Accounting firms cautiously maneuver in the new audit environment – a note

Abstract

Purpose -This paper seeks to discuss the effect that the Sarbanes-Oxley Act (SOA) had on both the nature of the external audit function and overall audit quality. Additionally, it aims to discuss how audit firms maneuvered through the newly regulated environment, and what their strategic actions are for the future. Design/methodology/approach -This discussion is based on interviews conducted with auditors from nine public accounting firms located in Northeast Ohio, United States of America. The sample consisted of five national and four regional firms, and the interviewees included mostly partners and a few senior managers. Findings -The increased oversight and workload resulting from the SOA requirements has changed the nature of the external audit function to more compliance type work, and the environment has created much anxiety for the auditors. The new reform has significantly impacted the audit environment in terms of: scope of services; client assessment procedures; management and audit committee relationships with the external auditor; audit firm personnel management; and the long-term outlook of the profession. The details of these impacts are discussed throughout the paper. Research limitations/implications -This paper provides detailed insight as to how the SOA impacted the audit profession. Hopefully, such an understanding will benefit future research in measuring the costs and benefits of the new reform. Lastly, a future research showed further examine the effect that the SOA has had on overall audit quality. Originality/value -This paper summarizes the insightful comments obtained in structured interviews with several leading audit professionals. The sample was judged to be highly knowledgeable of the changing audit environment caused by the SOA. With an improved understanding of its impacts, regulators, practitioners, and academics can better assess the effectiveness of the SOA.

The Impact of Auditor Industry Specialization on the Retention and Growth of Audit Clients

“…At the same time, investors, audit committees and the Public Company Accounting Oversight Board (PCAOB) started to critically scrutinize the auditors and management activities. Recent studies showed auditors changing their organizational structures and strategies to meet governing bodies and clients' requirements and needs after post SOX environment (Rama and Read, 2006;Nagy and Cenker, 2007, Tricker, 2015, Beattie et al, 2015.…”

“…Every international audit firm has representative or affiliated firms in every emerging market which directly affect the ranking, structure and strategies developed by these multinational firms which are competing in a very competitive markets. Also, few studies looked at the effect of industry specialization on auditors' retention and growth in firms' business (Mayhew and Wilkins, 2003;Nagy and Cenker, 2007;GAO, 2008; Minutti-Meza, 2010 and Wang et al, 2011).…”

Creating better humans towards sustainable competitive advantage for small and medium-sized accounting firms in Malaysia

“…The strategic management is a plan of action designed to achieve a long-term or overall design using the allocated available resources (Chandler, 1962). It would be pointless if the strategy could not address the internal and external issues affecting the organisation.…”

Discussion of “Are Related Party Transactions Red Flags?”

“…In the literature on auditing, a number of participant and interview‐based studies offer insights into the processes and motivations of those participating in audit practice. These studies reveal the ritualistic nature of audit work (Pentland ), the role of audit committees (Gendron, Bedard, and Gosselin ), the effect of corporate governance regulation on staff retention issues within audit firms (Nagy and Cenker ), the self‐perception of the role of audit partners (McCracken, Salterio, and Gibbins ), the implementation of auditing standards (Mennicken ) and the emotions experienced by auditors during an audit (Guénin‐Paracini, Malsch, and Paillé ,b). Such interpretive methods can enhance the reliability of statistical analysis by examining the complexities of practice (Cooper and Morgan ) that underlie the observed associations.…”