Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

Alharasis, Esraa Esam; Alidarous, Manal; Jamaani, Fouad

doi:10.1108/ajar-02-2022-0051

Cited by 15 publications

(11 citation statements)

References 46 publications

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“…This is done by employing more accurate proxies of IS measures which is rarely adapted by previous examinations (i.e. fee-based) due to: the lack of availability of audit fee-based measures of IS for most of the early IS research (before the disclosure of audit fees became more popular); and for recent studies conducted in countries with non-publicly available audit fee data, or for research with international data or a long time period series of data (Alharasis et al. , 2022a).…”

Section: Methodsmentioning

confidence: 99%

The moderating impact of auditor industry specialisation on the relationship between fair value disclosure and audit fees: empirical evidence from Jordan

Alharasis

Prokofieva

Clark

2022

ARA

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PurposeThis paper investigates the application of the product differentiation and shared efficiency approaches to understand the impact of the auditor industry specialisation (IS) on audit fees in relation to Fair Value Disclosures (FVD).Design/methodology/approachThe study uses 1,470 firm-year observations for the period 2005–2018 and is focused on Jordanian financial firms. Two competing theoretical approaches of IS proxied by audit fee-based measures were employed: firstly, the product differentiation approach measured using Market Share-based (MS) measure and secondly, the shared efficiency approach measured using Portfolio Share-based (PS) measure. The paper employs the Ordinary Least Squares regression to test the association between the proportion of fair-valued assets (using fair value hierarchy inputs) and audit fees.FindingsThe results suggest that the association between the proportion of fair-valued assets and audit fees is strengthened (weakened) when the client hires specialist auditors identified by MS (PS). This association varied across the fair value inputs. Level 1 assets were found to be only moderated by both scenarios positively (negatively) for MS (PS) experts. The results are robust after controlling the endogeneity of auditor self-selection.Practical implicationsThe results provide valuable insights for policymakers into challenges of auditing FVD. These insights present a valuable input for the development of FVD policies and practices as well as providing guidance for updating auditor prices. Additionally, the results provide a foundation for policymakers and regulators to introduce and update fair value auditing practices. The current findings are generalisable to other countries, including the Middle East and North Africa, and are particularly beneficial for those countries which have adopted the fair value model.Originality/valueThis study contributes to the theory by demonstrating the impact of the auditor industry expertise on post-implementation costs of FVD. The novelty of the study lies in introducing principle-based standards requirements of FVD to test the relationship. This approach is based on the IFRS disclosure requirements using data from the Jordanian financial sector to examine this relationship.

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Section: Methodsmentioning

confidence: 99%

The moderating impact of auditor industry specialisation on the relationship between fair value disclosure and audit fees: empirical evidence from Jordan

Alharasis

Prokofieva

Clark

2022

ARA

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“…One sign of an auditor's competence is when they come up with novel solutions to problems faced by business owners or when they come up with novel ideas to solve problems faced by business owners; both of these things make auditing more effective [9]. Expertise in the firm's industry has been used as a factor for audit quality [10]. Actually, in the self-employed sector, audit quality is directly proportional to auditor expertise; that is, a higher level of expertise results in a higher-quality audit, whereas a lower level of expertise results in a lower-quality audit.…”

Section: Industry-specialist Auditorsmentioning

confidence: 99%

Effect of industry-specialist auditors, auditor's tenure, and auditor's size on the quality of disclosure in the UAE Stock Exchange

Mohaisen,

Saedi,

Ali

2024

Heritage and Sustainable Development

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Having access to real-world information and accurate data is a key factor in improving auditor performance, which in turn impacts business performance and decision-making. Consequently, this research aims to determine how financial institutions' levels of experience impact the accuracy of the information they disclose. The present statistical population consists of all 127 businesses listed on the United Arab Emirates Stock Exchange. This type of research is categorized as applied studies in relation to the research methods used in the UAE stock market. Using a systematic deletion procedure, 46 companies were chosen based on the study's inclusion criteria. The findings revealed that in the UAE, the quality of financial information disclosure for companies listed on the UAE stock exchange is significantly affected by the auditor's decision-making experience, the duration of their job, and the size of the auditor.

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“…Jordan’s culture and political system helped improve national financial reporting and governance (The World Bank, 2021). Despite limited natural resources, Jordan has tried for years to improve its economic security and viability (Alharasis et al , 2023b). Since Jordan adopted the “International Accounting Standards Committee (IASC)” in 1988, the accounting profession has changed significantly.…”

Section: Institutional Structurementioning

confidence: 99%

Evaluation of ownership structure and audit-quality in the wake of the Covid-19 crisis: empirical evidence from Jordan

Alharasis

2023

IJLMA

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Purpose This study aims to collect new empirical evidence to determine how different forms of ownership structure responded to the recent COVID-19 crisis. In light of this tragedy, it explores the relationship between ownership structure forms (i.e. block-holders, foreign, institutional and family ownerships) and audit quality (proxied by audit fees). Design/methodology/approach In total, 3,200 firm-year observations for Jordanian enterprises covering the years 2005 through 2020 are used in an ordinary least squares regression with firm-clustered standard error to assess the hypotheses. Findings The regression results showed that COVID-19 strengthens the association between each type of ownership (i.e. block-holders, foreign, institutional ownership forms) and audit quality. This result reflects the need for high-quality audit services during the pandemic by such owners to improve their business decisions and limit agency-conflict issues. However, the analysis failed to find any effect of COVID-19 when it comes to family ownership. Family-controlled firms may react faster in crisis situations, and correspondingly, they do not bear high audit costs. The extended analysis covering the years 2005–2022 came to the same results. Practical implications The results aid authorities in their control and management of the auditing business. The findings have important consequences for policymakers, lawmakers, regulators and the audit profession as they assess the growing issues in an uncertain economic environment. Evidence is provided that may be used to reassure investors and aid authorities as they devise appropriate remedies to the pandemic-triggered economic crisis. The findings may aid in the improvement of legislation that governs Jordan’s auditing industry. Furthermore, the results can be generalized to other Middle Eastern countries. Originality/value To the best of the authors’ knowledge, this is the first study to empirically evaluate how different types of ownership affect audit quality in response to a dramatic shift in auditors’ working conditions brought on by the global health calamity. In emerging economies like Jordan, this type of analysis allows for preliminary assumptions to be established about ownership status during the COVID-19 outbreak. It adds to the body of auditing knowledge by shedding light on how various kinds of ownership affect responses to adverse events. This assessment is intended to serve as the definitive testimony in the field of accounting regarding the effects of the coronavirus across various corporations’ portfolios.

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Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

Cited by 15 publications

References 46 publications

The moderating impact of auditor industry specialisation on the relationship between fair value disclosure and audit fees: empirical evidence from Jordan

The moderating impact of auditor industry specialisation on the relationship between fair value disclosure and audit fees: empirical evidence from Jordan

Effect of industry-specialist auditors, auditor's tenure, and auditor's size on the quality of disclosure in the UAE Stock Exchange

Evaluation of ownership structure and audit-quality in the wake of the Covid-19 crisis: empirical evidence from Jordan

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