Search Results (7)

Audit quality is crucial, particularly for small and medium-sized enterprises (SMEs), due to their significant economic role. This study examined how spatial distance (physical separation) and social distance (perceived dissimilarity) between auditors and SME clients influence audit quality, focusing on technical quality (the tangible outputs of auditing) and process quality (the manner of service delivery). Using data from 449 SME executives across Thailand, the study investigated the mediating role of auditor independence within these relationships. The results from structural equation modeling revealed that spatial distance has no direct impact on audit quality but a negative effect on perceived auditor independence, which, in turn, diminishes audit quality indirectly. Conversely, social distance negatively impacts both technical and process quality directly and indirectly through auditor independence. The findings suggest that despite technological advancements facilitating remote auditing, maintaining some physical interaction remains vital for preserving client trust. Additionally, aligning auditor–client social similarities significantly enhances audit quality perceptions. This study provides practical implications for audit firms in managing client interactions effectively, particularly within SMEs. Full article

This study examined the practices of innovation management used by Brazilian industries. A survey was carried out with specialists that assessed 27 practices (PR) proposed by ISO 56002, considering two types of firms: small and medium-sized industries (SMI) and large industries (LI). The methodological approach included Hierarchical Cluster Analysis to identify the similarities between the specialists and define levels of specialists, as well as Fuzzy TOPSIS and frequency and sensitivity analyses to examine their responses. PR1 (analysis of internal and external issues that impact innovation management) was deemed the best practice for LIs, whereas PR10 (adequate assessment of potential partnerships) was best evaluated for SMIs. The PR27 (periodic audits to identify opportunities for improvement) received the lowest rating from both LIs and SMIs. In general, SMIs in the Brazilian context have more severe deficiencies in terms of applying innovation management practices than LIs. A broad overview of the innovation practices adopted in the Brazilian industrial scenario is provided. The study’s findings may assist managers and policymakers to develop initiatives and actions to improve the capacity of Brazilian industries to innovate. This research can also support future studies aimed at better understanding specific practices related to the topic. Full article

By constructing a staggered difference-in-differences model, we examined the effect of the high-speed railway opening on audit fees and its mechanism. The high-speed railway opening significantly reduces audit fees, and the inhibitory effect is more pronounced in firms located in non-central cities and small- and medium-sized audit firms. Furthermore, the high-speed railway opening mainly affects the audit fees by intensifying the competition in the audit market, but information asymmetry has no significant impact, indicating that the high-speed railway opening mainly reduces the audit fees by reducing the audit costs. In addition, the high-speed railway opening can improve the audit quality, which further shows that the high-speed railway opening can promote reasonable competition in the audit market. Full article

The present study aims to assess the relationship between prevention and panic from COVID-19, ethical principles, life expectancy, anxiety, depression, and stress in auditors and financial managers of small- and medium-sized Iraqi firms. In other words, this paper seeks to answer the question of whether different types of prevention and panic from COVID-19 can enhance the ethical principles, life expectancy, anxiety, depression, and stress, or not. The study method is practical in its objective and descriptive survey procedure. The study’s statistical population includes 185 employed auditors in audit firms, and 215 financial managers of small- and medium-sized Iraqi firms were selected as a sample of the study using the Cochran Sampling Method. In this paper, PLS tests are used to assess the effect of independent variables on the dependent variable. The results indicate no significant relationship between prevention from COVID-19 and ethical principles and life expectancy. However, the association between prevention from COVID-19 and anxiety, depression, and stress, and between panic from COVID-19 and ethical principles, life expectancy, anxiety, depression, and stress is positive and significant. The higher the panic from COVID-19, the more ethical principles, life expectancy, anxiety, depression, and stress. Since no study has been carried out so far on the effect of prevention and panic from COVID-19, ethical principles, life expectancy, depression, and stress in Iraqi firms, the present study results can provide valuable information and contribute to the development of science and knowledge. Full article

The aim of this study is to construct the assessment of the expected audit risk by the audit team leader (ATL) during the planification phase of the audit. The ATL plays an important role within the audit, and even more so regarding small and medium-sized (SME) audit firms. The audit risk assessment is critical as relying more (less) on internal controls implemented by the client leads to performing less (more) substantive audit procedures. This is determined by the ATL based on their professional judgement and previous experience. The use of fuzzy theory has powerful potential into the audit arena, as the audit risk assessment (outcome) is critically related to the auditors’ judgement and perception. We argue that ATL characteristics are core conditions in determining the audit risk assessment when planning. Using hand-collected and private data from Spanish SME audit firms, we find that a comprehensive set of conditions must be given for perceived high audit risk. The results indicate that female and inexperienced ATLs planning the audit of indebted firms with high proportions of capital assets, less profitability, and with a larger board sizes, as they are expected to have bad internal control. The same conditions are met when expecting errors, as well as shorter audit tenures. Finally, conditions such as the ATL’s experience gains importance in expecting irregularities. This paper extends our understanding of the role of ATL characteristics on the audit risk assessment when planning and raising awareness on studying SME audit firm behavior. Full article

Studies on the characteristics of insolvent firms’ earnings management are critical, as the ripple effects of a firm’s opportunistic accounting and insolvency on society can be widespread and significant. This study divides a dataset of unlisted firms into four groups (large firms that have received external audits; small- and medium-sized enterprises (SMEs) that received external audits; SMES that did not receive external audits; private businesses that did not receive external audits) and analyzes whether there are differences in terms of the discretionary accruals between groups. This study also uses discrete time logit regression to determine if the use of discretionary accruals is predictive of whether unlisted firms would become insolvent. This study used several models (a modified Jones model, a Kothari model, and performance matching model by ROA group) to measure discretionary accruals, which was used as a proxy for earnings management. The results of our study showed that, in the one year prior to insolvency, discretionary accruals were largest among non-externally audited private firms, followed by those of non-externally audited SMEs, externally audited SMEs, and externally audited large firms. The discretionary accruals of non-insolvent firms were larger than those of insolvent firms from the period of one year to three years preceding insolvency, and this difference increased as insolvency approached. The discretionary accruals were shown to have the ability to predict whether or not firms would become insolvent in two to three years before the occurrence of insolvency, but they did not support prediction for one year before the occurrence of insolvency. The findings suggest that additional accounting information should be used together to predict insolvency for unlisted firms. Full article

This paper examines the effect of state ownership on the effective tax rates of Spanish companies. Using information regarding 3169 companies during the period of 2008–2014, we show that there are significant differences between the tax burdens of non-state-owned enterprises (NSOEs) and state-owned enterprises (SOEs), with the effective tax rates of private ownership companies being higher than those of state-owned firms. Company features, such as size, leverage, research and development investment, profitability, firm age, foreign operations, and auditing determine the tax burden of private ownership firms. That of state-owned companies, however, is affected only by leverage and capital intensity. For both SOEs and NSOEs, the tax burden is lower when they are taxed under the Spanish special taxation regime for small- and medium-sized enterprises. In short, company characteristics are more important in private ownership firms, in which almost all the variables considered have certain repercussions. This result may be because private ownership companies devote more resources to tax avoidance, and their fiscal strategy may determine their economic and financial structure. However, SOEs present significantly lower effective tax rates than NSOEs, probably because of the tax incentives that the law provides for them to support their sustainability. Full article