Research paper external auditing

Table 1.

Auditing research

The results emanating from the analysis yield a number of interesting conclusions. Publication date: 28 June Abstract Purpose — The purpose of this paper is to explore whether internal audit's reporting relationship with the audit committee and the client's business risk environment impact external auditors' reliance on the work of internal audit. Accordingly, the firms in the sample generally do not include the smallest firms due to the requirements for firms to be included in Prowess. This might be an important factor behind the multiple auditor certification by corporations. Additionally, the results suggest that managerial ownership is a nonlinear function of firm value. In the light of these developments, the present study seeks to formulate a coherent empirical model to explore the association among external auditing, managerial monitoring and firm valuation. The number of auditor firm relationships and the shareholding of the promoters in a company provide good quantifiable measures of the quality of this corporate governance mechanism. If this is true, then the major benefits derived from external auditing activity should be reflected in the higher capitalized value of the ownership claims on the corporation. Figure 1 Summary representation of the relationship among auditor monitoring, managerial monitoring and firm valuation. In stage two, we deleted 30 firms which did not provide information on their share prices. The study uncovers a positive correlation between firm valuation measured by Tobin's Q and corporate governance scores.

Academics and policy makers in both developed and emerging markets are increasingly grappling with this issue as they seek to reform their governance mechanisms, particularly in the wake of the East Asian financial crises and recent accounting irregularities in the US and elsewhere.

The aim of this study is to provide information about the profession of forensic accounting, explain the historical development and emergence reasons of forensic accounting, state its process and operating scope, express the general characteristics of forensic accounting and emphasize the task scope of forensic accountants in addition to put forward required knowledge by forensic accountants and the path to forensic accounting profession.

research in auditing main themes

Forensic accounting is interested in revealing the truth about legal cases, which are passed to the court. The study uncovers a positive correlation between firm valuation measured by Tobin's Q and corporate governance scores.

First, until recently, corporate balance sheets were exceedingly opaque with limited disaggregated information being provided on the documentation by auditors.

How can working with the internal auditors benefit the external auditor

The institutional considerations that affect Indian firms are highlighted in Section 3. It is argued that both internal monitoring by managers and external monitoring by auditors play a vital role in affecting firm value, even though these two kinds of monitoring are either substitutes or complements in terms of monitoring. The amendment requires all companies to comply with Indian accounting standards, disclose any deviation, provide reasons for such deviation and state the impact of the deviation on the financial statements. Towards this end, this article explores the joint determinants of internal and external monitoring and its interrelationship with firm valuation. More specifically, external monitoring such as those by auditors can serve to reduce the moral hazard problem associated with high managerial ownership. The database and econometric methodology are presented in Section 4. Central to these studies has been to employ an index of governance, where auditing enters as one of the variables in the construction of the governance index. Other studies have also investigated the relationship between managerial ownership and firm value. The aim of this study is to provide information about the profession of forensic accounting, explain the historical development and emergence reasons of forensic accounting, state its process and operating scope, express the general characteristics of forensic accounting and emphasize the task scope of forensic accountants in addition to put forward required knowledge by forensic accountants and the path to forensic accounting profession. First, until recently, the corporate sector in many developing markets encountered several constraints in accessing equity and debt markets. Academics and policy makers in both developed and emerging markets are increasingly grappling with this issue as they seek to reform their governance mechanisms. Some of the salient legal restrictions on auditors include: the name of any firm that intends to register for ICAI membership must have a combination of the names of the partners of a name in being that is, a name in use before this rule was introduced ; 5 after , the display of any association with any firm, domestic or international, was banned; the number of partners in an audit firm is limited to a maximum of 20; the Companies Act prohibits indebtedness of audit partner to audit clients in excess of Rs. A need was increasingly felt that some statutory governance codes be instituted in view of several malpractices like insider trading that inflicted losses on small investors and undermined investor interests in capital markets. The reminder of the article is structured as follows. However, in emerging economies such as India, where conventional corporate control systems have begun to gain prominence only recently Ghosh, a , it seems likely that independent external auditors could potentially act as important monitors of controlling shareholders.

Additionally, the results indicate that the number of auditor relationships and firm performance are positively related, suggesting that external monitoring enhances firm performance. Before the Act, all issues of capital by Indian companies were controlled by a government agency, the Controller of Capital Issues, which regulated both the terms as well as the pricing of the issue.

can external auditor rely on internal audit

Towards this end, this article explores the joint determinants of internal and external monitoring and its interrelationship with firm valuation. It is argued that both external auditors which serve as an external monitoring function and managerial ownership which serves as an internal monitoring function affect firm value, while internal monitoring by managers and external monitoring by auditors were viewed as substitutes or complements.

Articles on auditing pdf

First, until recently, corporate balance sheets were exceedingly opaque with limited disaggregated information being provided on the documentation by auditors. Thus, in effect, the sample is skewed towards larger Indian firms. There are three main reasons for the choice of India in this study. Using a simultaneous equation framework, the findings reveal that internal monitoring is significantlynonlinearly related to external monitoring, as proxied by the number of auditors. Table 1. This article examines this issue in the Indian context, drawing upon the available theoretical and empirical literature. Recent studies have attempted to construct a corporate governance index to evaluate its impact on firm performance. Current regulations, by making the disclosure of substantial acquisitions mandatory, have sought to ensure that the equity of a firm does not covertly change hands between the acquirer and the promoters. We subsequently deleted a number of firms from the sample. The study uncovers a positive correlation between firm valuation measured by Tobin's Q and corporate governance scores.
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External auditors' reliance on internal auditing: further evidence