Management Influence on Auditor Selection and Subsequent Impairments of Auditor Independence during the Post‐<scp>SOX</scp> Period

Dhaliwal, Dan S.; Lamoreaux, Phillip T.; Lennox, Clive S.; Mauler, Landon M.

doi:10.1111/1911-3846.12079

Cited by 94 publications

(68 citation statements)

References 66 publications

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“…Intrinsically unobservable, quality is usually proxied by firm size, reputation, tenure and fess, among other things. With respect to independence, some of the proxies observed include discretionary accruals and/or earnings management (ASHBAUGH; LAFOND; MAYHEW, 2003;CAHAN et al, 2008;JOHNSON;KHURANA;REYNOLDS, 2002), qualified opinions (CRASWELL, 1999), and the probability of issuing a going concern opinion (CAREY; KORTUM; MORONEY, 2012;DHALIWAL et al, 2015;SHARMA;SIDHU, 2001). …”

Section: Auditor Competence Reputation and Independencementioning

confidence: 99%

“…Management's influence in the decision-making process when hiring an auditor may lead to shareholder concerns about the maintenance of auditor independence in safeguarding investors' interests (DHALIWAL et al, 2015). In a country such as Brazil, in which Sternberg, Leal and Bortolon (2011)have found that 65% of companies have a controller with more than 50% of the votes, the influence on audit-firm work is expected to be a concern.…”

Section: Non Audit Fees and Other Threats To Independencementioning

confidence: 99%

“…Given the importance of management in the client-auditor relationship Dhaliwal et al (2015) and the relevance of this subject in a scenario such as that of Brazil, which is characterised by ownership and control concentration, it is important to control for some corporate governance characteristics that can minimise these effects. For that reason, RIGHTSMIS (rights mismatch), NM2 (different levels of corporate governance), EXT (independent members of the board), CEO (chairman of the board of directors and CEO being different people) and AUDCMT (audit committee) were included.…”

Section: Econometric Modelmentioning

confidence: 99%

“…Management's influence in hiring and monitoring auditor work raises concerns about compromised audit independence (DHALIWAL et al, 2015). In a country such as Brazil, which is characterised by ownership and control concentration and boards with few independent members, this is a special concern that could be minimised by good corporate governance practices.…”

Section: Propensity To Change the Audit Reportmentioning

confidence: 99%

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Non-Audit Services and Auditor Independence in an Environment of Low Investor Protection

Sobrinho

Bortolon

2016

RUC

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This paper aims to evaluate whether the provision of non-audit services (NASs) affects external auditor independence in an environment characterised by low legal protection of minority investors and a high concentration of ownership and control. Audit reports and costs of services are analysed over 3 years for 154 Brazilian companies. The binary variable proxy for independence indicates a qualified auditor's report and, as an alternative specification, the issuing of a going concern opinion. Logit models were employed with control variables to identify aspects related to other sources of threats to independence, management influence, and the effort and risk of auditing services. The results indicate that the provision of NASs does not affect auditor independence. This evidence is robust in terms of the alternative specification of the independence proxy and the observation of a subset of companies considered qualifiable. Only when summed to audit fees is there evidence of a negative impact on independence, signalling that the client's economic dependence might be more relevant than NAS with respect NON-AUDIT SERVICES AND AUDITOR INDEPENDENCE IN AN ENVIRONMENT OF LOW INVESTOR PROTECTIONRevista Universo Contábil, ISSN 1809-3337, FURB, Blumenau, v. 12, n. 4, p. 107-128, out./dez., 2016 to auditor independence. This result is robust to both independence proxies and the subset of qualifiable companies. In general, other sources of threats do not seem related to independence. This study provides evidence of a market in which auditor independence is expected to be compromised, given controlling shareholders' influence on company management. Keywords: Audit fees; Non-audit services; Auditor independence; Corporate governance. RESUMOEste trabalhou avaliou se a prestação dos serviços extra-auditoria afeta a independência dos auditores externos em um ambiente caracterizado pela baixa proteção legal aos investidores minoritários e com alta concentração de propriedade e controle. Foram analisados os relatórios de auditoria e os valores dos serviços extra-auditoria de 154 empresas brasileiras com ações negociadas em bolsa, durante 3 anos. A proxy de independência evidencia a modificação da opinião do auditor e alternativamente a emissão de ressalva a continuidade da firma. A relação entre os serviços extra-auditoria e a independência do auditor é analisada através de modelos logit. Os resultados indicam que a prestação de serviços extra-auditoria não afeta a independência do auditor. Esta evidência é robusta inclusive em análise da ressalva de continuidade da firma e no subconjunto de empresas consideradas ressalváveis. Apenas quando adicionados os honorários de auditoria, há a evidência de um impacto negativo sobre a independência, sinalizando que a dependência econômica do cliente pode ser mais relevante do que os serviços extra-auditoria em respeito à independência do auditor. Este resultado é robusto para ambas as proxies de independência e inclusive no subconjunto de empresas ressalváveis. Em geral, outras fonte...

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Section: Auditor Competence Reputation and Independencementioning

confidence: 99%

Section: Non Audit Fees and Other Threats To Independencementioning

confidence: 99%

Section: Econometric Modelmentioning

confidence: 99%

Section: Propensity To Change the Audit Reportmentioning

confidence: 99%

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Non-Audit Services and Auditor Independence in an Environment of Low Investor Protection

Sobrinho

Bortolon

2016

RUC

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“…However, changes in audit committee composition and the shift in responsibility for auditor selection from management to the audit committee call for an updated understanding of the factors that impact post-SOX auditor selection. Only limited research on auditor selection has been conducted post-SOX (Beasley, Carcello, Hermanson, and Neal 2009;Cohen, Krishnamoorthy, and Wright 2010;Fiolleau, Hoang, Jamal, and Sunder 2013;Dhaliwal, Lamoreaux, Lennox, and Mauler 2014). Further, this post-SOX research has focused primarily on the role of management influence on the auditor selection process, with little attention paid to other factors, such as audit firm attributes (e.g., partner attributes, firm reputation, services offered) and industry expertise, which pre-SOX research found to impact the selection process.…”

Section: Introductionmentioning

confidence: 99%

What Drives Auditor Selection?

Almer

Philbrick

Rupley

2014

Current Issues in Auditing

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SUMMARY:This study provides evidence on the factors that currently impact audit committee members' selection of external auditors. Using a two-stage approach, we survey and interview public company audit committee members (ACMs), and find evidence that management continues to provide input into the decision process even as SOX regulations require audit committees to take responsibility for the auditor selection decision. ACMs view management as an important information source when they assess the proposing audit partner's reputation for accessibility, timeliness, and ability to liaise with the firm's national technical office, as well as the proposing audit firm's technical and industry expertise. Results of this study can help firms be more competitive in the audit bidding process, inform policy makers when considering whether to impose further audit committee regulations, and aid academics in ensuring an up-to-date understanding of the audit committee's role in the auditor selection process.

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Financial performance of hospitals: A critical obligation of corporate governance dimensions

Afriyie

Kong

Lartey

et al. 2020

Health Planning & Management

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Background: This paper aims to investigate the effects of corporate governance mechanisms on the financial performance of hospitals. The statement, "good corporate governance" has been incorporated in the health care sector over the last decade, as an element to improve financial performance. Methods: The researchers relied on both primary and secondary data in the study. For the primary data, the authors used structured and nonstructured questionnaires to obtain data from 125 hospitals. The secondary data used emanated from board meetings, financial statements and relevant reports of the selected hospitals from 2010 to 2017. However, the data was then sorted out to get the required information on Chief Executive Officer (CEO) presence, board relationship, governance dynamics, gender diversity and financial performance. Results: On the basis of empirical evidence provided in this study, the results show that the Independent Directors (INDPDR) variable has a positive effect on Return on Assets and Net Profit Margin and also a high statistically significant value of 0.000 for both performance measures. This is an indication that the variable, INDPDR, is highly capable of

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Management Influence on Auditor Selection and Subsequent Impairments of Auditor Independence during the Post‐SOX Period

Cited by 94 publications

References 66 publications

Non-Audit Services and Auditor Independence in an Environment of Low Investor Protection

Non-Audit Services and Auditor Independence in an Environment of Low Investor Protection

What Drives Auditor Selection?

Financial performance of hospitals: A critical obligation of corporate governance dimensions

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