The demand for auditor services in wholly family-owned private firms: the moderating role of generation

Corten, Maarten; Steijvers, Tensie; Lybaert, Nadine

doi:10.1080/00014788.2014.959462

Cited by 18 publications

(20 citation statements)

References 56 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…While Collis and coworkers (Collis, 2010;Collis et al, 2004) find for the UK that small companies that are wholly family owned reveal a lower demand for voluntary audit, this could not be confirmed by Collis (2012). In contrast to these findings, Corten et al (2015) hypothesize and provide evidence for US private family firms (possibly because of entrenching) that the demand for reviews and compilations increases in the case of second-generation family firms.…”

Section: Agency Conflicts With Ownerscontrasting

confidence: 51%

“…This might lead to disputes among shareholders and result in more severe agency conflicts between the owners and management, which could be mitigated by an audit of financial statements. In contrast, if small companies are family owned, conflicts of interests between family members are assumed to be less pronounced due to a higher level of trust and consequently lower agency conflicts (Collis et al, 2004;Corten, Steijvers, & Lybaert, 2015). However, Corten et al (2015) also argue that even in small and family-owned companies agency problems can exist because of an entrenchment effect (similar to Carey & Tanewski, 2013).…”

Section: Agency Conflicts With Ownersmentioning

confidence: 99%

See 1 more Smart Citation

What drives voluntary audit adoption in small German companies?

2018

View full text Add to dashboard Cite

The purpose of this study is to validate the drivers of voluntary audit in small companies identified in previous research and uncover additional determinants related to agency conflicts with owners. For our research we use the German institutional setting, documented in the literature as being very different from its Anglo-Saxon equivalent. Based on a random sample of 405 small companies responding to a postal questionnaire survey, we find that the proportion of owners not involved in management, the subsidiary status of a company, a company's legal form, and the importance of financial statements' information to management activities all increase the likelihood of voluntary audit. In contrast, firms that outsource accounting tasks to an external expert are less likely to opt for voluntary audit, suggesting that an external expert's involvement substitutes for an external audit. In addition, owing to the absence of a statutory audit history for small companies in Germany, we find that voluntary audits are less common compared with findings from previous studies.

show abstract

Section: Agency Conflicts With Ownerscontrasting

confidence: 51%

Section: Agency Conflicts With Ownersmentioning

confidence: 99%

What drives voluntary audit adoption in small German companies?

2018

View full text Add to dashboard Cite

show abstract

“…Extant studies, such as Gomez-Mejia et al (2011), on family business have established distinguishing characteristics of family firms from other forms of business organisation. A few studies in the audit literature have provided new insights into the relationship between family-controlled firms and audit demand (Corten et al, 2015;Ho and Kang, 2013). However, these studies have mainly considered privately owned family firms in the context of voluntary audit demand and assumed family firms to be a homogenous group with less severe agency problems.…”

Section: Introductionmentioning

confidence: 99%

“…However, these studies have mainly considered privately owned family firms in the context of voluntary audit demand and assumed family firms to be a homogenous group with less severe agency problems. Although Corten et al (2015) did assume heterogeneity within family firms, the paper's focus was still on the demand for audit service in privately held family firms considering the role of generation. The present study extends audit demand research by focussing on the heterogeneity within the group of publicly listed family firms in Malaysia.…”

Section: Introductionmentioning

confidence: 99%

Chief executive officer retirement and auditor’s risk assessment

Abdulmalik

Amran

Ahmad

2020

JFRA

View full text Add to dashboard Cite

Purpose This study aims to examine the unique nature of family firms by investigating the moderating effect of chief executive officer (CEO) identity on CEO career horizon and the auditor’s client risk assessment. Consistent with literature on family businesses, the level of CEO attachment to socio-emotional wealth (SEW) varies among family businesses. Design/methodology/approach This study used a longitudinal sample of 2,063 non-financial family firm-year observations from 2005 to 2016 listed on the Bursa Malaysia. The study used the general method of moments (GMM), which controls for endogeneity concerns. Findings The results reveal that, without the moderating effect of CEO identity, the relationship between CEO career horizon and auditor’s risk assessment is positive, which suggests that the auditor’s risk perception of retiring CEOs is very high. However, the interaction of CEO identity reverses the relationship as evidenced by the negative and significant coefficient on the interacted terms. The finding suggests that the auditor’s perceived risk associated with CEO career horizon is lower in family firms with CEOs affiliated to family members or in which the CEO has an equity stake. Overall, the findings provide compelling evidence that the extent of the CEO’s attachment to the firm’s SEW affects the auditor’s client risk assessment. Practical implications The findings of the study serve as an enlightenment to policymakers such as Bursa Malaysia and Security Commission that within the family-controlled firms, differences still exist; therefore, there might be a need for future regulatory initiative to cater for the specific need of family-controlled firms. Originality/value The study contributes to prior literature by departing from the agency theory adopted in previous studies on auditor choice in family firms under the assumption that family firms are homogenous.

show abstract

“…Additionally, voluntary audits have no effect on the cost of the debt. Moreover, for family-owned private companies, Corten et al (2015) suggest that reviews and compilations seem to be sufficient and more cost effective.…”

Section: Introductionmentioning

confidence: 99%

External investigations and disciplinary sanctions against auditors: the impact on audit quality

Barberá

Illueca

Pucheta‐Martínez

2015

SERIEs

View full text Add to dashboard Cite

In this paper, we provide empirical evidence for the impact of disciplinary sanctions imposed on Spanish auditing firms and their engagement partners. The disciplinary sanctions resulted from external investigations, which revealed misapplications of auditing standards. In particular, we evaluate (a) the efficacy of the external supervisory board in identifying low-quality auditors and (b) the effectiveness of the disciplinary system in improving the quality of subsequent statutory audits performed by the sanctioned auditors. We employ two earnings management indicators as proxies for audit quality: loss avoidance through extraordinary items and abnormal accruals. And we compare these measures in the financial statements of client companies (auditees) audited by sanctioned and non-sanctioned auditors between 1995 and 2007. Our evidence is mixed. The results show that companies audited by Non-Big 4 sanctioned auditors in the pre-inspection period are less likely to avoid bottom-line losses. Additionally, we conclude that use of this earnings management tool decreases in the post-investigation period for all sanctioned auditors, whether Big 4 or Non-Big 4 firms. Contrary to our expectations, the enhancement performance on this measure of audit quality is observed only for smaller fines. The discretionary accrual approach to earnings management does not offer significant results, however. Therefore, the con- clusions are not robust, and further investigation is needed. A feasible explanation for the elusive conclusion may be based on the strong incentives for private firms to avoid bottom-line losses for financing purposes and to manipulate earnings to minimize tax payments.

show abstract

The demand for auditor services in wholly family-owned private firms: the moderating role of generation

Cited by 18 publications

References 56 publications

What drives voluntary audit adoption in small German companies?

What drives voluntary audit adoption in small German companies?

Chief executive officer retirement and auditor’s risk assessment

External investigations and disciplinary sanctions against auditors: the impact on audit quality

Contact Info

Product

Resources

About