Peter Moizer

The Audit Expectations Gap in Britain: An Empirical Investigation

Abstract This paper reports the results of a postal questionnaire survey to ascertain the perceptions of individuals about audit expectations issues in Britain, including: what the role of the auditor is and should be; what prohibitions and regulations should be placed on audit firms; and what decisions auditors could be expected to make in a series of mini-cases. The questionnaire also included a semantic differential testing instrument which, through factor analysis, provides evidence about what different groups of individuals perceive to be the key attributes of auditing activity. The survey included chartered accountants in public practice, corporate finance directors, investment analysts, bank lending officers and financial journalists.

Auditor Reputation: The International Empirical Evidence

The purpose of this paper is to consider whether some audit firms are perceived by the financial communities of different countries to have higher reputations than other audit firms. The results that will be considered come from three sources: audit fee studies, studies of the issue of new shares and studies of the effects on a company of changing its auditor. The studies reveal that there is considerable evidence that Big Six auditors are differentiated from other audit firms by company directors when recommending to shareholders the appointment of a firm of auditors and its audit fee. The results point to a Big Six audit fee premium of between 16 to 37% across the countries surveyed. Participants in the stock market (investors and bankers) also appear to differentiate between audit firms. The Big Six tend to be associated with a higher quality service in most of the countries surveyed. In addition, there is some evidence of differential effects within the Big Six, with Price Waterhouse being identified with above average reputation in the 1980s in three countries. However, for other Big Six firms any reputational effects appear to be country specific and do not generalize across countries.

The audit expectations gap—plus ca change, plus c'est la meme chose?

Abstract This paper explores the response of the accounting profession to the audit expectations gap, with primary reference to the professions behaviour in the United Kingdom during the period of the last 20 years. Starting from a brief examination of the history of expectation concerns over a somewhat longer period, it is argued that both the existence of a gap and the specific aspects of audit performance it comprises have shown considerable continuity and resilience against solution. The professions response to the expectations gap are then discussed, considering them as interrelated with, rather than independent of, the nature of professional interests. Two main strategies of response are identified: a defensive approach focusing on education and reassurance of the public; and a constructive approach, seeking to convey a willingness to change audit activities to meet public concern. The paper evaluates these responses, and their likelihood of success in reducing expectations problems, in the context of the inherent conflicts in the structure of auditing as a self-regulated activity,

Determinants of audit fees in Bangladesh

Abstract This paper reports the results of an analysis of the determinants of audit fees of both financial and non-financial companies in Bangladesh. The Bangladeshi audit services market is unusual in that there is no direct involvement of international audit firms in it. The results of the regressions show that the size of the auditee has the greatest influence on audit fees. Whilst there was no international Big Six grouping, it was possible to construct a group of Bangladeshi audit firms which commanded a price premium, based on their size and whether they had a link with an international firm of auditors. Financial services companies were found to have higher audit fees relative to non-financial companies. Subsidiaries of multi-national holding companies also had higher audit fees. The surprising result was that auditees which employed at least one qualified accountant had higher audit fees.

The Meaning of Audit Reports

Abstract This paper reports the results of a study of how the various stylised forms of audit report used in the UK are interpreted by both accountants and professional users of audited financial statements. The results indicate that both accountants and users distinguish between the various audit reports, although users found less difference than accountants. The greatest divergences of interpretation concerned the qualification relating to lack of internal control (small companies qualification) and the going concern qualification.

Questioning the value of the research selectivity process in British university accounting

Provides a response to Puxty et al.′s call for academics to become involved in public policy debate. Addresses the issue of the effect on British university accounting research of the promotion and undertaking of continual research selectivity exercises. This should be of direct concern to accounting and other academics. The key message is that greater co‐operation, not competition, is needed both to secure a healthy future for academic accounting across the broad range of institutions in which the subject is researched and taught, and to provide a worthwhile educational experience for all students, not just the favoured few.

Protecting against Detection: The Case of Auditors and Fraud?

The auditor′s responsibility with respect to fraud has been one of the issues which has been associated most persistently with questions about the adequacy of audit performance. Examines the way in which the position of the accountancy profession in Britain on this subject developed during the 1980s – a period of considerable professional activity with respect to the issue of the auditor and fraud. While the profession has been persuaded to accept additional responsibilities concerning the reporting of detected fraud, it is argued that no such development has occurred with respect to the auditor′s responsibilities concerning fraud detection. The current nature of the auditor′s duties regarding fraud detection is seen as contestable. While further government action may force the profession to assume additional responsibilities in this respect, any such developments are seen as needing more detailed investigation of the precise capacities of audit practice in detecting (particularly management) fraud.

Auditor licensing in the European Union: a comparative study based on cultural differences

This paper examines the links between the ways in which auditors are licensed in eleven EU countries and the cultures of those countries using the model developed by Gray (1988). The paper shows that there are significant differences in the ways that auditor licensing is carried out and that culture could be associated with the different approaches. The paper also discusses the methodology employed and makes suggestions for future research directions for both auditor licensing and culture-based comparative work.

Independence and Competence? A Critical Questioning of Auditing

This paper reviews key aspects of the regulatory response in the UK and the USA to the apparent crisis of confidence in auditing stimulated by Enron and other recent corporate scandals. Drawing on a consideration of the nature of the market for auditing services and the regulatory and corporate governance structures in which auditing is embedded, the paper argues that the bulk of recent regulatory attention appears to have been on matters of auditor independence rather than auditor competence. Such a focus is seen to have parallels with former ‘crisis’ eras in the auditing arena, while the analysis presented also raises questions about the status of the auditing function within accounting firms and the capacity of regulatory reform to deliver a fundamentally enhanced auditing function. The paper concludes by stressing the importance of making more transparent what is being done in the name of auditing and audit regulation.

The images of the Big Six audit firms in the Czech Republic

In recent years, there has been a large growth in audit markets around the world as many formerly planned economies have moved to become market economies (transitional economies) and the Big Six (now the Big Five) accountancy firms have established a large presence in many of these economies. However, there has been little research on how these Big Six firms are perceived by some of their users. Following on from Moizers research on the image of the Big Six firms in the UK, this article reports the results of a similar survey in the Czech Republic. The results of the survey indicate that there are substantial differences in the image of the Big Six audit firms compared to local Czech audit firms. The results also indicate that there are differences in the perceived images of each of the Big Six firms which partly follow from the way in which each firm has established itself in the Czech Republic. A comparison of these results with similar research in the UK and Spain indicates that each of the Big Six firms has a different image in each country.