Internal audit quality, audit committee independence, growth opportunities and firm performance

This study explores whether the relation between internal audit quality and firm performance is associated with firm characteristics of information asymmetry and uncertainty (growth opportunities) and certain governance controls (audit committee effectiveness). The results from this preliminary study of 60 Malaysian companies show that the association between internal audit quality and firm performance is stronger for firms with high growth opportunities and that this positive association is weakened by increasing audit committee independence. These findings demonstrate the internal auditors conflicting roles and question the governance recommendations that require all members of the audit committee to be non-executive directors.

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.

Corporate governance quality, audit fees and non-audit services fees

This paper extends prior research on the relationship between governance quality and auditor remuneration.We examine the influence of audit committee effectiveness (ACE), a proxy for governance quality, on audit fees (AF) and non-audit services fees (NASF) using a new composite measure comprising audit committee independence, expertise, diligence and size. We find that after controlling for board of director characteristics, there is a significant positive association between ACE and AF only for larger clients. Our results indicate that effective audit committees undertake more monitoring which results in wider audit scope and higher audit fees. Contrary to our expectations, we find the association between ACE and NASF to be positive and significant, especially for larger clients. This suggests that larger clients are more likely to purchase non-audit services (NAS) even in the presence of effective audit committees probably due to the complexity of their activities. Overall, our findings support regulatory initiatives aimed at improving corporate governance quality.

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.

Busy auditors, ethical behavior, and discretionary accruals quality in Malaysia

The required professional and ethical pronouncements of accountants mean that auditors need to be competent and exercise due care and skill in the performance of their audits. In this study, we examine what happens when auditors take on more clients than they should, thus raising doubts about their ability to maintain competence and audit quality. Using 2803 observations of Malaysian companies from 2010 to 2013, we find that auditors with multiple clients are associated with lower earnings quality, proxied by total accruals and discretionary accruals. Our results demonstrate that associating client firms’ reported discretionary accruals with individual auditors, rather than their firms or offices, is important in determining audit quality. Moreover, we demonstrate that the disclosure of auditors’ signatures on their reports is useful for assessing auditor quality at the individual level, thus contributing to the debate on the usefulness of having auditor identities on reports.

An analysis of the nature and effectiveness of corporate governance in smaller listed Australian companies

The objective of this thesis is to investigate the corporate governance attributes of smaller listed Australian firms. This study is motivated by evidence that these firms are associated with more regulatory concerns, the introduction of ASX Corporate Governance Recommendations in 2004, and a paucity of research to guide regulators and stakeholders of smaller firms. While there is an extensive body of literature examining the effectiveness of corporate governance, the literature principally focuses on larger companies, resulting in a deficiency in the understanding of the nature and effectiveness of corporate governance in smaller firms. Based on a review of agency theory literature, a theoretical model is developed that posits that agency costs are mitigated by internal governance mechanisms and transparency. The model includes external governance factors but in many smaller firms these factors are potentially absent, increasing the reliance on the internal governance mechanisms of the firm. Based on the model, the observed greater regulatory intervention in smaller companies may be due to sub-optimal internal governance practices. Accordingly, this study addresses four broad research questions (RQs). First, what is the extent and nature of the ASX Recommendations that have been adopted by smaller firms (RQ1)? Second, what firm characteristics explain differences in the recommendations adopted by smaller listed firms (RQ2), and third, what firm characteristics explain changes in the governance of smaller firms over time (RQ3)? Fourth, how effective are the corporate governance attributes of smaller firms (RQ4)? Six hypotheses are developed to address the RQs. The first two hypotheses explore the extent and nature of corporate governance, while the remaining hypotheses evaluate its effectiveness. A time-series, cross-sectional approach is used to evaluate the effectiveness of governance. Three models, based on individual governance attributes, an index of six items derived from the literature, and an index based on the full list of ASX Recommendations, are developed and tested using a sample of 298 smaller firms with annual observations over a five-year period (2002-2006) before and after the introduction of the ASX Recommendations in 2004. With respect to (RQ1) the results reveal that the overall adoption of the recommendations increased from 66 per cent in 2004 to 74 per cent in 2006. Interestingly, the adoption rate for recommendations regarding the structure of the board and formation of committees is significantly lower than the rates for other categories of recommendations. With respect to (RQ2) the results reveal that variations in rates of adoption are explained by key firm differences including, firm size, profitability, board size, audit quality, and ownership dispersion, while the results for (RQ3) were inconclusive. With respect to (RQ4), the results provide support for the association between better governance and superior accounting-based performance. In particular, the results highlight the importance of the independence of both the board and audit committee chairs, and of greater accounting-based expertise on the audit committee. In contrast, while there is little evidence that a majority independent board is associated with superior outcomes, there is evidence linking board independence with adverse audit opinion outcomes. These results suggest that board and chair independence are substitutes; in the presence of an independent chair a majority independent board may be an unnecessary and costly investment for smaller firms. The findings make several important contributions. First, the findings contribute to the literature by providing evidence on the extent, nature and effectiveness of governance in smaller firms. The findings also contribute to the policy debate regarding future development of Australia’s corporate governance code. The findings regarding board and chair independence, and audit committee characteristics, suggest that policy-makers could consider providing additional guidance for smaller companies. In general, the findings offer support for the “if not, why not?” approach of the ASX, rather than a prescriptive rules-based approach.

Corporate governance mechanisms and earnings management in transitional countries – evidence from Chinese listed firms

The objective of this thesis is to investigate whether the corporate governance practices adopted by Chinese listed firms are associated with the quality of earnings information. Based on a review of agency and institutional theory, this study develops hypotheses that predict the monitoring effectiveness of the board and the audit committee. Using a combination of univariate and multivariate analyses, the association between corporate governance mechanisms and earnings management are tested from 2004 to 2008. Through analysing the empirical results, a number of findings are summarised as below. First, board independence is weakened by the introduction of government officials as independent directors on the boards. Government officials acting as independent directors, claim that they meet the definition of independent director set by the regulation. However, they have some connection with the State, which is the controlling shareholder in listed SOEs affiliated companies. Consequently, the effect of the independent director’s expertise in constraining earnings management is mitigated as demonstrated by an insignificant association between board expertise and earnings management. An alternative explanation for the inefficiency of board independence may point to the pre-selection of independent directors by the powerful CEO. It is argued that a CEO can manipulate the board composition and choose the "desirable" independent directors to monitor themselves. Second, a number of internal mechanisms, such as board size, board activities, and the separation of the roles of the CEO and chair are found to be significantly associated with discretionary accruals. This result suggests that there are advantages in having a large and active board in the Chinese setting. This can offset the disadvantages associated with large boards, such as increased bureaucracy, and hence, increase the constraining effects of a large and resourceful board. Third, factor analysis identifies two factors: CEO power and board power. CEO power is the factor which consists of CEO duality and turnover, and board power is composed of board size and board activity. The results of CEO power show that if a Chinese listed company has CEO duality and turnover at the same time, it is more likely to have a high level of earnings management. The significant and negative relationship between board power and accruals indicate that large boards with frequent meetings can be associated with low level of earnings management. Overall, the factor analysis suggests that certain governance mechanisms complement each other to become more efficient monitors of opportunistic earnings management. A combination of board characteristics can increase the negative association with earnings management. Fourth, the insignificant results between audit committees and earnings management in Chinese listed firms suggests that the Chinese regulator should strengthen the audit committee functions. This thesis calls for listed firms to disclose more information on audit committee composition and activities, which can facilitate future research on the Chinese audit committee’s monitoring role. Fifth, the interactive results between State ownership and board characteristics show that dominant State ownership has a moderating effect on board monitoring power as the State totally controls 42% of the issued shares. The high percentage of State ownership makes it difficult for the non-controlling institutional shareholders to challenge the State’s dominant status. As a result, the association between non-controlling institutional ownership and earnings management is insignificant in most situations. Lastly, firms audited by the international Big4 have lower abnormal accruals than firms audited by domestic Chinese audit firms. In addition, the inverse U-shape relationship between audit tenure and earnings quality demonstrates the changing effects of audit quality after a certain period of appointment. Furthermore, this thesis finds that listing in Hong Kong Stock Exchanges can be an alternative governance mechanism to discipline Chinese firms to follow strict Hong Kong listing requirements. Management of Hong Kong listed companies are exposed to the scrutiny of international investors and Hong Kong regulators. This in turn reduces their chances of conducting self-interested earnings manipulation. This study is designed to fill the gap in governance literature in China that is related to earnings management. Previous research on corporate governance mechanisms and earnings management in China is not conclusive. The current research builds on previous literature and provides some meaningful implications for practitioners, regulators, academic, and international investors who have investment interests in a transitional country. The findings of this study contribute to corporate governance and earnings management literature in the context of the transitional economy of China. The use of alternative measures for earnings management yields similar results compared with the accruals models and produces additional findings.

An analysis of the corporate governance practices of smaller listed Australian companies

We examine the corporate governance environment of smaller listed Australian firms to investigate the factors that determine how firms respond to recommendations contained in corporate governance codes. We group corporate governance recommendations into three distinct categories and argue that differences in adoption costs between categories, together with firm specific factors, determine a firm’s decision to conform with the recommendation or to explain the reasons for non-conformance. Analysis of the conformance by smaller firms with governance recommendations highlights substantial differences in adoption rates between categories of recommendations. Our results also reveal that the cost of adopting specific recommendations, together with profitability, external audit quality, and ownership dispersion, jointly explain a firm’s decision to ‘comply or explain’. This study provides insights for policy makers and regulators regarding the appropriateness of corporate governance recommendations for smaller firms

Gender-diverse boards and properties of analyst earnings forecasts

Using a sample of 2,200 US listed firm year observations (2001-2007)this study shows a positive (negative) relation between female participation in corporate boards and analysts' earnings forecast accuracy (dispersion), after controlling for earnings quality, corporate governance, audit quality, stock price informativeness and potential endogeneity. Our findings are important as they suggest that board diversity adds to the transparency and accuracy of financial reports such that earnings expectations are likely to be more accurate for these firms.

The effect of internal audit function quality and internal audit contribution to external audit on audit fees

Corporate governance mandates and listing rules identify internal audit functions (IAF) as a central internal control mechanism. External audits are expected to assess the quality of IAF before placing reliance on its work. We provide evidence on the effect of IAF quality and IAF contribution to external audit on audit fees. Using data from a matched survey of both external and internal audits, we extend prior research which is based mainly on internal audits' assessment and conducted predominantly in highly developed markets. We find a positive relationship between IAF quality and audit fees as well as a reduction in audit fees as a result of external auditors' reliance on IAF. The interaction between IAF quality and IAF contribution to external audit suggests that high quality IAF induces greater external auditor reliance on internal auditors' work and thus result in lower external audit fees.

Quality issues for the National Bowel Cancer Screening Program (NBCSP)

Purpose: This two-part research project was undertaken as part of the planning process by Queensland Health (QH), Cancer Screening Services Unit (CSSU), Queensland Bowel Cancer Screening Program (QBCSP), in partnership with the National Bowel Cancer Screening Program (NBCSP), to prepare for the implementation of the NBCSP in public sector colonoscopy services in QLD in late 2006. There was no prior information available on the quality of colonoscopy services in Queensland (QLD) and no prior studies that assessed the quality of colonoscopy training in Australia. Furthermore, the NBCSP was introduced without extra funding for colonoscopy service improvement or provision for increases in colonoscopic capacity resulting from the introduction of the NBCSP. The main purpose of the research was to record baseline data on colonoscopy referral and practice in QLD and current training in colonoscopy Australia-wide. It was undertaken from a quality improvement perspective. Implementation of the NBCSP requires that all aspects of the screening pathway, in particular colonoscopy services for the assessment of positive Faecal Occult Blood Tests (FOBTs), will be effective, efficient, equitable and evidence-based. This study examined two important aspects of the continuous quality improvement framework for the NBCSP as they relate to colonoscopy services: (1) evidence-based practice, and (2) quality of colonoscopy training. The Principal Investigator was employed as Senior Project Officer (Training) in the QBCSP during the conduct of this research project. Recommendations from this research have been used to inform the development and implementation of quality improvement initiatives for provision of colonoscopy in the NBCSP, its QLD counterpart the QBCSP and colonoscopy services in QLD, in general. Methods – Part 1 Chart audit of evidence-based practice: The research was undertaken in two parts from 2005-2007. The first part of this research comprised a retrospective chart audit of 1484 colonoscopy records (some 13% of all colonoscopies conducted in public sector facilities in the year 2005) in three QLD colonoscopy services. Whilst some 70% of colonoscopies are currently conducted in the private sector, only public sector colonoscopy facilities provided colonoscopies under the NBCSP. The aim of this study was to compare colonoscopy referral and practice with explicit criteria derived from the National Health & Medical Research Council (NHMRC) (1999) Clinical Practice Guidelines for the Prevention, Early Detection and Management of Colorectal Cancer, and describe the nature of variance with the guidelines. Symptomatic presentations were the most common indication for colonoscopy (60.9%). These comprised per rectal bleeding (31.0%), change of bowel habit (22.1%), abdominal pain (19.6%), iron deficiency anaemia (16.2%), inflammatory bowel disease (8.9%) and other symptoms (11.4%). Surveillance and follow-up colonoscopies accounted for approximately one-third of the remaining colonoscopy workload across sites. Gastroenterologists (GEs) performed relatively more colonoscopies per annum (59.9%) compared to general surgeons (GS) (24.1%), colorectal surgeons (CRS) (9.4%) and general physicians (GPs) (6.5%). Guideline compliance varied with the designation of the colonoscopist. Compliance was lower for CRS (62.9%) compared to GPs (76.0%), GEs (75.0%), GSs (70.9%, p<0.05). Compliance with guideline recommendations for colonoscopic surveillance for family history of colorectal cancer (23.9%), polyps (37.0%) and a past history of bowel cancer (42.7%), was by comparison significantly lower than for symptomatic presentations (94.4%), (p<0.001). Variation with guideline recommendations occurred more frequently for polyp surveillance (earlier than guidelines recommend, 47.9%) and follow-up for past history of bowel cancer (later than recommended, 61.7%, p<0.001). Bowel cancer cases detected at colonoscopy comprised 3.6% of all audited colonoscopies. Incomplete colonoscopies occurred in 4.3% of audited colonoscopies and were more common among women (76.6%). For all colonoscopies audited, the rate of incomplete colonoscopies for GEs was 1.6% (CI 0.9-2.6), GPs 2.0% (CI 0.6-7.2), GS 7.0% (CI 4.8-10.1) and CRS 16.4% (CI 11.2-23.5). 18.6% (n=55) of patients with a documented family history of bowel cancer had colonoscopy performed against guidelines recommendations (for general (category 1) population risk, for reasons of patient request or family history of polyps, rather than for high risk status for colorectal cancer). In general, family history was inadequately documented and subsequently applied to colonoscopy referral and practice. Methods - Part 2 Surveys of quality of colonoscopy training: The second part of the research consisted of Australia-wide anonymous, self-completed surveys of colonoscopy trainers and their trainees to ascertain their opinions on the current apprenticeship model of colonoscopy in Australia and to identify any training needs. Overall, 127 surveys were received from colonoscopy trainers (estimated response rate 30.2%). Approximately 50% of trainers agreed and 27% disagreed that current numbers of training places were adequate to maintain a skilled colonoscopy workforce in preparation for the NBCSP. Approximately 70% of trainers also supported UK-style colonoscopy training within dedicated accredited training centres using a variety of training approaches including simulation. A collaborative approach with the private sector was seen as beneficial by 65% of trainers. Non-gastroenterologists (non-GEs) were more likely than GEs to be of the opinion that simulators are beneficial for colonoscopy training (χ2-test = 5.55, P = 0.026). Approximately 60% of trainers considered that the current requirements for recognition of training in colonoscopy could be insufficient for trainees to gain competence and 80% of those indicated that ≥ 200 colonoscopies were needed. GEs (73.4%) were more likely than non-GEs (36.2%) to be of the opinion that the Conjoint Committee standard is insufficient to gain competence in colonoscopy (χ2-test = 16.97, P = 0.0001). The majority of trainers did not support training either nurses (73%) or GPs in colonoscopy (71%). Only 81 (estimated response rate 17.9%) surveys were received from GS trainees (72.1%), GE trainees (26.3%) and GP trainees (1.2%). The majority were males (75.9%), with a median age 32 years and who had trained in New South Wales (41.0%) or Victoria (30%). Overall, two-thirds (60.8%) of trainees indicated that they deemed the Conjoint Committee standard sufficient to gain competency in colonoscopy. Between specialties, 75.4% of GS trainees indicated that the Conjoint Committee standard for recognition of colonoscopy was sufficient to gain competence in colonoscopy compared to only 38.5% of GE trainees. Measures of competency assessed and recorded by trainees in logbooks centred mainly on caecal intubation (94.7-100%), complications (78.9-100%) and withdrawal time (51-76.2%). Trainees described limited access to colonoscopy training lists due to the time inefficiency of the apprenticeship model and perceived monopolisation of these by GEs and their trainees. Improvements to the current training model suggested by trainees included: more use of simulation, training tools, a United Kingdom (UK)-style training course, concentration on quality indicators, increased access to training lists, accreditation of trainers and interdisciplinary colonoscopy training. Implications for the NBCSP/QBCSP: The introduction of the NBCSP/QBCSP necessitates higher quality colonoscopy services if it is to achieve its ultimate goal of decreasing the incidence of morbidity and mortality associated with bowel cancer in Australia. This will be achieved under a new paradigm for colonoscopy training and implementation of evidence-based practice across the screening pathway and specifically targeting areas highlighted in this thesis. Recommendations for improvement of NBCSP/QBCSP effectiveness and efficiency include the following: 1. Implementation of NBCSP and QBCSP health promotion activities that target men, in particular, to increase FOBT screening uptake. 2. Improved colonoscopy training for trainees and refresher courses or retraining for existing proceduralists to improve completion rates (especially for female NBCSP/QBCSP participants), and polyp and adenoma detection and removal, including newer techniques to detect flat and depressed lesions. 3. Introduction of colonoscopy training initiatives for trainees that are aligned with NBCSP/QBCSP colonoscopy quality indicators, including measurement of training outcomes using objective quality indicators such as caecal intubation, withdrawal time, and adenoma detection rate. 4. Introduction of standardised, interdisciplinary colonoscopy training to reduce apparent differences between specialties with regard to compliance with guideline recommendations, completion rates, and quality of polypectomy. 5. Improved quality of colonoscopy training by adoption of a UK-style training program with centres of excellence, incorporating newer, more objective assessment methods, use of a variety of training tools such as simulation and rotations of trainees between metropolitan, rural, and public and private sector training facilities. 6. Incorporation of NHMRC guidelines into colonoscopy information systems to improve documentation, provide guideline recommendations at the point of care, use of gastroenterology nurse coordinators to facilitate compliance with guidelines and provision of guideline-based colonoscopy referral letters for GPs. 7. Provision of information and education about the NBCSP/QBCSP, bowel cancer risk factors, including family history and polyp surveillance guidelines, for participants, GPs and proceduralists. 8. Improved referral of NBCSP/QBCSP participants found to have a high-risk family history of bowel cancer to appropriate genetics services.

WSUD application audit at Gold Coast City

In recent years, Water Sensitive Urban Design (WSUD) has been strongly promoted in South East Queensland to mitigate quantity and quality issues in relation to stormwater. Gold Coast City Council has implemented WSUD devices widely for stormwater management for a number of years and is planning to continue this practice into the future. According to the planning policy of Gold Coast City Council, the adoption of WSUD practices is now mandatory for any new development within the city. As a result, Council is expected to be in possession of tens of millions of dollars of these assets in the future and will be responsible for their maintenance and long-term management. Any shortcoming in the implementation of best practice can potentially result in substantial liability for the Council in the future. However, there has been limited evaluation of WSUD systems in relation to their performance, long-term maintenance, and current knowledge gaps. It was considered that periodical audits of WSUD applications on the Gold Coast is vital to ensure that Council’s WSUD policies are continually improved to new learning and best practice is implemented and risk to Council is mitigated. After a series of stakeholder interviews within Council to understand current practical issues (weaknesses and strengths) in relation to the implementation of WSUD on the Gold Coast, a field audit comprising of condition assessment of eleven WSUD systems within four suburbs was undertaken to identify weaknesses and strengths in WSUD implementation on the Gold Coast. The outcomes of this study are presented in this paper.

Using the Donabedian framework to examine the quality and safety of nursing service innovation

Aims and objectives To evaluate the safety and quality of nurse practitioner service using the audit framework of Structure,Process and Outcome. Background Health service and workforce reform are on the agenda of governments and other service providers seeking to contain healthcare costs whilst providing safe and effective health care to communities. The nurse practitioner service is one health workforce innovation that has been adopted globally to improve timely access to clinical care, but there is scant literature reporting evaluation of the quality of this service innovation. Design. A mixed-methods design within the Donabedian evaluation framework was used. Methods The Donabedian framework was used to evaluate the Structure, Process and Outcome of nurse practitioner service. A range of data collection approaches was used, including stakeholder survey (n=36), in-depth interviews (11 patients and 13 nurse practitioners) and health records data on service processes. Results The study identified that adequate and detailed preparation of Structure and Process is essential for the successful implementation of a service innovation. The multidisciplinary team was accepting of the addition of nurse practitioner service, and nurse practitioner clinical care was shown to be effective, satisfactory and safe from the perspective of the clinician stakeholders and patients. Conclusions This study demonstrated that the Donabedian framework of Structure, Process and Outcome evaluation is a valuable and validated approach to examine the safety and quality of a service innovation. Furthermore, in this study, specific Structure elements were shown to influence the quality of service processes further validating the framework and the interdependence of the Structure, Process and Outcome components. Relevance to clinical practice Understanding the structure and process requirements for establishing nursing service innovation lays the foundation for safe, effective and patient-centred clinical care.

Understanding VET teachers' dilemmas in providing quality education to international students in Brisbane

In the past fifteen years, increasing attention has been given to the role of Vocational Education and Training (VET) in attracting large numbers of international students and its contribution to the economic development of Australia. This trend has given rise to many challenges in vocational education, especially with regard to providing quality education that ensures international students' stay in Australia is a satisfactory experience. Teaching and learning is continuously scrutinized, teaching quality and student assessment are subject to regular audit (Takerei, 2010). VET teachers are key stakeholders in international education and share responsibility for ensuring international students gain quality learning experiences and positive outcomes, however, their experiences are generally not well understood. Therefore, this thesis, investigates particular challenges and associated dilemmas that VET teachers experience when teaching international students. The research participants were 15 teachers from several public and private VET institutions in Brisbane, Australia. The method involved responsive interviewing and inductive data analysis to identify and categorize teachers' challenges and dilemmas. The research reveals qualitatively different ways in which the 15 VET educators experienced challenges and associated dilemmas in their culturally diverse teaching context. The research shows that VET teachers experience numerous challenges and various inter-related professional, educational and personal dilemmas. These dilemmas result from ethical tensions teachers experience in their interactions with international students, teaching colleagues and their employment institutions. The dilemmas are often influenced by current economic and political conditions of international education. The dilemmas raised in the study by 15 VET teachers might be familiar to other teachers in VET and universities but to date they have received limited attention by researchers. This study's findings indicate significant implications for VET teachers, students, VET institutions and the government at a time of rapid economic, political, cultural and educational change. The findings are of potential interest to VET policy makers, managers and teachers. By giving voice to VET teachers, who are key stakeholders in the sustainability and future growth of VET, they contribute evidence for ongoing review and development of quality learning and teaching in the culturally diverse VET sector.