SUMMARY: This study investigates the role of business risk perspectives in the audit of smaller and medium-sized entities (SMEs) by small and medium-sized audit practices (SMPs). The research is important, since we have little knowledge of how SMPs utilize business risk factors, and there is a current debate about the need for proportionally applying auditing standards, including standards on business risks, in the audit of SMEs. We conduct 38 interviews with Dutch and German auditors of both small and medium-sized audit practices to capture a variety of different audit environments. We develop a model that considers a continuum of audit approaches ranging from a substantive-based audit approach to a full-scope business risk audit, and observe a limited and heterogeneous application of business risk perspectives by SMP auditors. We find that client complexity, enforcement by audit supervisory authorities, relative emphasis on book-tax alignment in different countries, and investments in audit technology are important factors explaining the use of business risk perspectives. The findings imply a need to provide auditors with sufficient flexibility to proportionally adjust their audit approaches in the application of international audit standards under varying client and audit firm conditions.

This study examines what the impact is of frequently proposed information needs on reducing the audit expectations gap (AEG), including information about the audited company, information about the audit process and changes to the auditors' report. We base our findings on a survey of 302 participants from the Netherlands, consisting of 61 bankers, 118 preparers and 123 auditors. We consider the AEG in essence to be a classic agency problem. We find that stakeholders fall back in basic strategies to maximize their own value: bankers require additional information, management is reluctant to let the auditor provide sensitive information and auditors try to minimize their risks. Further, we observe that only information about the audit process with respect to continuity and the reporting of errors in the financial statements may reduce the bankers' AEG. Finally, we observe that format changes to the auditors' report do not reduce the bankers' AEG.

The sociocultural and socioeconomic situation of sanitation in Dar-es-Salaam (Dsm), Tanzania, was studied with explicit emphasis on pit-latrines. Without considering the sociocultural conditions, the so-called best solution might not be the right one. Therefore, in order to achieve the intended goal, a literature review, a questionnaire survey, and personal visits to the chosen study areas were done. In total, 207 household questionnaires were filled in 16 areas of the city. Interviewers did house-to-house visits and questionnaires were filled out on the spot. Results indicated that the city population is about 3.8 million at present, with over 80% of the dwellers using pit-latrines; some 3% use septic tanks with soakage pits, about 6% are connected to the sewerage system, and 1% have no excreta disposal facility. Difficulties faced include dismal budget allocations, fragmentation of sanitation activities among subsectors, lack of or poor sanitation record keeping, unsatisfactory machinery for septic tank and pit-latrine emptying, lack of a clear policy on pit-latrine handling and, in competition for resources, low priority is accorded to an excreta disposal system among the people. City residents will continue to use the pit-latrines for a long time to come. Reusing the fecal sludge is not known by most city dwellers and is influenced by sociocultural habits. To prevent groundwater pollution and to recover useful products in human excreta and urine, ecological sanitation toilets and anaerobic digesters offer a good option.

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SUMMARY The business risk auditing (BRA) approach was developed in the late 1990s and partly incorporated into audit standards in the early 2000s. As such, BRA was a significant innovation in audit methodology. In our interview study, we examine the experiences of 38 non-Big 4 auditors toward the theorization and diffusion of BRA. We use the widely recognized framework from Greenwood, Suddaby, and Hinings (2002), emphasizing the importance of legitimacy within an organizational field, to evaluate the change process toward BRA. First, we observe that the theorization of the new concept of BRA was often of limited success as many non-Big 4 auditors found it to be too complex and remained unconvinced that BRA was developed in response to problems with previous audit approaches (“moral legitimacy”). The lack of moral legitimacy can provide the underlying basis for resistance toward change. Second, auditors often expressed skeptical views about the benefits of BRA (“pragmatic legitimacy”), resulting in only limited use of nonmandatory BRA tools. Finally, we find that auditors were divided in considering elements of BRA as the natural way of doing audits (“cognitive legitimacy”). In all, our findings help to understand the role of regulatory mechanisms and of non-Big 4 audit firms in institutional processes in auditing.

Purpose The purpose of this paper is gaining more insight into the impact of the strength of the auditor–client relationship on the client’s perceptions about added-value of the auditor service including the role of auditor tenure. Design/methodology/approach This study is based on both archival data (auditor tenure) and interview data (strength of the auditor–client relationship and client’s perceptions on added-value). The data comprise 497 small- and medium-sized entity (SME) audit engagements in The Netherlands. Findings This study finds evidence of a positive relationship between the strength of the auditor–client relationship and client’s perceptions on added-value. The data do not suggest a main effect of auditor tenure on client’s perceptions on added-value. This study finds evidence that auditor tenure, combined with the strength of the auditor–client relationship, has a strong positive influence on the perceived added-value. Therefore, this study argues that a longer tenure turns out to positively influence the auditor’s client-specific knowledge. The findings are relevant to auditing research by extending the scope of application of social exchange theory (SET) to SME settings, and by suggesting that the auditor–client relationship may capture more an audit quality dimension than auditor tenure. Findings are also relevant for audit practitioners in showing the contribution of a strong auditor–client relationship to client satisfaction in terms of perceived added-value. Standard setters may consider the results of this study in proper designing a specific auditing standard for smaller, less complex entities. Originality/value This study fits into a development in auditing research where auditing is viewed as a service. Prior studies in this area were mainly build on marketing concepts (e.g. Grönroos 2007). This study uses a sociological lens, particularly building on SET. In particular, this study focuses on the impact of relationship quality on perceived added value. Using this perspective sheds light on the importance of interactions between auditors and their clients. Both the product (audit opinion) and the process of collecting sufficient appropriate audit evidence in interaction with the client are important. This relationship perspective may serve as an explanation to why long auditor tenure can turn out to improve audit quality. Future research may build on this sociological perspective and particularly examine what conditions need to be present to realize benefits of the relationship approach and when a more transactional approach is more suitable.