. However, the reporting of adjustments and management letter reduces the perceptions of the quality of accounting records. Beattie, et al., (2000) examined the extent, nature and outcome of negotiations between auditors and directors. The paper first reviewed the related accounting literature and developed research questions. Then, the methodology adopted was exhaustively described. The finance directors and the audit engagement partners were the centre of the study. Survey questionnaire was designed to assess the frequency with which a set of 46 audit and audit related issues were discussed, negotiated, and resulted in changes to either the accounting figures or disclosures. A sample size of 507 respondents was used. The first research question addressed was the issues discussed by finance directors and auditors and the incidence of such discussions. The study revealed that the discussions between auditors and directors were dominated by compliance issues – maintenance of proper records, failure to meet agreed audit timetable by the auditor, and time pressures caused by late adjustments from the auditor. The second research question addressed the issues negotiated by finance directors and auditors and the incidence of these negotiations. The study showed that negotiations were dominated by accounting and fee issues. This confirms the importance of fee issues in audit relationships. The study also revealed that the audit committees reduced the level of negotiations and increased the level of discussions thereby avoiding conflicts. The results also revealed that the negotiations between auditors and the directors led to changes to financial statements which suggests that the auditors influenced the financial statements. Kaplan & Williams (2012) examined the changing relationship between audit firms size and going concern reporting for 22 years from 1989 to 2010. The study sought to challenge the view that larger audit firms report more conservatively so as to avoid exposure to litigation. They hypothesised that, in fact, financially stressed public firms were increasingly being audited by regional audit firms who were increasingly likely to offer conservative reports to their financial stressed clients. Therefore, the study first developed testable hypotheses based on prior literature. The results confirmed their suspicions. It was revealed that financially stressed audit firms had shifted to regional audit firms and that these regional audit firms were more likely to issue conservative reports. On the other hand, the big audit firms were less likely to issue conservative reports for their financial stressed clients. Thus, the regional audit firms are issuing are acting more conservatively than their big audit firm counterparts by issuing more going concern reports in order to lessen their litigation risks. On the other hand, the large audit firms are lessening their litigation risks by centralising client selection and acceptance process. Auditor Independence: Tenders and the EU There are two issues at the centre of auditor independence in accounting research – tendering and auditor rotation. These two issues have received the attention of scholars interested in auditor independence research. In this section, two papers on these two topics are reviewed and their results presented. Academics and practitioners recognise that there are significant changes in the accounting environment which have in turn led to changes in the behaviour of market participants. The changes have led to intense competition which has then led to rigorous fee negotiations and competitive tendering practices. Scholars have opined that tendering threatens independence of auditors. Beattie & Fearnley (1998) examined the auditor change process arising from audit tendering. The study reviewed a number of prior studies on tendering but most of the papers were not in the accounting field as nothing had been done before since audit services had not been subjected to tendering before. The study then described the methodology. Interview method was used to gather evidence from twelve UK listed firms that had conducted competitive tender for auditors, changed auditors, or both between 1989 and 1992. A total of twelve finance directors were therefore interviewed. What are the reasons of change of auditors? The paper found that both economic and behavioural factors influenced the choice of auditors. Clients are in need high quality audit and non-audit services (NAS), good relationships and value for money. In cases where no firm tops on all of the dimensions, complex trade-offs are made. Since most of the auditors price almost in the same range, choosing an auditor based on the price is not feasible. Clients therefore choose auditors based on non-price factors. These include issues such as audit quality, quality of non-audit services (NAS) and quality of working relationship. The study found that in two cases, price was a determining factor for the choice of auditor as they charged high fees. The author concludes that the tender process for audit services has established a market price for each audit and anyone who moves outside the fee level tolerance limits damages the auditor-client relationship and risks replacement. This supports the notion that tendering weakens auditor’s position because the directors are at liberty to appoint, remunerate and dismiss auditors with little risk of challenge. The balance of power has therefore shifted in favour of directors. In the second study, the issue of auditor rotation is examined. Wang & Tuttle (2009) did an experimental study to investigate the effect of mandatory audit rotation on auditor-client negotiations. A thorough review of literature was carried out in a bid to come up with testable hypotheses based on literature. The study first reviewed auditor-client negotiation literature. This was followed by a review on mandatory rotation. Negotiation as a social process was then reviewed. Auditor negotiation strategies were reviewed upon which the first hypothesis was developed. The authors hypothesised that mandatory rotation affects negotiation strategies used by auditors (use an obliging negotiation strategy more frequently without mandatory rotation than with mandatory rotation, and an inaction negotiation strategy more frequently with mandatory rotation than without mandatory rotation). A review of client negotiation strategies was then carried out and hypotheses developed. They then hypothesised that mandatory rotation affects negotiation strategies used by clients (integrating negotiation strategy under mandatory rotation than without mandatory rotation especially in the final year, and contending negotiation strategy with mandatory rotation than without mandatory rotation). A literature review of negotiation outcomes then followed from which the last hypotheses were developed. The authors then hypothesised that mandatory rotation leads to less cooperation by auditors in a negotiation as well as by clients. Finally, they hypothesised that more negotiations will lead to an impasse with mandatory rotation than without mandatory rotation. The data was collected from 54 graduate business students who participated in a laboratory experiment. In each session, four participants were randomly assigned as managers while four participants were assigned as the auditors. They then, in pairs, negotiated a value to be reported for an asset. This means that one auditor earned zero fees for each session as he sat out through the negotiations. The results showed that under mandatory rotation, auditors adopted less cooperative strategies with clients especially in the final audit year before they are rotated. The audit firms thus produced asset values that were more in line with their preferences as opposed to those of the clients under a mandatory audit rotation regime. Further, there were more negotiation impasse between the auditors and the clients under mandatory audit regimes. In an environment where rotation was not mandatory, the audit firms were more obliging. On the other hand, the clients adjust their negotiating strategy in more subtle ways than auditors do. The clients were however less obliging and more integrating under mandatory rotation. The supplemental analysis revealed that asset values were lower under mandatory rotation due to changes to the incentives experienced by the auditor and the client. This had nothing to do with the length of the audit-client relationship. The authors then conclude by discussing the limitation of their experimental study. They aptly argue that the study suffers from the design selection as the laboratory limited the choice of participants and tasks. They offer more areas for further research. In summary, these papers reviewed show that auditor independence is affected by the mandatory auditor rotation as well as the tendering process for the auditing services. With tendering, auditors are at the mercy of the directors to be selected for the job as competition is heightened and the pricing is similar. When the decisions to select an auditor are based on non-price factors, auditors become vulnerable to their clients and therefore may decide to be conservative in their reports just to keep their clients happy. This impeded independence also affects the quality of audits. Auditing Groups and International Auditing Regulation The international auditing regulations especially the ISAs have been at the forefront of studies in auditing. Auditing groups such as professional bodies and regulatory bodies have also been the focus of a number of accounting studies. These studies have been carried out in a number of juridictions but mostly the UK and US. A few studies have been carried out in countries such as Russia and Canada except for when issues of internationalisation of the audit profession are discussed. These issues are at the centre of this review in this section. Samsonova-Taddei (2013) documented three types of responses by local audit firms in the implementation of ISAs in Russia and investigated the link between these responses and the degree of social embeddedness of indigenous firms. The paper discusses the historical background of ISAs in Russia in an in-depth review of studies. The paper goes ahead to discuss the social embeddedness and the dynamics of standardisation. The methodology adopted is then described. The study performed fieldwork which covered 10-year period from 2003 to 2012. Data sources included review of documents, interviews, and observations of professional gatherings. The documents reviewed were professional journals and periodicals, policy documents issued by the Ministry of Finance and professional auditing associations, audit market reviews and ratings, and Tacis project materials. The interviews were conducted with the auditors, presidents of professional accounting bodies, government official, and academics. Professional gatherings observed included meetings held by professional auditing associations, practitioner workshops, and presentations at Tacis conference. The study revealed that higher levels of social embeddedness led to genuine commitment to the ISAs in Russia. The study also found that the levels of social embeddedness were influenced by geographical proximity, the commonalities in professional characteristics of the firms, and the demands of the target clientele. Barrett, et al. (2005) examined how the coordination of a multinational audit impacts, and is affected by, the structuration of globalisation. The study analyses how a project involving multiple locations is organised and coordinated as well as how such processes affect audit firms and the individual auditors. The methodology adopted included field site visits to a Big Four audit firm in Canada and its audit client. Interviews were conducted, documentary evidence gathered and observations used. The study found two key globalising tendencies – the increased risk of litigation and commercialisation of the audit industry. The increased litigation had led the audit firm to standardise its work through new documentation procedures and practices. Commercialisation was about the provision of a wide range of services in order to respond to the needs of clients. Mennicken (2008) analysed the use of ISAs within a large audit firm in Russia. The study adopted a case study approach and the review compared the adoption of standard in US and UK. Interviews were conducted to gather data. The results showed that the ideals of audit universalism and international comparability were challenged by global divisions of audit labour. The audit firm in the study had adopted a brand name of an international audit network and this had led to higher international institution recognition. It became recognised as working in accordance with international standards while maintaining some of its local specificity. Humphrey, et al. (2009) examined how regulatory relationships in the global arena were affected by the financial crisis. The paper reviewed the emergence of an international financial architecture. The paper also reviewed the relationship between international financial architecture and the auditing profession. Then, the policy responses of the auditing profession meant to manage crisis are reviewed. Further, the study reviews the financial crisis and the practice of bank audits in terms of valuation, assessment of the going concern, audit reporting and audit quality, and contemplating regulatory actions. The results showed the active nature of regulatory responses to the financial crisis and the influence of professional and regulatory bodies in the global audit sphere. The analysis revealed that there had been active regulatory responses to the crisis. However, this paper was purely a literature review and not an empirical study. It does not therefore offer new insights into the concept auditing groups as much. This may limit its applicability. Audit Committees Audit committees have been at the forefront of auditing literature as they play a very signicant role in audit-client relationships. Studies have therefore been conducted by a number of scholars to test their influence and roles in auditing. In this section, a few papers on audit committees are reviewed and summarised. Gendron & Bedard (2006) examined the process by which meanings regarding audit committee effectiveness are internally developed and sustained. The authors first reviewed the theoretical underpinnings by focusing on the perceptions of actors and the frame of reference. The methodology adopted for the study was then discussed. Semi-structured interviews were conducted with 22 individuals in 2000 and 2001 with a second round of interviews in 2004 in three large Canadian firms listed on the Toronto Stock Exchange. Most of the interviews were face-to-face interviews with just a few being conducted on the phone. Qualitative analysis procedures were sued. The paper found that reflective acts upon processes and activities surrounding audit committee meetings configure meanings of effectiveness. The configuration of meaning is an amalgamation of heterogeneous set of emotions about the formal duties of audit committees. The results also show that the AC attendees do not perceive the AC meetings as rituals free from interests. The AC meetings are perceived as avenues where attendees have their reputation at stake. Porter (2009) explored the role of tripartite audit function on accountability. This paper was based on a normative approach to literature review. First, the concept of corporate accountability and governance was reviewed. This was followed by a review of the development of corporate accountability. The paper then reviews the discharge of corporate accountability. The audit trinity is then discussed. Finally, the paper discusses the link between corporate accountability and the audit trinity. The paper found that each of the three parties in an audit has a specific role that relates to the other. The external auditors’ role is to ensure that the accountability reports that are produced by their clients are a fair representation of the audit clients’ activities as well as financial and environmental, social and/or ethical performance. The study found that the role of the internal auditors is not only to monitor internal controls but also risk and environmental management, systems and ensure that they meet the corporate governance objectives of the audit client. The study revealed that the role of audit committees is to oversee and coordinate internal and external audit functions and also to review financial and non-financial accountability reports before they are submitted to the board of directors for their approval and publication to the public. Norman, et al. (2011) examines the amount of adjustment required to correct a misstatement. The study first reviewed literature and developed testable hypotheses based on the literature. Literature was reviewed on the misstatements and financial reporting location. Literature was then reviewed on the effects of audit committee expertise on internal auditors’ decisions. The study design was then described followed by the results and subsequent conclusions and implications of the study. Experimental design was adopted for the study. A total of 73 chief audit executives and deputy chief audit executives were involved as participants in the study. A 2 x 2 between-participants design was adopted. The manipulated independent variables were audit committee expertise and misstatement type. Participants were then assigned to one of the four treatment conditions. The results show that the financial reporting location affects the decisions of the internal auditors to correct misstatements. The study also revealed that increased audit committee expertise and associated increased in audit committee members’ perceived powers do not cause the internal auditors to be less willing to waive misstatements. Salleh & Stewart (2012) examined the role of audit committees in resolving auditor-client disagreements. The paper first provided a contextual background to the study and discussed prior literature and theory. Prior literature reviewed were on auditor-client negotiation, the mediating role of audit committee and mediation techniques. The next section described the research methodology followed by results and conclusions. An exploratory case study approach was used to gather data from seven listed companies in Malaysia. Semi-structured interviews were conducted with audit committee chair/member, the finance manager/CFO and the external auditor. The in-depth interviews were conducted in 2006 and 2007. The study found that when the audit issue is material, the audit committees play a mediating role using a number of mediating techniques such as controlling the agenda, gathering information, advising and solving problems. Appendix 1: Summary of Studies Reviewed Author Purpose Key Findings Audit Quality (Jere, 2004) Reviews audit failure rates, costs of auditing, audit report research, auditor differentiation and audit quality, big-firm small-firm dichotomy, policy making and the role of audit research. The frequency of outright audit failures with significant economic consequences are very low. The audit fees are less than 0.1% of client sales. The audit report research show that the reports are informative (audit quality is high). There is a positive relationship between audit quality and earnings quality. Audit quality is influenced by legal regimes and the incentives created by the regimes. There is voluntary differential audit quality among the audit firms. Audit research has had little impact on regulations and policy making in the US. (Ghosh & Moon, 2005) Examined how information intermediaries and investors perceive auditor tenure and quality. There is a positive association between investor perceptions of audit tenure and earnings quality. The influence of earnings on stock rankings varies (improves) with (extended) tenure. The influence of past earnings on earnings forecast improves with extended tenure. (Carey & Simnett, 2006) Examine the relationship between audit quality and long audit partner tenure Audit partner’s long tenure leads to a lower propensity to issue a going-concern opinion for distressed companies. Long tenures also lead to just beating earnings benchmarks. Thus, longer tenure of audit partners lead to deterioration in audit quality. (Lin & Hwang, 2010) A meta-analysis of the effects of corporate governance and audit quality on earnings management. Governance: BOD independence and expertise have a negative relationship with earnings management. There is a negative relationship between earnings management and AC independence, size, expertise, and number of meetings. AC has a positive effect on earnings management. Audit Quality: Auditor tenure, size, and specialisation have a negative relationship with earnings management. Auditor independence (fee ratio and total fee) has a negative effect on earnings management. (Holm & Zaman, 2012) Analysis of the extent to which audit firms, professional bodies and investors considered FRC proposals sufficient for addressing concerns about audit quality The proposals by the FRC, audit firms and professional bodies have focused on issues which do not pose a threat to the commercial interests of audit firms. The regulatory and professional bodies have engaged in image management and promotion of audit quality to remedy their tarnished image and augment their legitimacy and standing. (Ettredge, et al., 2014) The relationship between audit fee pressure and audit quality (accounting misstatements). Fee pressure (difference between benchmark audit fees and actual audit fees) has a positive effect on accounting misstatement (during recession period). Fee concessions during recession reduced the audit quality. Audit Reporting (Hatherly, et al., 1998) Examines the ability of a free-form audit report to change the perceptions of the auditor, the auditee and auditee’s financial statements The recognition and disposition of audit problems in the free-form report generates a user perception of a more rigorous and useful audit. (Beattie, et al., 2000) The extent, nature and outcome of negotiations between auditors and finance directors. Discussions are dominated by compliance issues while negotiations are dominated by accounting and fee issues. Audit committees reduce the level of negotiation and increase the level of discussion. Negotiations result in a change to financial statements. (Kaplan & Williams, 2012) Examined the changing relationship between audit firm size and going concern reporting Financially stressed audit firms have shifted to regional audit firms. Regional audit firms are more likely to issue going concern reports while big audit firms are less likely to issue going concern reports for their financial stressed clients. Auditor Independence: Tenders and the EU (Beattie & Fearnley, 1998) Examined the auditor change process arising from tendering. The paper also reviews the relevant economic concepts and theory on audit tendering. Both economic and behavioural factors influence auditor choice. There is evidence of efficiency gains (technical improvements, improvement of corporate accounting procedures, and lower audit fees). (Wang & Tuttle, 2009) Experimental investigation of the effect of mandatory audit rotation on auditor-client negotiations Under mandatory rotation, auditors are less cooperative with clients especially in the final audit period before they are rotated. Auditing Groups and International Auditing Regulation (Barrett, et al., 2005) Examines how the coordination of a multinational audit impacts, and is affected by, the structuration of globalisation. Finds two key globalising tendencies – the increased risk of litigation and commercialisation of the audit industry. (Mennicken, 2008) Analyses the use of international auditing standards within a large audit firm Shows that ideals of audit universalism and international comparability are challenged by global divisions of audit labour. (Humphrey, et al., 2009) Examined how regulatory relationships in the global audit arena were affected by the financial crisis. Shows the active nature of regulatory responses to the financial crisis and the influence of regulatory and professional participants in the global audit arena. (Samsonova-Taddei, 2013) Documents three types of responses by local audit firms to the implementation of ISAs in Russia; Investigates the link between the responses and the degree of indigenous firms’ social embeddedness levels. Higher embeddedness levels leads to genuine commitment to the standards. Social embeddedness is influenced by geographical proximity, commonalities in professional characteristics, and target clientele. Audit Committees (Gendron & Bedard, 2006) Examined the process by which meanings regarding audit committee effectiveness are internally developed and sustained. Reflective acts upon processes and activities surrounding AC meetings configure meanings of effectiveness. Configuration of meeting is an amalgamation of heterogeneous set of emotions about the formal duties of ACs. (Porter, 2009) Distinguish between corporate accountability and corporate governance, explore the development of corporate accountability and examine the role of tripartite audit function in accountability. External auditors should ensure that accountability reports produced by their clients are a fair reflection of its activities. Internal auditors are responsible for monitoring the internal control, and risk and environmental management, systems established and to ensure they meet corporate governance objectives. The AC is responsible for overseeing and co-ordinating internal and external audit functions, and for reviewing financial and non-financial accountability reports before submission to the board for approval and subsequent publication. (Norman, et al., 2011) Examines the amount of adjustment required to correct a misstatement Financial reporting location significantly affects internal auditors’ decisions to correct misstatements. Increased AC expertise and associated increases in AC members’ perceived powers do not cause internal auditors to be less willing to waive misstatements. (Salleh & Stewart, 2012) Examines the role of ACs in resolving auditor-client disagreements. When the issue is material, the ACs play a mediating role. Mediation techniques are controlling the agenda, gathering information, advising and solving problems. Read More