Regulating audit quality : restoring trust and legitimacy

The global financial crsis, corporate failures and scandals in amny countries raise significant questions audit quality. In the UK, the FRC took the unprecedented step of codifying audit quality in its ‘Audit Quality Framework’. We analyze the extent to which audit firms, professional bodies, and investors considered the FRC proposals sufficient for addressing concerns about audit quality. Using impression management and legitimacy as a framework to analyze stakeholder responses we go beyond audit quality drivers identified by the FRC. In contrast to the drivers identified by the FRC, our focus on transparency, expertise, professionalism and commercialization of the audit shows that FRC, audit firms and professional bodies have mainly focused on issues which possibly do not pose a threat to the commercial interest of audit firms. Overall, our analysis shows that regulatory and professional bodies engaged in image management and the promotion of audit quality in an attempt to remedy tarnished image and augment their legitimacy and standing. In attempting to restore trust and legitimacy regulatory bodies, such as the FRC, have to reconcile complex often contradictory stakeholder demands.

A study of the informal interactions between audit committees and internal auditors in Australia

This paper finds evidence for the growing importance of informal interactions between the internal audit function and the audit committee (AC) in Australia – a relatively unexplored topic in the literature – using a survey of Chief Audit Executives (CAEs). It also describes the nature of these informal interactions. The most innovative elements of this paper are the findings that certain personal characteristics of CAEs, the specific knowledge and expertise of the AC chair, as well as some of the AC chair’s personal characteristics are associated with the existence (and increase) of informal interactions.

Do Big-Four affilitates earn audit fee premiums in emerging markets?

The paper investigates whether Big-Four affiliated (B4A) firms earn audit premiums in an emerging economy context, using Bangladesh as a case. The joint determination of audit and non-audit service fees is also examined using a sample of 122 companies listed in the Dhaka Stock Exchange. Our findings reveal that although the B4A firms do not generally earn a fee premiumin Bangladesh, they charge higher audit fees for clients not purchasing non-audit services. This suggests that the B4A firms may actually lower audit fees to attract non-audit services, and cross subsidizes audit fees through non-audit-services fees. The lack of a B4A premium implies that there is lack of quality audit in emerging markets. We also document that audit and non-audit service fees are jointly determined in Bangladesh. Thus, we provide evidence of joint determination of audit and non-audit service fees in an emerging economy context.

Informal interactions between audit committees and internal audit functions : exploratory evidence and directions for future research

Purpose – This paper aims to recognise the importance of informal processes within corporate governance and complement existing research in this area by investigating factors associated with the existence of informal interactions between audit committees and internal audit functions and in providing directions for future research. Design/methodology/approach – To examine the existence and drivers of informal interactions between audit committees and internal audit functions, this paper relies on a questionnaire survey of chief audit executives (CAEs) in the UK from listed and non-listed, as well as financial and non-financial, companies. While prior qualitative research suggests that informal interactions do take place, most of the evidence is based on particular organisational setting or on a very small range of interviews. The use of a questionnaire enabled the examination of the existence of internal interactions across a relatively larger number of entities. Findings – The paper finds evidence of audit committees and internal audit functions engaging in informal interactions in addition to formal pre-scheduled regular meetings. Informal interactions complement formal meetings with the audit committee and as such represent additional opportunities for the audit committees to monitor internal audit functions. Audit committees’ informal interactions are significantly and positively associated with audit committee independence, audit chair’s knowledge and experience, and internal audit quality. Originality/value – The results demonstrate the importance of the background of the audit committee chair for the effectiveness of the governance process. This is possibly the first paper to examine the relationship between audit committee quality and internal audit, on the existence and driver of informal interactions. Policy makers should recognize that in addition to formal mechanisms, informal processes, such as communication outside of formal pre-scheduled meetings, play a significant role in corporate governance.

Audit pricing and product differentiation in small private firms : evidence from Thailand

Purpose – There is limited evidence on how differences in economic environments affect the demand for and supply of auditing. Research on audit pricing has mainly focused on large client markets in developed economies; in contrast, the purpose of this paper is to focus on the small client segment in the emerging economy of Thailand which offers a choice between auditors of two different qualities. Design/methodology/approach – This paper is based on a random stratified sample of small clients in Thailand qualifying for audit exemption. The final sample consists of 1,950 firm-year observations for 2002-2006. Findings – The authors find evidence of product differentiation in the small client market, suggesting that small firms view certified public accountants as superior and pay a premium for their services. The authors also find that audit fees have a positive significant association with leverage, metropolitan location and client size. Audit risk and audit opinion are not, however, significantly associated with audit fees. Furthermore, the authors find no evidence that clients whose financial year ends in the auditors’ busy period pay significantly higher audit fees, and auditors engage in low-balling on initial engagements to attract audit clients. Research limitations/implications – The research shows the importance of exploring actual decisions regarding audit practice and audit pricing in different institutional and organizational settings. Originality/value – The paper extends the literature from developed economies and large/listed market setting to the emerging economy and small client market setting. As far as the authors are aware, this is the first paper to examine audit pricing in the small client market in an emerging economy.

The Corporate Governance Effects of Audit Committee

This chapter provides a synthesis and evaluation of empirical research on the governance effects associated with audit committees. Given recent policy recommendations in several countries aimed at strengthening these committees, it is important to establish what research evidence demonstrates about their existing governance contribution. A framework for analyzing the impact of audit committees is described, identifying potential perceived effects which may have led to their adoption and documented effects on aspects of the audit function, on financial reporting quality and on corporate performance. It is also shown that most of the existing research has focused on factors associated with audit committee existence, characteristics, and measures of activity and there is very little evidence on the processes associated with the operation of audit committees and the manner in which they influence organizational behavior. It is clear that there is no automatic relationship between the adoption of audit committee structures or characteristics and the achievement of particular governance effects, and caution may be needed over expectations that greater codification around factors such as audit committee members’ independence and expertise as the means of ‘‘correcting’’ past weaknesses in the arrangements for audit committees. The most fundamental question concerning what difference audit committees make in practice continues to be an important area for research development. For future research we suggest: (1) greater consideration of the organizational and institutional contexts in which audit committees operate; (2) explicit theorization of the processes associated with audit committee operation; (3) complementing extant research methods with field studies; and (4) investigation of unintended as well as expected consequences of audit committees.

Are Australia’s universities in deficit? A tale of generic managers, audit culture, and casualisation

Managerial changes to Australian universities have had considerable impact on employees. In this paper we consider some of these changes and apply a theory known as the democratic deficit to them. This theory was developed from the democratic critique of managerialism, as it has been applied in the public sector in countries with Westminster-type political systems. This deficit covers the weakening of accountability through politicisation, the denial of public values through the use of private sector performance practices, and the hollowing out of the state through the contracting out and privatisation of public goods and services, and the redefinition of citizens as customers and clients. We suggest that the increased power of managers, expansion of the audit culture, and the extensive use of contract employment seem to be weakening the democratic culture and role of universities in part by replacing accountability as responsibility with accountability as responsiveness.

Child and youth sport in rurally remote regions of Australia: the views of a north Queensland community

This study addresses the under-researched area of community sport in rurally isolated contexts. Data were gathered using semi-structured interviews with teachers, children, parents, and local community members from a small township in an isolated North Queensland region. The data indicate that community sport for young people is circumstantially difficult in some regional centres, but is none-the-less viewed differently by different sectors of the community. There is much value ascribed to sport as part of the social and cultural capital of the area however, it appears that community opinion is divided on the quality of sport experiences available with the young people of the community being particularly critical of the facilities, equipment, and the level of service from sports organisations in larger towns and cities.

An investigation of early career teachers’ perceptions of professional development opportunities and career advancement for teachers in rural and remote Queensland

It is generally accepted that to live and work in the remote regions of Australia requires specific skills and expertise to accommodate the shifting demands of outback life. For professionals assigned to such areas by employing bodies, this is particularly the case, and teachers are no exception. In addition to such personal attributes, professionals such as teachers must maintain currency in their professional practice both to serve their students appropriately and to ensure that they become eligible for future promotions and transfers possibilities. This study investigated whether teachers in rural and remote regions are disadvantaged in ways that could potentially affect their teaching careers in negative ways, in particular in terms of professional development and career advancement opportunities. Such opportunities are crucial if teachers are to provide an education of high relevance to rural and remote children who are already considered to be significantly disadvantaged in terms of educational provision. The data are presented in the form of a single teacher narrative, a composite tale aimed at telling the story of rural and remote teachers, professional development provision and career advancement opportunities. It was apparent that teachers in these contexts face serious challenges in terms of their professional and career development.

Remote monitoring of underwater objects

A system for monitoring conditions in a remote environment. The system comprising a data transmission network including a plurality of data sensing nodes. Each data sensing node includes an environment sensing means for periodically sensing the environment around node, a transmission means for periodic wireless transmission of sensed data to adjacent data sensing nodes. These adjacent data sensing nodes combining their sensed data with the received data from other data sensing nodes and on transmit the combined data.

Emerging water treatment technologies for decentralised systems : an overview of selected systems suited for application in towns and settlements in remote and very remote regions of Australia and vulnerable and lagging rural regions in Sri Lanka

The primary purpose of this paper is to overview a selection of advanced water treatment technology systems that are suited for application in towns and settlements in remote and very remote regions of Australia and vulnerable and lagging rural regions in Sri Lanka. This recognises that sanitation and water treatment are inextricably linked and both are needed to reduce risks to environment and population health from contaminated water sources. For both Australia and Sri Lanka only a small fraction of the settlements in rural and remote regions are connected to water treatment facilities and town water supplies. In Australia’s remote/very remote regions raw water is drawn from underground sources and rainwater capture. Most settlements in rural Sri Lanka rely on rivers, reservoirs, wells, springs or carted water. Furthermore, Sri Lanka has more than 25,000 hand pumped tube wells which saved the communities during recent droughts. Decentralised water supply systems offer the opportunity to provide safe drinking water to these remote/very remote and rural regions where centralised systems are not feasible due to socio-cultural, economic, political, technological reasons. These systems reduce health risks from contaminated water supplies. In remote areas centralized systems fail due to low population density and less affordability. Globally, a new generation of advanced water treatment technologies are positioned to make a major impact on the provision of safe potable water in remote/very remote regions in Australia and rural regions in Sri Lanka. Some of these systems were developed for higher income countries. However, with careful selection and further research they can be tailored to match local socio-economic conditions and technical capacity. As such, they can equally be used to provide decentralised water supply in communities in developed and developing countries such as Australia and Sri Lanka.

Live from the Sydney Opera House: Remote musical interactions for teacher professional development

A significant challenge for the implementation of the Australian Curriculum: The Arts is the professional development of primary school teachers in all parts of the country. During 2012, the Sydney Symphony Orchestra (SSO) conducted a remote music professional development workshop as part of the Sydney Opera House’s Digital Education Program for teachers in New South Wales using the Department of Education’s Connected Classroom system which allows live synchronous interaction between facilitators and participants in multiple sites. In this article, we analyse observational and videotape data collected during this live professional development event to consider the opportunities and challenges presented by this type of professional learning experience in the arts. In particular, consideration is given to the impact of a remote musical interaction on embodied learning and aesthetic experience. We draw on actor-network theory to consider the ways in which a remote professional development experience differs to one in which all participants are present in the same space. Finally, we conclude that although there are significant differences in the type of learning that occurs in a remote music interaction, the online space provides a legitimate and potentially transforming experience for primary school teachers.

Social Audit Regulation: Development, Challenges and Opportunities

This book takes the concept of social audit and lifts it beyond the role of functioning largely as a management tool. The book proposes a system in which social audit is regulated so as to provide a mechanism for effectively promoting corporate accountability in society. Taking this as its theme, this book provides both a conceptual explanation of the developmental perspectives of social audit regulation and empirical evidence of the impact of social audit practice from different parts of the world. It is the first book to explore the issues and challenges related to the development of effective social audit regulation.

Social audit: A mess or means in CSR assessment?

Social Audits play an important role in the measurement and analysis of a company's social performance. They provide corporations with a tool to plan and manage their social responsibility activities. Similarly, they provide stakeholders with a tool which they could use when monitoring, assessing and analysing concrete and accurate company data. Whilst the topic of social audits has been raised and discussed by a number of scholars, industry representatives and government institutions over the years, such contributions have mostly revolved around the general notion and importance of social audit, rather than addressing the most effective ways to achieve a widespread and reliable adoption of the practice through the implementation of specific legal regulation and other methods. This matter is of significant importance as corporations can exert a considerable amount control over the entire social audit process, allowing them to disclose only information deemed beneficial to their own corporate image instead of releasing all relevant social and environmental data. In order to achieve a truly transparent system promoting corporate accountability, there is an obvious need for social audits to be regulated. One of the purposes of this book is to provide an overview of the development of social audit practices and regulation. It also sets out to explore the issues and challenges which have arisen relating to this matter around the world.