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I examine the spillover effects of the 2013 revision to the U.K. audit report standard, the International Standard on Auditing (ISA) 700 (UK and Ireland), from firms subject to the regulation (i.e., Premium companies listed on the London Stock Exchange (LSE)), to firms not subject to it (i.e., those listed on the Alternative Investment Market (AIM) of the LSE). The new regulation requires increased disclosures in three areas: audit risks, materiality and the scope of the audit. I hypothesize that application of the new rules to regulated clients will result in changes in audit styles and auditor mindsets that would be transferred to other (non-regulated) clients. If so, such effect of the new regulation on audit outcomes – specifically improvement in audit quality - for regulated clients will spill over to non-regulated clients. Because I expect the auditor to be the conduit for the spillover, I examine the difference in changes in audit quality for two groups: (1) AIM clients in audit offices that audit both Premium and AIM clients and (2) AIM clients in audit offices that audit only AIM clients. The results show that AIM firms in the first group (i.e., AIM clients of audit offices that also have Premium clients) experience lower absolute discretionary accruals, reduced propensity to have small positive earnings, and are more likely to receive a modified opinion under the new regulation. However, there is no change in audit quality for the AIM client firms of audit offices with only non-regulated (AIM) clients. These results are consistent with audit quality benefits spilling over from regulated clients to AIM clients, brought about by auditor-level changes. Further analyses indicate that the audit quality spillovers are more prominent for AIM clients with greater audit complexity, AIM clients of large audit offices, and London audit offices. / Business Administration/Accounting

The literature on International Diversification suggests that investors and analysts value foreign earnings differently than domestic earnings. Prior studies also show an overall "valuation discount" for firms with foreign operations. To my knowledge, no study has empirically tested and found there to be differences in earnings quality for these firms. This study investigates differences in the quality of earnings for U.S. firms with foreign operations using a direct measure (discretionary accruals) and an indirect measure (investor perception of earnings). I also consider the impact of audit quality on each measure of earnings quality. In the first part of my dissertation I find firms with foreign operations report lower discretionary accruals than firms with only domestic operations. This indicates that auditors, similar to investors and analysts, report more conservatively for firms with foreign operations. My results show that audit quality further reduces the absolute value of reported accruals, and I find a higher level of reported "income decreasing" accruals for these firms. In the second section of my dissertation I consider the impact of audit quality on investor perception of earnings. Similar to earlier papers I find that foreign earnings changes are more highly associated with changes in firm value than domestic earnings changes, and this larger earnings response is attributed to negative changes in foreign earnings. I also find that audit quality improves investor perception of foreign earnings for firms with foreign operations. While there are ample studies demonstrating that firms with foreign operations are valued differently than firms with purely domestic operations, my study is the first to provide empirical evidence about how audit quality impacts financial reporting, the quality of earnings, and investor perception of earnings for firms with foreign operations. / Business Administration/Accounting

No / Using a unique dataset for Egyptian firms, we investigate the relationship between board independence, audit quality and earnings management. We test whether firm-level corporate governance provisions matter in an emerging market setting characterised by weak legal enforcement and inadequate external discipline by the market for corporate control. Our results cast doubt on the notion that a higher ratio of nonexecutive members is associated with lower earnings management. We find that the effect of board independence on earnings management practices is contingent on the levels of ownership held by executive directors and large shareholders, as well as the composition of audit committee. In addition, the results are consistent with the view that high-quality auditors are effective in reducing earnings management.

Yes / This paper reviews the literature on the independent oversight of auditing from 2003 to 2018 and provides several research opportunities for filling the identified gaps in that literature. Our review classifies the literature into three themes: (1) the development of independent audit oversight; (2) the effects of independent audit oversight; and (3) the interface between the independent audit oversight authorities and the global audit networks. The paper finds different effects of the independent audit oversight. Positively, it enhances the capital markets by adding more credibility to the published information. Auditors become more conservative about accepting or continuing to work with high-risk clients. At the same time, while audit fees have increased as a result of the additional requirements of independent audit regulation, non-audit fees from audit clients have decreased significantly. Negatively, independent oversight has increased audit concentration and resulted in insufficient choice of auditors in most audit markets.

As the leader of an audit team, the audit partner can have a significant impact on the outcomes of an audit engagement. One hitherto unexplored aspect of partner assignments to audits is cases where they handle clients in multiple audit offices. I examine factors associated with the assignment of audit partners to multiple offices (henceforth multi-office partners or MOPs) and the implications of such assignments for audit quality. I document that audit firms assign partners to multiple offices to match partner expertise to client needs and to manage resource constraints in audit offices. Specifically, partners specializing in the financial sector, who report more skills on LinkedIn profiles, and have more professional experience, are more likely to be MOPs. Audit offices with fewer partner resources are more likely to share partners among the network of offices to mitigate resource constraints. In the audit quality analyses, I find that MOPs are, on average, associated with an increased likelihood of restatements, suggesting the negative impact of audit office resource constraints dominates the positive influence of partner expertise on audit quality. The negative effect of MOPs on audit quality exists for both local and non-local clients and is concentrated in MOPs who (1) are not industry specialists, (2) face greater information friction as the distance between different audit offices increases, and (3) have limited knowledge-sharing opportunities from audit offices. / Business Administration/Accounting

This qualitative study delves into the effects of Computer Assisted Audit Tools (CAAT) onthe quality of audits in Sri Lanka. Recognizing the lack of a universal definition for auditquality, this research draws upon established frameworks by Knechel et al. (2013) and theInternational Auditing and Assurance Standards Board (IAASB) from 2014 to explore auditquality indicators within the domains of input, process, context, and outcome. The researchadopts an Interpretivism paradigm to appreciate subjective viewpoints and humanisticaspects within its methodology. In order to gain an in-depth understanding, semi-structuredinterviews were conducted with auditors from the big four, private firms, and large localaudit firms in Sri Lanka.Selection criteria ensured a diverse sample size of seven participants from each firmcategory. Findings reveal that not only does the use of audit software contribute to enhancedaudit quality in Sri Lanka, but motivated auditors armed with effective tools are also morelikely to produce reports devoid of misstatements.Furthermore, the study observes a discrepancy in technology adoption for auditing purposeswith larger firms utilizing more advanced systems compared to smaller local entities anddiscusses how this dichotomy impacts overall audit practices. The research ultimatelyunderscores the significance of technological innovation and auditor motivation in elevatingaudit quality within the Sri Lankan context and offers valuable insights for practitioners,regulators, and academics aiming to bridge practices with global standards.

I examine factors influencing accounting firms' and their clients' decisions to pursue an auditing vs. consulting relationship. I employ the Sarbanes Oxley Act (SOX) prohibition on providing both services to the same clients as a natural experiment. Because Deloitte & Touche was the only Big 4 firm to retain its consulting division post-SOX, I compare Deloitte's client switch and retention decisions to those made by its direct competitors. In this context, I investigate how the decision to continue or terminate an audit relationship is influenced by auditor industry specialization, the historical provision of auditor-provided consulting services and the likelihood that the client will require consulting services in the future. I find that there is a preference for auditing when the auditor is a specialist in the client's industry, and there is a preference for consulting when the auditor provided consulting services in the past and the client is likely to require consulting services in the future. I also report empirical evidence on audit effectiveness and efficiency in cases where the auditor and its client discontinued the audit in order to maintain a consulting relationship. Although there was no impact on audit effectiveness, the auditor switches reduced efficiency as evidenced by significantly higher audit fees. This study is relevant to the current audit environment because public accounting firms that spun-off their consulting divisions around the enactment of SOX are in the process of rebuilding their consulting practices and must now choose between providing audit and consulting services to their clients. It may also be pertinent to European policy makers who are currently considering a proposal to limit auditors' ability to jointly offer audit and consulting services to the same client.

I investigate the stock market's reaction to events related to the Public Company Accounting Oversight Board's (PCAOB) development and enactment of Auditing Standard No. 5 (AS 5). The change from Auditing Standard No. 2 (AS 2) to AS 5 was debated in the business press at length. The PCAOB stated that the goal of AS 5 was to reduce the prohibitive costs of the Sarbanes-Oxley Act of 2002 - Section 404 and AS 2 (Krishnan et al. 2008) while maintaining the effectiveness of the internal control audits required by those policies. However, there was concern that internal control audit quality would decrease under AS 5. My study examines how investors perceived this change by considering stock market reaction around 10 event dates related to PCAOB and Securities and Exchange Commission (SEC) actions with regard to the development and enactment of AS 5. I find evidence that the market's reaction to key AS 5 events was significantly negative, which is consistent with investors perceiving AS 5 as a significant decrease in internal control audit quality. I also study these investor reactions cross-sectionally to further examine the two potential effects of AS 5 (decrease in compliance costs and decrease in internal control audit quality) and how they relate to firm characteristics (size, complexity, litigation risk, and fraud risk). I find evidence consistent with my main finding: investors' perceived increase in information risk under AS 5 is apparent when considering firm characteristics. Finally, I consider ex-post financial reporting quality under AS 5 and find no significant change in financial reporting quality compared to under AS 2. This study contributes to accounting research by being the first to study the stock market's perception of this significant policy change archivally and the first to consider the effectiveness of AS 5 with regard to financial reporting quality.

本研究欲探討在中國大陸審計市場中，會計師事務所產業專精度對於審計品質之影響，並進一步研究不同城市層級之產業專精度對於審計品質有無差別。 研究結果顯示，在產業專家以特定產業客戶在會計師事務所客戶組合中所佔比率之定義下，無法發現由產業專家會計師事務所查核之公司，其審計品質較佳；但進一步考慮城市層級因素後，實證結果發現城市會對產業專精度造成影響，支持假說二，審計品質較佳。造成此結果之可能係因掛靠制度及政府之尋租行為所造成中國審計市場分割與分散特性，且使得上市公司對事務所的選擇並不重視其審計品質的高低，而是更看重會計師事務所的掛靠單位，使得中國會計師事務所無法發展整體之產業專家。 / The objective of this thesis is to examine whether auditor’s industry specialization at the city-level affects the audit quality in China. In addition, we classify industry auditor expertise at the city level into the following two groups, and further investigate whether the association between industry expertise and audit quality differs between these two groups: (1) Directly Controlled Municipalities or locations of Stock Exchange (therefore DCM); (2)non-Directly Controlled Municipalities or non locations of Stock Exchange (non-DCM). The empirical results find no statistically significant association between audit quality and industry specialization at the city level in China. However, the results document that the association between industry expertise and audit quality are more pronounced for the DCM group than for the non-DCM, consistent with our prediction.