The Small Company Audit Qualification: A Preliminary Investigation

Keasey, Kevin; Watson, Robert; Wynarczyk, Pooran

doi:10.1080/00014788.1988.9729379

Cited by 66 publications

(73 citation statements)

References 9 publications

(8 reference statements)

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“…The initial exemption was introduced to reduce the costs imposed on very small private companies and applied to companies which qualified as small, and which reported turnover not exceeding £90,000, alongside a balance sheet total not exceeding £1.4m. 4 The cost of audit to very small companies has been argued to be disproportionately high and difficult to justify given the limited benefits that an audit confers on the users of these accounts (Keasey et al, 1988). Subsequent extensions, applied via amendments to the UK Companies Act (1985), have culminated in the exemption thresholds being brought into line with those applied by the EU, with the largest threshold change occurring in 2004.…”

mentioning

confidence: 99%

The Demand for Audit in Private Firms: Recent Large-Sample Evidence from the UK

Dedman

Kausar

Lennox

2013

European Accounting Review

112

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Although theory suggests that companies would rationally select into audit even if it were not a legal requirement, many countries impose mandatory audits. This is arguably due to an audit having elements of a public good, which may result in not enough audits being purchased without regulatory intervention. The mandatory nature of public company audit has created problems for researchers wishing to investigate the demand for voluntary audit. Recent events in the UK, however, have provided such an environment. In the UK, private companies must publicly file financial statements and, until recently, they had also to be audited. However, this requirement has now been relaxed for many private companies. We are therefore able to examine the determinants of voluntary audit in a large sample of companies for which we have financial statement data. We analyse a sample of 6274 recently exempt companies, following them for three years post-exemption. We use agency theory and prior evidence to generate our hypotheses and examine them using a more comprehensive set of explanatory variables than has previously been available in the literature. Our results indicate that companies are more likely to purchase voluntary audits if they have greater agency costs, are riskier, wish to raise capital, purchase non-audit services from their auditor, and exhibited greater demand for audit assurance in the mandatory audit regime. We also document a trend away from audit over time. Overall, our results strongly support the idea that companies choose to be audited when it is in their interests to do so.

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mentioning

confidence: 99%

The Demand for Audit in Private Firms: Recent Large-Sample Evidence from the UK

Dedman

Kausar

Lennox

2013

European Accounting Review

112

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“…The investors also can use the model as a proxy to predict the qualified opinion. Keasey et al (1988) in a similar approach with Dopuch et al (1987) examined 12 financial and non financial factors that may explain audit qualifications in audit report. Using multivariate logistic regression, the result of their study showed that auditor is more likely to issue qualified audit report in the case of existence of certain variables such as the large type of audit firm, the a few non director -shareholders in the board, declining earnings, secured loan and the time lag of audit report.…”

Section: International Journal Of Academic Research In Business and Smentioning

confidence: 99%

The Role of Auditors in the Recent Nigerian Banking Crisis

Jibrin¹,

Blessing²,

Danjuma³

2014

IJARBSS

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In market societies people routinely have to transact with faceless corporations about whom they have little personal knowledge. In such societies external auditing and auditors are promoted as a trust engendering technology and watchdog with the capacity to promote a particular kind of social order. Investors and depositors in a number of banks in Nigeria have lost several billions of Naira due to the lack of implementing qualified audit report theory and practices of accountants and auditors, which has resulted in the distress of a number of banks. This research work has examined the contemporary auditing and the role of accountants and auditing firms in causing the collapse of banks. The paper locates the role of auditors within the broader dynamics of professionalism and the pursuit of profits to argue that major accountancy firms are becoming more and more willing to increase their profits by indulging in anti-social practices that show scant regard for social norms and even legal rules and regulations. Contrary to their claims to be protecting the public interest, accountants and auditors may be partly responsible for cases of distress and the collapse of banks in Nigeria, as they failed to qualify their reports when there were indications of financial difficulties in the banks. There is also evidence to show that auditors have collected large sums in audit and non-audit fees. Such events raise questions about the value of company audits, auditor independence and the quality of audit work. This paper argues that the basic auditing model is flawed since it makes auditors financially dependent on companies. The conventional approach to 'audit quality' is also inadequate as it pays little attention to the organizational pursuit of profits and the social

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“…Internal controls of the SMEs are not as extensive as those of large companies, where auditors cannot rely on the system to make their audits more efficient. The lack of formal internal control systems and the application of universal auditing standards have given rise to the use of a special "small company audit qualification" in the UK (Keasey et al, 1988).…”

Section: Problem Statementmentioning

confidence: 99%

Quality control practices, service quality and customers satisfaction: The case of non-audit services provided by SMPs to SMEs in Malaysia

Haron¹,

Yahya²,

Yuvaraj³

et al. 2012

Afr. J. Bus. Manage.

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This study focuses on the satisfaction level of Small and Medium Enterprises (SMEs) with regards to the quality of non-audit services provided by Small and Medium Practitioners (SMPs) and their quality control practices. The objective is to examine the relationship between quality control, service quality and satisfaction and the mediating effect of the quality of SMPs' service on the relationship between quality control practices of SMPs and satisfaction level of SMEs. The results show that all the variables have partially significant relationship and there is mediating effect of service quality on the relationship between quality control and satisfaction. Relevant authority body should educate SMPs the importance of quality control and the way it can induce the quality of services provided and maximize client's satisfaction level without impairing their independent roles and compliance with standards, ethical, regulatory and legal requirements.

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The Small Company Audit Qualification: A Preliminary Investigation

Cited by 66 publications

References 9 publications

The Demand for Audit in Private Firms: Recent Large-Sample Evidence from the UK

The Demand for Audit in Private Firms: Recent Large-Sample Evidence from the UK

The Role of Auditors in the Recent Nigerian Banking Crisis

Quality control practices, service quality and customers satisfaction: The case of non-audit services provided by SMPs to SMEs in Malaysia

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