Purpose Although a number of studies suggest that big audit firms provide higher audit quality in strict legal environments, empirical evidence remains inconclusive. As little is known about the effect of auditor type on audit quality in less strictly legal environments, this study aims to investigate the impact of auditor type on audit quality in the Egyptian market. Design/methodology/approach Data of Egyptian-listed companies during the period 2011–2018 are used. To examine the impact of auditor type on audit quality, ordinary least square regression and robust standard errors clustered at year and industry level are used. This study uses discretionary accruals as a proxy for audit quality. Several additional analyzes are conducted to assess the robustness of the main results, including alternative measures of audit quality and auditor type. Findings The results show that audit firms tend to provide higher audit quality when they are affiliated with a foreign audit firm. However, Big 4 auditors do not provide higher audit quality compare to their counterparts. Additionally, the governmental agency, accountability state authority, that monopolize audit function in state-owned companies do not appear to be associated with higher audit quality. Finally, local audit firms have a negative association with audit quality. This may be their strategy to secure future clients that seek low-quality audits. Research limitations/implications This study suggests that affiliation with foreign audit firms will help the Egyptian firms to develop their abilities by using advanced technology and techniques and transfer rare expertize to the Egyptian auditors. This study also shows that the strategy adopted by many Egyptian audit firms to affiliate with foreign auditors reflects the desire of these firms to be included in one tier alongside Big 4 audit firms to increase their market share under a claim of providing a higher audit quality. Originality/value This study adds to the rare but growing body of literature by investigating how auditor type affects audit quality in the context of less strictly legal environments. The results are important, as investors, standards-setters and regulators have growing concerns over audit quality since the Enron scandal. The findings suggest that audit quality depends on auditor type. These findings have important implications for investors, standards-setters and auditors interested in auditor oversight, audit quality and auditor choice.

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This study focuses on the distinctive Egyptian setting, where firms could use multiple audit mechanism voluntarily or mandatory under certain circumstances. We investigate the effects on audit quality and cost of debt. A sample of 1699 firm-year observations of Egyptian listed firms for the 2009-2019 period is used. Abnormal accruals are employed as proxies of audit quality through abnormal working capital accruals and modified-Jones models. Results suggest that joint audits are not associated with both proxies of audit quality. In contrast, the dual audit is positively associated with abnormal accruals leading to conclude that dual audits are not providing a high level of audit quality. But this result holds only in companies with income decreasing discretionary accruals. These results are in line with litigation and reputational risk fears offering motivations for auditors to favour conservative accounting alternatives (i.e., income decreasing discretionary accruals). This implies that firms opting to employ dual audits have a higher level of earnings conservatism. Our evidence also indicates that the choice of multiple audit mechanisms especially joint audits is related to significant increases in the cost of debt, implying a higher perceived level of risk. Further, dual audits decrease the cost of debt only in companies with high earnings management. This study adds to the literature on whether the preference of income-increasing or income decreasing discretionary accruals is related to multiple audit mechanism and consequently affected the cost of debt. Together, our results support the view that voluntary joint audits are not related to audit quality in Egypt compared to mandatory dual audits, which consequently affect the pricing of debt. Our results have important implications for policymakers, audit firms and investors.

PurposeMany countries are enacting regulations or/and recommendations to promote gender equality in the workplace, especially in the top leadership and management positions. However, despite current research on gender diversity and firm outcomes, the authors know comparatively little about how different female leadership roles drive such outcomes. This study explores this notion in an emerging market by examining the effect of female leadership on financial reporting quality in Egypt.Design/methodology/approachThis study uses multiple regression analyses for a sample of 1,686 firm-year observations listed on the Egyptian Stock Exchange over the period 2011–2020.FindingsThis study’s results show that female directors, female executives and females on audit committees are positively associated with financial reporting quality. Further, the results suggest that executive female directors are less involved in income decreasing earnings management practices. The findings are robust to possible omitted variables bias, alternative measurements and endogeneity issues. Taken together, the results are in line with the view that gender diversity is an effective monitoring instrument, which attenuates agency conflict and thus upholds financial reporting quality.Research limitations/implicationsFuture research may expand the analysis performed in this study by using other proxies of financial reporting quality (e.g. earnings persistence, earnings predictability, conservatism and restatements). Also, the authors did not investigate the characteristics related to female directors (e.g. education, experience and age) due to data availability. Future research may examine the effect of these characteristics on female directors regarding financial reporting quality.Practical implicationsThe evidence about the importance of female leadership in shaping financial reporting quality may inform future policy and regulatory initiatives.Originality/valueThis study contributes to the growing literature related to gender diversity. First, this study extensively investigates the leadership aspects related to female directors in both mentoring and executive positions. Second, the evidence reached is based on three different proxies of financial reporting quality. Thus, unlike previous studies, conclusions were reached based on a solid basis to support the reliability of the results. These findings should be of great interest to policymakers, academics and stakeholders.