The purpose of this study is to investigate how the effects of principles vs. rules based accounting standards and a potential change in the audit reporting model will affect investors' perceptions of management's reporting credibility.  The Securities and Exchange Commission is currently considering the adoption of International Financial Reporting Standards, which is considered to be a set of principles based accounting standards.  Whereas, U.S. Generally Accepted Accounting Principles are considered rules based.  Additionally, the Public Company Accounting Oversight Board is considering a possible change to the existing audit reporting model.  The audit reporting change currently under consideration would require the use of additional emphasis of matter paragraphs within the audit report to discuss areas of higher risk in the financial statements.  A sample of 196 nonprofessional investors completed an on-line 2 X 2 between subjects experiment that manipulated accounting standard type and level of auditor reporting.  Participants assessed direct and indirect measures of reporting credibility, obtained the experimental manipulations, and provided revised credibility assessments.  Changes in credibility served as the dependent variable.  The results suggest that expanded auditor reporting resulted in lower perceptions of management\'s reporting credibility. Additionally, the effects of expanded auditor reporting appear stronger under rules based accounting standards.  No main effects, however, of accounting standard type were observed.  These results contribute to the existing literature on accounting standard type, the information content of audit reports, and reporting credibility. / Ph. D.

Extraordinary high fees received by the auditors from their clients during the recent financial crisis have attracted public attention. However, reasons for high fees for audit service are obscure. Many studies have proved the importance of the client size, complexity, risks and the auditor status in determination of audit fees. Another determinant, the non-audit fee, has been intensively debated in the literature. The reason for this is that the audit and non-audit fees are not correlated in the way many researchers have expected. Namely, the vast majority of research has reported a positive association between two services. Many explanations for the phenomenon have been set forward. However, real reasons for such association remain unclear and the consensus between researchers is lacking. The study of the correlation between the two types of expenditures in the Swedish audit environment during a long time period may shed some light on this complex phenomenon. Some evidence suggest that an economic downturn can affect the relationship between audit and non-audit fees and their ratios. Therefore, the recent financial crisis provides an excellent opportunity to examine a possible relationship. Using the data from Middle Cap and Small Cap Swedish companies, this study investigates the relationship between audit and non-audit fees and their ratios during three periods of different economic conditions: favorable 2006 -2007, economic downturn 2008-2009 and post crisis period 2010-2011. In this study I tested a number of hypotheses. Firstly, I investigated the suggestion that the relationship between audit and non-audit fees in Sweden, like in many other countries, is positive. Secondly, I tested the hypothesis that economic fluctuations affect this relationship. Thirdly, I explored my prediction that the economic downturn influences the ratios of audit and non-audit fees. I have shown that the relationship between audit and non-audit services is positive during the whole investigated period. According to these results, the relationship is not affected by different economic conditions. Furthermore, I have found out that the financial crisis affected the audit and non-audit fee ratios. The ratio of the audit fee increased during the crisis and continued to increase during the post-crisis period. The ratio of non-audit fee decreased in the same proportion.

Yes / This study aims to provide a better understanding of the role of the Financial Reporting Council (FRC) in restoring public trust in audit profession in the UK. It analyses the views of partners in the Big 4 audit firms on this role. This study identifies three main strategies to promote trust and enhance the choice of auditors in the UK audit market. These strategies are improving audit quality, increasing the transparency of the big audit firms and reducing the barriers to competition in the audit market. The findings suggest that partners of the Big 4 believe that the FRC's projects effectively participate in improving audit quality as well as providing wider information about the audit firms to the public. However, different actions need to be taken to enhance the choice in the market.

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

<p>Background</p><p>In 2006 the audit duty for SME’s was abolished in Denmark, and January 1st 2007 Finland decided to do the same. The subject is now under investigation in Sweden since the government has appointed an</p><p>investigation dealing with the future of the audit duty for small companies. The report will not only investigate whether an abolishment needs to be done but also if compliments are needed in order to prevent companies from breaking the rules, intentionally or unintentionally due to lack of knowledge.</p><p>Purpose</p><p>To investigate how a possible abolishment of the auditing duty for small companies will affect the creditors’ ability to assess the company’s creditworthiness.</p><p>Method</p><p>The selected sample of this study contained interviews with five organisations that would be affected differently of an abolishment of the audit duty. The authors wanted to interview organisations with different perceptions of the audit duty although the or-ganisations have in common that they all possess knowledge which is important to the banks in the credit rating process. The sample consists of representatives from; FAR SRS, Företagarna, Handelsbanken, Nordea and Upplysningscentralen.</p><p>Conclusion</p><p>All the different organisations in the study showed different views in the value of having audited financial statements. FAR SRS and Företagarna were, as could be expected, most and least in favour of having audited financial statements. UC did not predict to be affected by an abolishment, but did see a value in it. Interesting conclusions could be seen between the banks. It showed that depending on the organisational structure dif-ferent value was seen in the audit duty. This addresses how important a bank’s routines are in the process of valuing a company’s creditworthiness. The study showed that an abolishment will probably turn the focus in the credit process from the information that figures generates. The information used to assess a company’s creditworthiness would to a larger extent be on analysing the business concept, the environment and the re-sources that a company posses.</p>

Very little accounting research exists which investigates specific decision tasks performed by audit committee members. More specifically, little research exists regarding the one decision task which appears to be a primary duty of all audit committees--the decision task of selecting and/or evaluating the external auditor. Since the auditor selection decision is basically an assessment of the tradeoffs between audit quality and audit fees and the determination of audit fees is straightforward, the current study focuses on the assessment of audit quality. The primary objectives of this research project were (1) to identify those factors which affect audit quality, (2) to investigate how those audit-quality factors correlate with audit committee chairpersons' assessments of audit quality, and (3) to determine whether audit committee chairpersons exhibit expert judgment in their audit-quality assessments. To meet these objectives of two-phase study was conducted. In the first phase of the study audit committee chairpersons were asked to rate the impact various factors have on the quality of auditing services. Those factors identified in the first phase to have the strongest impact on audit quality were then utilized in the second phase to develop audit-quality scenarios. The second phase of the study consisted of requesting each audit committee respondent to assess audit quality for 32 individual audit-quality scenarios. Regression analysis was employed in the second phase to represent the cognitive models of the respondents. The Judgmental Analysis (JAN) technique also was used in the second phase to cluster the decision makers into the various decision-making groups which exist. The results of this two-phase study provided data regarding the perceived impact of 15 audit-quality factors on audit quality and how the most important of these audit-quality factors correlate with audit committee chairpersons' audit-quality assessments. The main conclusions of the study were (1) team-specific factors have a stronger perceived impact on audit quality than do firm-specific factors, (2) audit team composition factors are perceived to be the most important determinants of audit quality, and (3) consensus is not obtained regarding audit-quality assessments.

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Through the audit of annual reports, auditors contribute to the credibility of financial information. To ensure trustworthiness, the auditor has to be independent from the audited company. Auditors’ independence has been a very broadly discussed topic for many years. The most discussed threat to auditors’ independence is the provision of non-audit services by audit firms. But there are other threats to auditors’ independence besides the provision of non-audit services, which are not that frequently discussed so far. There is a tendency that companies hire employees of their current audit firm, which can imply a threat to auditors’ independence. This threat is addressed in the present research paper. The purpose of this paper is to examine if banks, as important capital providers, are aware of the threat to auditors’ independence through the client employment of previous auditors. This study uses qualitative data, collected by a web-based self-completion questionnaire with open questions. This questionnaire was sent out to corporate account officers in German banks via email. The analysis of these results shows that banks perceive the client employment of previous auditors as a threat to auditors’ independence. But even though banks perceive this as a threat, most of the respondents do not see any possibility to counteract the dangers posed by such a move. The main reason is the missing capability to gather knowledge about the employment behavior of a company. Hence, the client employment of previous auditors often stays undetected. Such a move may affect the mind-set of the bankers in a theoretical way, but has no influence regarding their daily business with the customer firms. Different measures exist to counteract the threat to auditors’ independence as well as the negative impacts caused by the client employment of previous auditors. These countermeasures refer to all three parties – (I) the company, (II) the audit service providers and (III) the bank. Especially regulation, both of the audit and the bank, but as well voluntary acting can be consulted. Further research needs to be done in order to proof the results of this study preferably in a quantitative way. An extension to how banks act instead on looking how they perceive the client employment would be interesting in order to draw more conclusions and develop further countermeasures.

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