International Audit

01
Audit committee effectiveness, isomorphic forces, managerial
attitude and adoption of international financial reporting
standards (2019)
Juma Bananuka, Arafat Walugyo Kadaali, Veronica
Mukyala, Bruno Muramuzi and Zainab Namusobya
 Audit committee effectiveness, isomorphic forces, managerial attitude and adoption of
international financial reporting standards
Introduction

The purpose of this paper is to report the results of a study carried out to establish the contribution of audit committee (AC) effectiveness,
isomorphic forces and managerial attitude to the adoption of international financial reporting standards (IFRS) in MFIs on the African scene
using evidence from Uganda’s MFIs. .

The adoption of International Financial Reporting Standards (IFRS) is important to both developing and developed countries. IFRS bring
about transparency by enhancing the international comparability and quality of financial information. The adoption of IFRS lowers the cost
of capital and reduces international reporting costs.

Africa’s countries have adopted IFRS (IFRS Foundation, 2018) at the national level but it is not clear to
what extent domestic firms have embraced the use of IFRS in financial reporting.

In Uganda, IFRS were adopted at the national level. The Institute of Certified Public Accountants of Uganda (ICPAU) adopted the use of IFRS
in 1998 and subsequently adopted the IFRS for small and Medium Enterprises in 2010

In Uganda, MFIs are listed among publicly accountable entities by ICPAU and thus must apply full IFRS. The World Bank (2005) report
indicates that the adoption of IFRS in Uganda was expected to promote reliable financial reporting but this has not been achieved. At firm
level, the World Bank (2014) reveals that a number of audit reports show that the financial statements of savings and credit cooperative
societies (SACCOs) in Uganda did not disclose all the information as per the relevant IFRS. Therefore, questions continue to abound about
which models, mechanisms and instruments firms could use to ensure the adoption of IFRS.
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 Audit committee effectiveness, isomorphic forces, managerial attitude and adoption of
international financial reporting standards
Methodology

Research method Population & Sample

• Quantitative.
• Cross-sectional and correlational.
The study population is 85 AMFIU member MFIs. Of the 85 AMFIU
member MFIs, usable questionnaires were received from 67 MFIs
representing a response rate of 79 percent. The researcher enlisted
responses from either the Chief Finance Officer (CFO) or General
Manager (or Chief Executive Officer) of the MFI. Of the 67 usable
questionnaires received from respondents, 43 questionnaires were
received from male respondents while 24 were received from female
respondents. Majority of the respondents were aged below 30 years
(37 respondents) implying that MFIs are largely managed by the
youth. 64 respondents had a work experience of 10 years and below
and majority of these had Certified Public Accountants (CPA)
qualifications. In total, 50 respondents had a bachelor’s degree and
only one respondent had a PhD degree.

4
 Audit committee effectiveness, isomorphic forces, managerial attitude and adoption of
international financial reporting standards
Results, Limitation, & Suggestions

Resul
Limitation Suggestions
t

Both AC effectiveness, isomorphic forces and
managerial attitude significantly contribute to the
adoption of IFRS. However, the explanatory power
of managerial attitude is subsumed in isomorphic
forces and AC effectiveness. Results further indicate
that AC effectiveness partially mediates the
relationship between isomorphic forces and adoption
of IFRS. In terms of control variables, ownership and
capital structure are not significant predictors of
adoption of IFRS.
The study limitations alongside the directions for
further research. This study only focused on MFIs in
Uganda and it is highly possible that the results may
be generalized to the Ugandan MFIs. The study
predictor variables only account for 49 percent of the
variance in the adoption of IFRS.
Future research may be conducted to establish other
predictors of adoption of IFRS and identify more
other variables that can be controlled for such as firm
size, profitability, auditor type among others. For the
first time (to the authors’ knowledge), this study tests
whether AC effectiveness mediate the relationship
between isomorphic forces and adoption of IFRS and
thus there is no previous literature to compare with.
Future studies may be conducted to validate our
mediation results. In the presence of the above
limitations, this study results remain useful to both
academicians and policy makers in Uganda’s MFIs
and other environments with a similar setting.
 02
The effect of audit quality and degree of International Financial
Reporting Standards (IFRS) convergence on the accrual earnings
management in ASEAN countries (2019)
Zahratun Nadhir, Ratna Wardhani
The effect of audit quality and degree of International Financial Reporting Standards (IFRS)
convergence on the accrual earnings management in ASEAN countries
Methodology

Research method Population & Sample

• Quantitative. The data used in this research is financial report data from companies
• The methodology used in this research is the listed on the stock exchange, obtained from Thomson Reuters EIKON
multiple regressions by using Least Square database with sample company selection method used in this research
method. is purposive sampling. The company criteria sampled are listed on the
stock exchanges in the ASEAN countries: Philippines, Indonesia,
Malaysia, Singapore, Thailand and Vietnam, excluding the financial
industry and have complete data in the period 2014-2015. In addition,
data on the similarities and differences between local accounting
standards of a country and IFRS issued by PricewaterhouseCoopers
(2015) and Deloitte (2016) are used. Based on the sample selection
procedure, 503 sample companies were obtained. We also treat outlier
by delating observations that fall outside the average ± 3 times
standard deviation for each variable in all research model.

7
 03
Audit Regulation and Cost of Equity Capital: Evidence
from the PCAOB’s International
03 Inspection Regime
(2020)
Phillip T. Lamoreaux, Landon M. Mauler, Nathan J.
Newton
 Audit Regulation and Cost of Equity Capital: Evidence from the PCAOB’s International
Inspection Regime
Introduction

• The purpose of this study is to investigate the relation between one measure of audit regulation (specifically inspection oversight by the U.S.
Public Company Accounting Oversight Board (PCAOB)) and the cost of equity capital. At the most fundamental level, auditing serves to
reduce information risk between originators and users of information. Information quality is directly linked to cost of capital, and as
information risk declines, so should cost of capital (Lambert, Leuz, and Verrecchia 2007).

Although it is intuitively appealing that an improvement in auditor oversight should lower cost of capital, there is a lack of empirical evidence for
this claim. This lack of evidence may exist because investors do not connect changes in regulatory oversight with changes in audit quality.

This study investigate the relation between audit regulation and cost of capital using clients of non-U.S. auditors which become subject to regulatory oversight
through the PCAOB’s international inspection program. Because certain countries have prohibited PCAOB inspections over time, this setting provides
variation in the PCAOB’s ability to regulate auditors (through inspection) and therefore is a useful setting to empirically measure the relation between audit
regulation and the cost of equity capital.

Specifically, this study design compares cost of capital for companies whose auditors became subject to PCAOB inspection with cost of capital
for companies that did not experience a change in inspection access at that time (i.e., company-year observations in countries that never allow
PCAOB inspections and company-year observations when inspections are prohibited in countries that prohibit (allow) but later allow (prohibit)
inspections). 9
 Audit Regulation and Cost of Equity Capital: Evidence from the PCAOB’s International
Inspection Regime
Methodology

Research method Population & Sample

• Qualitative.
• Hypothesis using the following Ordinary Least
Squares (OLS) regression model.
This study obtain a company-year sample of U.S.-listed clients of
foreign auditors from 2000-2012.This study exclude observations
missing data for control variables from the Center for Research in
Security Prices (CRSP), Compustat, I/B/E/S, and Audit Analytics and
with insufficient data to calculate cost of capital measures and also
exclude company-years with less than $1 million in total assets as
well as financial companies (SIC code 6000-6999). There are 3,010
company-year observations meeting data requirements for at least one
of our cost of capital measures. Note that each cost of capital measure
has different data requirements so sample sizes vary across the
measures.

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 Audit Regulation and Cost of Equity Capital: Evidence from the PCAOB’s International
Inspection Regime
Results, Limitation, & Suggestions

Resul
Limitation Suggestions
t

Using a difference-in-differences design, we find that
foreign SEC registrants with auditors from countries
that allow PCAOB inspections enjoy a lower cost of
capital, relative to foreign SEC registrants with
auditors from countries that prohibit inspections.
Furthermore, we find that this cost of capital effect is
attenuated for companies with higher quality
governance mechanisms. Finally, we document that
inspection access is associated with higher quality
analyst forecasts, which suggests that this change in
audit regulation reduces information risk for market
participants.
We acknowledge that there are important limitations
to inferences that can be drawn from this study. For
example, we do not conduct an exhaustive study of
the costs and benefits of PCAOB inspection
oversight.
This conclusions suggest that cost of capital is lower
for foreign, U.S.-listed companies whose auditors are
subject to PCAOB oversight but there may be other
costs associated with PCAOB inspection access
which are not reflected in cost of capital. Finally, our
analysis is conducted on foreign companies listed in
the U.S. so inferences from our study may not
generalize to companies domiciled in the U.S.

11
 An audit of received international business corruption literature for logic, consistency,
completeness of coverage
A. Kouznetsov, Sarah Kim, Chris Wright

Introduction:

- Research interest in corruption is the high-ranking academic journals from various disciplines. Some research related to corruption

- There were the different categories of corruption (e.g. judicial, political, and between private individuals and government offcials), where its
have long been the subject of academic research (Ayres, 1996; Gerber and Mendelsom, 2008; Jain, 2001; Della Porta, 2002; Rose-Ackerman,
1996)

- A high level of corruption is an acute problema in emerging market where it often entangles foreign firms from less corrupt country (e.g. Doh et
al., 2003, Frei and Muethel, 2017)

- The topic research lanscape on business corruption remains confusing and disparate. Its defenition still lack consensus with some commonly
held defenitions lacking comprehensive.

- Shielfer and Vishy (1993) defined corruption as “….the sale by government officials government property for personal gain. Rose-Ackerman
(2002) defined “corruption is an ilegal payment to a public agent to obtain a Benefit that my or may not deserved in the absence of payoffs
(bribery)

- un

12
 An audit of received international business corruption literature for logic, consistency,
completeness of coverage
A. Kouznetsov, Sarah Kim, Chris Wright

Introduction:

- Based on these criteria and subsuming both demandand supply sides of corruption, we defne B2G corruption in IB as an unlawful transaction
involving government ofcials from one country and business entities from another country conducted directly between the two parties or
indirectly via domestic or foreign intermediaries.

- Objective of this paper is to study audits/reviews the literature relating to corruption in IB that is published in high-ranking academic journals
from 2000 to 2019, to identify omissions, inconsistencies, and failure of logic to be reviewed and resolved by future research

- The main focus of this paper is on recent development (2000-2019) in the literatura on IB on B2G with the aim of identifying future research
avenues

- un

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 05
Management earnings forecasts
03 disaggregation and
audit fees: International evidence (2021)
Liwei Shan, Ziyao San, Albert Tsang
 Management earnings forecasts disaggregation and audit fees: International evidence
Research method
• Quantitative method.
• This study is descriptive analysis and
correlation between variables.
Methodology
Population & Sample
This study collect audit fees data for firms from 27 non-US countries
around the world from the Worldscope database and international
management earnings forecast data from the S&P CapitalIQ
Compustat database (CapitalIQ hereafter). This study obtain the
analyst coverage data from the I/B/E/S database and the institutional
ownership data from the Factset database. Data for all other control
variables are obtained from CapitalIQ.
This final sample consists of 32,377 firm-year observations from
firms domiciled in 27 countries, of which roughly 23% firm-year
observations involve the issuance of a management earnings
forecast, either in a disaggregated or non-disaggregated manner.
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 06
Did the International Financial Reporting Standards Increase the
Audit Expectation Gap An Exploratory Study (2021)
Pierre Astolfi
 Did the International Financial Reporting Standards Increase the Audit:
Expectation Gap An Exploratory Study
Resul
t
This research survey show that international
accounting standards are an underestimated but key
contributing factor to the AEG, where they contribute
to increase both (1) the complexity of financial
accounting, facilitating manipulation of financial
statements by management; (2) the subjective
element within auditing, increasing pressure on
auditor
Results, Limitation, & Suggestions
Limitation Suggestions
The respondents come from France and 1. Future research may usefully build upon the
Luxembourg, which may introduce a bias to the findings;
result. 2. Future research could investigate the further role
of big data and artificial intelligence regarding the
extent to which the AEG can be reduced thanks to
innovation.
3. Future research could investigate the way
improvements of new technologies may change
result of the survey
4. Future research could study further the effect of
new standards, such as IFRS 16 or FIRS 17, to extent
that these new standards may increase the complexity
of financial statements.
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THANKS!