The Effects of Mandatory Audit Firm Rotation on Client Importance and Audit Industry Concentration

Bleibtreu, Christopher; Stefani, Ulrike

doi:10.2308/accr-51728

Cited by 48 publications

(52 citation statements)

References 92 publications

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“…On the other hand, the authors documented an increase in the frequency of restatement discoveries, announcements and deferred tax valuation allowances. Bleibtreu and Stefani (2018) examined the audit rotation in EU context. This specific paper provided evidence concerning the regulators' goals of simultaneously decreasing client importance and audit market concentration are in direct conflict.…”

Section: Discussionmentioning

confidence: 99%

Auditing Research: A Review of Recent Research Advances

Cuzdriorean¹

2018

EJEF

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We survey recent auditing research published in top 5 leading accounting journals over the last two years (2017-2018). We use the recent findings as a roadmap aiming to offer useful suggestions for future research. Finally, we urge more research on topics related to: implications of social challenges facing audits of complex estimates, implications of contrast effect for audit quality, assessing the effects of conservative bias in audit work, examining the factors affecting accounting firms` competencies.

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Section: Discussionmentioning

confidence: 99%

Auditing Research: A Review of Recent Research Advances

Cuzdriorean¹

2018

EJEF

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“…In the EU, however, the adopted system for mandatory audit rotation is believed to strengthen independence and decrease audit market concentration. Yet, interestingly, Bleibtreu and Stefani (2018) conclude that the mandatory rotation system might have unintended consequences due to the observed conflict regarding whether such a system increases client importance and audit market concentration. Bleibtreu and Stefani (2017) exploit a market‐matching model—after differentiating between Big 4 and non‐Big 4—to examine the degree to which mandatory audit firm rotation can increase the dynamics of the audit markets and thus decrease Big 4 market concentration (thereby aiming to investigate whether regulators and regulation can address declining audit independence).…”

Section: Independent Audit Oversight and Audit Competitionmentioning

confidence: 99%

Independent oversight of the auditing profession: A review of the literature

2021

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This paper reviews the literature on the independent oversight of auditing from 2003 to 2018 and provides several research opportunities for filling the identified gaps in that literature. Our review classifies the literature into three themes: (1) the development of independent audit oversight, (2) the effects of independent audit oversight and (3) the interface between the independent audit oversight authorities and the global audit networks. The paper finds different effects of the independent audit oversight. Positively, it enhances the capital markets by adding more credibility to the published information. Auditors become more conservative about accepting or continuing to work with high‐risk clients. At the same time, while audit fees have increased as a result of the additional requirements of independent audit regulation, non‐audit fees from audit clients have decreased significantly. Negatively, independent oversight has increased audit concentration and resulted in insufficient choice of auditors in most audit markets.

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“…At this stage, there is still room for "rent-seeking" in the audit work of Chinese listed firms. On the one hand, higher levels of abnormal audit fees will increase the dependence of auditors on customers [32], leading to a decrease in the independence of auditors. Second, due to oversupply and competitive incentives in the Chinese audit market, auditors have no advantage in negotiations with management.…”

Section: Plos Onementioning

confidence: 99%

Impact of managerial overconfidence on abnormal audit fee: From the perspective of balance mechanism of shareholders

Xie

et al. 2020

PLoS ONE

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Overconfidence, as a psychological feature that is difficult to measure, means that managers are overconfident in their management ability, investment judgment ability and knowledge richness, thus overestimating their ability and making irrational behavior. Based on the sample of Chinese listed firms from 2014 to 2018, we measure managerial overconfidence in terms of age, gender, education, position and salary, and analyzed the relationship between overconfidence, abnormal audit fees, and the balance mechanism of shareholders. The research results show that there is a significant positive correlation between managerial overconfidence and abnormal audit fees, and the balance mechanism of shareholders can significantly inhibit the positive correlation between managerial overconfidence and abnormal audit fees. The research results of this paper are conducive to the supervision department to further improve the relevant supervision measures, improve the audit quality, and provide theoretical support for the more specific requirements of audit fee information disclosure.

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The Effects of Mandatory Audit Firm Rotation on Client Importance and Audit Industry Concentration

Cited by 48 publications

References 92 publications

Auditing Research: A Review of Recent Research Advances

Auditing Research: A Review of Recent Research Advances

Independent oversight of the auditing profession: A review of the literature

Impact of managerial overconfidence on abnormal audit fee: From the perspective of balance mechanism of shareholders

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