Joint Impact of Materiality Guidance and Justification Requirement on Auditors' Planning Materiality

Audsabumrungrat, Juthathip; Pornupatham, Sompong; Tan, Hun‐Tong

doi:10.2308/bria-51339

Cited by 6 publications

(3 citation statements)

References 18 publications

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“…An example in this sense could be an accurate review of the materiality thresholds calculated during the audit planning (ISA 320 "materiality in planning and performing an audit") and Chong (2015) expresses the need for a common definition of materiality, especially in a litigious society such as contemporary society. From a different perspective, Audsabumrungrat et al (2016) found that "audit managers make less appropriate materiality planning judgments with structured guidance than with unstructured guidance, and that this detrimental influence of structured materiality guidance is reduced when they are required to justify their materiality judgments". Importantly, their findings are based on a study conducted on Big 4 firms in Thailand, a country that has a market structure and corporate governance mechanisms similar to those in Italy (see Connelly et al 2012).…”

Section: Discussionmentioning

confidence: 99%

Going concern modifications and related disclosures in the Italian stock market: do regulatory improvements help investors in capturing financial distress?

et al. 2020

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This paper investigates the investor reaction to audit reports containing a going concern modification (GCM) in the Italian market following new amendments regarding auditing regulations and public financial information disclosures. We applied the event study (ES) methodology to short event windows considering Italian listed companies during the period 2009–2015. Our findings partially contradict previous studies revealing a systematic negative impact of GCMs, especially when a GCM is attached to unqualified opinions. We clearly observe that Italian auditors have a strong higher propensity to issue a GCM than to express a qualification. Moreover, we find other interesting results that contradict the mainstream literature, detecting a stronger negative reaction in the case of recurring GCMs and when the modification is issued by non-Big 4 auditing firms. These differences could be explained considering the environmental characteristics of the Italian market such as the ownership structure, governance mechanisms and accounting culture, where minority investors act against ownership in accordance with the type II agency problem. Our empirical results suggest that the domestic and international regulatory amendments during the study period have increased the value relevance of GCMs and the usefulness of financial disclosures. This study might be of interest to practitioners and regulators in regard to contributing to the introduction of further regulatory interventions that will enhance both the informativeness of audit reports and awareness of investors in regard to going concern uncertainty.

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Section: Discussionmentioning

confidence: 99%

Going concern modifications and related disclosures in the Italian stock market: do regulatory improvements help investors in capturing financial distress?

et al. 2020

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“…Esto es, con el porcentaje de socios firmantes. En este escenario limitado, Audsabumrungrat et al (2016) mediante una metodología experimental 2x2 muestran que, cuando la firma tiene una guía propia para fijar la materialidad, los gerentes de auditoría realizan evaluaciones de materialidad más arriesgadas y menos apropiadas. Entendemos que si la firma tiene una guía propia de materialidad debe ser porque ha alcanzado cierto tamaño, de lo que se puede inferir, aunque con cautela, que tiene un número relevante de socios firmantes y este número está ligado a la fijación de la materialidad.…”

Section: Número De Socios Firmantesunclassified

El origen de ingresos del auditor y calidad de la auditoría: el caso español

et al. 2022

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Previous studies point out the existence of a relationship between auditor’s specialization and audit quality. Beginning with this idea, the more important the auditing activity is over the audit firm’s business and the greater specialization in such activity, the more conservative the signing auditor will be in the issuance of the audit report. Using the quantitative materiality as audit quality proxy, we examine the effect of consultancy services’ fees and the signing audit partners’ relevance on materiality values. From the hand-collected real amounts of quantitative materiality informed by 995 Spanish non-listed client-year sample, we conclude that more effort on consultancy services lead auditors to apply higher materiality numbers. Our results also show that audit firms employ higher materiality estimations when the signing audit partners gain importance within the audit firm, supporting the idea of a risky shift. Our findings are consistent with the mainstream that affirms there are other factors, beyond quantitative ones, that influence the determination of materiality amounts. This study contributes to the existing research by using archival data that mirrors auditors’ quantitative materiality judgements and its implication for financial reporting. Estudios previos señalan la existencia de una relación entre la especialización del auditor y la calidad de la auditoría. A partir de esta idea, cuanto más importante sea la actividad de auditoría en el total del negocio de la firma auditora y mayor especialización exista en dicha actividad, el auditor firmante adoptará una postura más conservadora en la emisión de su informe. Utilizando la materialidad cuantitativa como subrogado de la calidad, se examina el efecto que los honorarios por otros servicios distintos a los de auditoría y el peso de los socios firmantes en la firma tienen sobre la cifra de materialidad. Partiendo de la materialidad real utilizada en cada uno de los encargos como medida de calidad de la auditoría y a través de una muestra de 995 clientes-año de compañías españolas no cotizadas, se concluye que una mayor dedicación a trabajos distintos a los de auditoría lleva al auditor a aplicar unas cifras de materialidad más altas. Los resultados también muestran que las firmas de auditoría usan materialidades más altas cuando los socios firmantes de la firma de auditoría ganan representación, reforzando la idea de un risky shift. Los hallazgos de este estudio son consistentes con la corriente de estudios que afirma que existen otros factores además de los cuantitativos que afectan a la fijación de la cifra de materialidad. Este trabajo contribuye a esta corriente mediante datos de archivo que reflejan el comportamiento del auditor durante la determinación de la cifra de materialidad cuantitativa y sus implicaciones en la divulgación de información financiera.

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“…Iskandar e Iselin (1999), Rodriguez (2008), Socol (2008), Audsabumrungrat (2012), Beasley et al (2015) destacam a importância da conceção da materialidade e do risco na condução de uma auditoria e enfatizam a sua relatividade. Aquela permite a exclusão do objeto de análise de um elevado número de transações, o que possibilita que atos ilegais, erros e fraudes não sejam investigados ou filtrados, criando, naturalmente, um expectation gap.…”

Section: Conceitos De Auditoria Não Compreendidos Pelo Público Em Geralunclassified

Aplicação da Metodologia CSSI à Interpretação do Audit Expectation Gap

Almeida¹

2016

CGG

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RESUMOO desenvolvimento do processo de auditoria tem subjacente um conjunto de conceitos não compreendidos pelos utilizadores da informação financeira e pela generalidade dos investidores. A auditoria desenvolve-se a partir da plataforma contabilística, cujo objeto abstrato-formal incorpora um conjunto de convenções, princípios e normas que proporcionam o chamado accounting gap. Baseia-se, ainda, nos conceitos de risco e de materialidade que, sendo considerados âncoras da auditoria, não são percebidos ou entendidos pelo público em geral, originando, assim, gaps. Adicionalmente, surge o gap de credibilidade, face ao nível de julgamento implícito em qualquer modelo contabilístico: princípios e normas contabilísticas determinam o que deve ser ou não reconhecido. Por sua vez, o gap entre segurança razoável versus segurança absoluta, está igualmente presente, assim como o gap relativo ao desempenho dos auditores. Analisar o conceito e o significado destes termos, numa perspetiva interpretativa, é o objetivo central deste trabalho. Tendo subjacente o modelo de Blumer, a metodologia adotada enfatiza a interação simbólica representativa, ao sugerir que, na sociedade, cada espaço profissional interpreta de forma singular os conceitos e símbolos utilizados no processo de comunicação. O estudo sugere que os conceitos são instrumentos fundamentais utilizados na prática social para observar e representar o mundo real, para agir e nele trabalhar. Palavras-chave:Accounting gap; Remoteness gap; Risco; Auditoria; Materialidade. ABSTRACT The development of the audit process is underpinned by a set of concepts that are not generally understood by the users of financial information or by the generality of investors. An audit is developed based on an accounting platform whose abstract or formal object consists of a set of conventions

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Joint Impact of Materiality Guidance and Justification Requirement on Auditors' Planning Materiality

Cited by 6 publications

References 18 publications

Going concern modifications and related disclosures in the Italian stock market: do regulatory improvements help investors in capturing financial distress?

Going concern modifications and related disclosures in the Italian stock market: do regulatory improvements help investors in capturing financial distress?

El origen de ingresos del auditor y calidad de la auditoría: el caso español

Aplicação da Metodologia CSSI à Interpretação do Audit Expectation Gap

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